APD Air Products and Chemicals Inc

Praxair Inc’s (PX) Indian unit, Praxair India Private Limited was recently awarded a gas supply contract from Usha Martin Limited, the largest Indian wire and wire-rope manufacturer.

Praxair India has long been associated with Usha Martin, supplying the latter with gaseous oxygen via two oxygen plants, having 220 tons per day of production capacity. As per the terms of the new contract, Praxair India will set up a cryogenic air separation unit with a daily production capacity of 130 tons of gaseous oxygen and 65 tons of gaseous nitrogen.

Praxair India’s additional capacity will satisfy the requirement of gases as Usha Martin progresses with its expansion plans. The new plant is expected to start operations in the first half of 2012.

Praxair is one of the leading companies engaged in the production and distribution of industrial gases, primarily catering to demands in North America, South America, Europe, and Asia. Earlier, the company had announced plans to build a new plant in Argentina to supply gaseous oxygen, nitrogen and argon to meet the escalating demand for industrial gases in the region.

We believe the growth prospects of industrial gas producers are very bright going forward, with demand for gases expected to rise manifold due to their wide application areas. Industrial gases are being widely used by the chemical processing and petroleum refining, metal production and fabricating, and electronics and health care industries. Demands for industrial gases are also on the rise in the emerging economies.

Praxair anticipates EPS to be roughly $5.25-$5.40 and the revenue to be approximately $11 billion for the fiscal year 2011. Praxair is slated to release its first quarter 2011 financial results on April 27, 2011.

However, the highly competitive environment as well as extreme dependence on energy costs can be causes of concern. Prime competitors of the company include Air Products & Chemicals Inc. (APD) and L'Air Liquide SA.

We currently maintain our Neutral recommendation on the stock.

 
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