Executive Summary & Investment Thesis

This report presents a comprehensive investment analysis of Air Liquide SA (AI.PA), a world leader in gases, technologies, and services for industry and health. The analysis concludes that Air Liquide represents a compelling long-term investment opportunity, underpinned by a resilient and diversified business model, a clear and credible strategy for profitable growth, and a leadership position in the defining secular megatrends of our time.

The core investment thesis is that Air Liquide is poised for a significant valuation re-rating, driven by the successful execution of its ADVANCE strategic plan. This plan is demonstrably delivering unprecedented and sustainable operating margin expansion, which will narrow the long-standing profitability and valuation gap with its primary peer, Linde plc. The company’s entrenched position in the structurally growing markets of healthcare, electronics, and, most critically, the multi-decade industrial decarbonization and hydrogen megatrends, provides a clear and de-risked pathway for sustained growth and value creation. While the market has begun to acknowledge this progress, the current valuation does not fully reflect the high probability of achieving the company’s ambitious 2026 targets. This creates a compelling opportunity for long-term investors to benefit from both strong underlying earnings growth and a potential expansion of the stock’s valuation multiple.

I. Air Liquide: An Enduring Leader in a Resilient Oligopoly

Air Liquide’s investment appeal begins with its foundational strengths: a highly resilient and diversified business model that generates predictable revenue streams through various economic cycles. The company’s structure is a fortress of stability, built upon diverse end-markets, a robust contractual framework, and a balanced global footprint.

A. The Diversified Business Model: A Fortress of Stability

Air Liquide operates a strategically diversified business, insulating it from cyclicality in any single end-market or geography.¹ This diversification is not merely across industries but also across customer size and contract type, creating a powerful, self-balancing portfolio. The business is primarily composed of Gas & Services, which accounts for approximately 97% of Group revenue, with a smaller, synergistic Engineering & Technologies segment.³

The core Gas & Services business is broken down into four key activities:

• Large Industries (28% of Gas & Services Revenue): This segment is the historical backbone of the company, supplying essential industrial gases such as oxygen, nitrogen, and hydrogen via extensive pipeline networks to major customers in foundational industries like chemicals, refining, and steel.² The business is defined by its high capital intensity, requiring significant upfront investment in large-scale Air Separation Units (ASUs) and hydrogen production facilities. This creates high barriers to entry and fosters deep, long-term partnerships with customers who rely on an uninterrupted supply of these critical molecules for their own production processes.⁷
• Industrial Merchant (43% of Gas & Services Revenue): Representing the largest portion of the business, Industrial Merchant serves a vast and highly fragmented customer base of over 4 million customers, from small independent craftspeople to mid-sized manufacturing companies.¹ It provides gases in smaller quantities, delivered in cylinders (packaged) or via small on-site production units. The sheer diversity of this customer base provides significant resilience and, crucially, substantial pricing power. The FY 2024 results demonstrated this, with a strong +4.0% price effect offsetting softer volumes in a subdued economic environment.⁴
• Healthcare (15% of Gas & Services Revenue): This is a defensive, high-growth segment that is structurally decoupled from industrial economic cycles.⁹ Air Liquide provides medical gases (e.g., oxygen) to hospitals and, increasingly, home healthcare services for patients with chronic conditions like sleep apnea and diabetes.² This business benefits from powerful demographic tailwinds, including aging populations and the growing need for more efficient, out-of-hospital care models.¹⁰ H1 2025 results showed continued strong momentum with +5% growth, and the company is actively strengthening this pillar through targeted bolt-on acquisitions, such as two recent purchases in Germany’s home healthcare market.³
• Electronics (9% of Gas & Services Revenue): This high-tech, high-growth segment supplies ultra-high purity gases and advanced materials that are indispensable for the manufacturing of semiconductors.¹³ As the world demands ever more powerful and smaller chips for applications like artificial intelligence, and as governments incentivize the on-shoring of chip production, the need for these specialized molecules is expanding rapidly. Air Liquide is making major investments to capture this growth, including a landmark investment of over $250 million in Idaho to supply Micron Technology.⁴

The combination of these segments is a key source of the company’s strength. The Large Industries segment provides a stable, visible baseload of revenue from long-term contracts. Simultaneously, the highly fragmented Industrial Merchant segment offers flexibility and pricing power to counteract inflation and offset periods of volume softness in other areas. This was evident in the H1 2025 results, where a solid price effect of +2.6% in Industrial Merchant helped drive performance.¹⁶ This structure creates a portfolio that is uniquely resilient to economic shocks.

Table 3: Business Segment Analysis (FY 2024)

Category	Revenue (€ billion)	% of Gas & Services	% of Group Total
Gas & Services by Business Line
Industrial Merchant	11.10	43%	41%
Large Industries	7.23	28%	27%
Healthcare	3.87	15%	14%
Electronics	2.32	9%	9%
Subtotal Gas & Services	25.81	100%	95%
Gas & Services by Geography
Americas	10.32	40%	38%
Europe, Middle East & Africa (EMEA)	10.19	39%	38%
Asia-Pacific	5.30	21%	20%
Subtotal Gas & Services	25.81	100%	95%
Other Activities
Engineering & Technologies	1.25	N/A	5%
Total Group Revenue	27.06	N/A	100%

Source: Adapted from.² Note: Percentages are approximate and based on reported figures for Gas & Services and Group revenue. FY 2024 Group Revenue was €27.06B, with Gas & Services at €25.81B. Geographic breakdown based on 2023 data from ² as a close proxy.

B. The Contractual Moat: Engineering Revenue Visibility

Underpinning the diversified business model is a robust contractual framework that serves as a formidable competitive advantage, or “moat.” This framework is meticulously designed to de-risk operations and ensure highly predictable, long-term revenue streams.

The key features of this contractual moat are:

• Long-Term Durations: Contracts in the Large Industries and Electronics segments, which involve significant capital investment at the customer’s site, typically span 15 to 20 years. Even smaller on-site units within the Industrial Merchant business are often secured with contracts of up to 15 years.⁷ This provides exceptional visibility into future revenues, far beyond that of typical industrial companies.
• Take-or-Pay Clauses: A critical feature of these long-term agreements is the inclusion of “take-or-pay” clauses. These clauses contractually obligate the customer to pay for a minimum volume of gas, regardless of whether they consume it.⁷ This structure provides a powerful shield against demand destruction during economic downturns, ensuring a stable baseload of revenue and protecting the return on Air Liquide’s invested capital.
• Price Indexation: Perhaps the most crucial element, especially in the recent macroeconomic environment, is the contractual indexation of sales prices. Prices are systematically indexed to variable input costs, most notably energy (electricity and natural gas), as well as to inflation.⁷ This mechanism allows Air Liquide to automatically pass through volatile costs to its customers, thereby protecting its operating margins. The effectiveness of this model was clearly demonstrated during the European energy crisis of 2022, where a massive +16.8% energy pass-through impact on revenue diluted the
  published margin percentage but crucially protected the absolute level of operating profit.¹⁸

This business model effectively externalizes a significant portion of the two primary operational risks in the industrial gas sector—volume volatility and input price volatility—to its customer base. This transforms a substantial part of Air Liquide’s revenue stream into a predictable, bond-like annuity. This high degree of engineered stability and risk mitigation is a core structural advantage that justifies a premium valuation.

C. Geographic Footprint: Balanced for Global Growth

Air Liquide’s operational strength is further enhanced by its well-balanced global presence. The company is not overly reliant on any single region, with 2023 Gas & Services revenue split almost evenly between the Americas (39%), Europe (37%), and a significant, growing presence in Asia-Pacific (20%).²

This global reach is strategic. It allows the company to maintain a strong, cash-generative foothold in mature, developed economies while simultaneously capturing the higher growth rates offered by industrialization and technological adoption in emerging markets.¹³ The company’s strategy focuses on developing deep integration within key industrial basins, creating dense pipeline networks that enhance supply reliability for customers and optimize operating costs for Air Liquide.¹⁹

This geographic balance acts as a natural hedge against regional economic downturns. As seen in the first half of 2025, solid growth in the Americas (+2.9%) and Asia (+2.1%) helped to offset a more sluggish environment in Europe (+0.5%).³ This diversification, layered on top of the resilient business mix and the contractual moat, further reinforces the stability and predictability of the Group’s overall earnings profile.

II. The Industrial Gas Market: Secular Growth and Competitive Dynamics

Air Liquide operates within an attractive market characterized by rational competition, high barriers to entry, and exposure to some of the most powerful secular growth trends of the coming decades. Understanding this landscape is key to appreciating the company’s long-term potential.

A. Market Structure and Growth Drivers

The global industrial gas market is a highly concentrated oligopoly, a structure that inherently promotes rational pricing and disciplined capital deployment. The market is dominated by three principal global players: Linde plc, Air Liquide, and Air Products, with a few smaller regional specialists.⁹

The market is poised for consistent and robust expansion. Projections for the compound annual growth rate (CAGR) vary across market studies but consistently point to healthy growth, with estimates ranging from 4.17% to as high as 8.5% through the 2030-2034 forecast period.¹⁰ This growth is not merely cyclical but is underpinned by several powerful, long-term structural drivers:

• Energy Transition and Decarbonization: This is unequivocally the most significant long-term driver. As the world mobilizes to combat climate change, industries are under immense pressure to decarbonize their operations. This creates massive demand for low-carbon hydrogen to replace fossil fuels in processes like steelmaking and refining, as well as for carbon capture, utilization, and storage (CCUS) technologies to manage emissions from existing facilities. Industrial gas companies are the natural leaders and enablers of this transition.¹⁰
• Healthcare: The non-discretionary and growing demand for medical gases and services provides a defensive bedrock for the industry. An aging global population, the rising prevalence of chronic respiratory diseases, and increased investment in healthcare infrastructure globally are driving sustained demand for medical oxygen, nitrogen, and specialized home healthcare services.¹⁰
• Electronics: The digital transformation of the global economy hinges on the production of increasingly powerful semiconductors. This relentless drive for technological advancement, coupled with geopolitical trends encouraging the on-shoring of chip manufacturing, requires enormous and growing volumes of the ultra-high purity gases and advanced materials that are a core competency of Air Liquide.¹³
• Industrialization in Emerging Markets: Rapid industrialization, particularly in the Asia-Pacific region, continues to fuel demand for basic industrial gases across a wide range of applications, from manufacturing and chemicals to food and beverage. Asia-Pacific is recognized as both the largest and fastest-growing regional market for industrial gases.¹⁴

Air Liquide is not simply a participant in this growing market; it is strategically positioned at the very epicenter of its most powerful and durable growth trends. The company’s core competencies in producing, handling, and distributing essential molecules are directly aligned with the highest-growth segments of the future. This positioning provides a structural tailwind that is set to propel the business for decades to come.

B. Competitive Positioning: Air Liquide vs. Linde plc

Within the industrial gas oligopoly, Air Liquide’s primary competitor and benchmark is Linde plc. Linde became the undisputed market leader in terms of revenue and market share (approximately 33%) following its 2018 merger with Praxair, with Air Liquide being a close and formidable second (approximately 29% share).²⁴ A comparative analysis reveals key differences in performance, strategy, and valuation that are central to the investment thesis.

• Profitability: The most significant historical distinction between the two giants has been profitability. Linde has consistently generated superior operating margins and a higher return on invested capital (ROIC).⁹ Recent data shows Linde’s operating margin at around 27%, compared to Air Liquide’s at approximately 20%, with Linde also leading on ROIC.²⁵ This profitability gap has been a primary justification for Linde’s premium valuation.
• Strategy and Capital Allocation: The two companies have exhibited different strategic postures. Linde’s management is often described as being heavily aligned with shareholder returns through stock-based compensation, with a strong emphasis on operational efficiency and returning capital to shareholders via share buybacks and dividends.⁹ Air Liquide, while also focused on performance, has historically pursued a more balanced approach. It prioritizes long-term industrial investment to capture future growth and maintains a famously stable and growing dividend policy, supported by its unique and loyal individual shareholder base, which holds a remarkable 33% of the company’s capital.¹
• Valuation: This divergence in profitability and strategic focus translates directly into a persistent valuation gap. Linde consistently trades at a significant premium to Air Liquide on key valuation multiples. For example, Linde’s forward price-to-earnings (P/E) ratio is in the 32-34x range, while Air Liquide’s is closer to 26-30x. A similar premium is observed in the EV/EBITDA multiple, where Linde trades at 18-19x versus Air Liquide’s 13-15x.²⁴

The central question for an investor considering Air Liquide is whether this valuation gap is justified and sustainable. The potential for Air Liquide’s profitability to converge towards Linde’s level represents the most powerful catalyst for a re-rating of its stock. The company’s ADVANCE strategic plan, with its explicit and ambitious margin improvement targets, is the direct and measurable mechanism designed to achieve this convergence.

III. Strategic Deep Dive: The ADVANCE Plan as a Value Creation Engine

Launched in March 2022, the ADVANCE strategic plan is Air Liquide’s roadmap through 2025 and beyond. It is more than a set of financial targets; it is a comprehensive strategy that inextricably links financial performance with sustainable development, positioning the company to capitalize on the profound transitions shaping the global economy. The plan’s rigorous execution to date provides strong evidence of management’s capability and is the primary driver of the investment thesis.

A. Deconstructing the Four Pillars

ADVANCE is structured around four clear priorities that guide the company’s capital allocation and operational focus ²⁰:

1. Delivering Strong Financial Performance: This is the foundation of the plan. The headline objectives are to accelerate comparable sales growth to an average of +5% to +6% per year, achieve a recurring Return on Capital Employed (ROCE) of more than 10%, and, most critically, deliver a significant and sustained improvement in the operating margin.²⁰
2. Decarbonizing the Planet: This pillar transforms a global challenge into a core business opportunity. Air Liquide has committed to reaching an inflection point and beginning to reduce its absolute Scope 1 and 2 CO2 emissions around 2025, on a path to a 33% reduction by 2035 and full carbon neutrality by 2050.²⁰ This commitment drives investment in low-carbon solutions for its own assets and creates a massive market to help its customers do the same.
3. Unlocking Progress via Technology: This pillar focuses investment and innovation on five key high-growth markets where Air Liquide’s expertise provides a distinct advantage: hydrogen mobility, Electronics, Healthcare, advanced industrial applications, and Space.³⁴
4. Acting for All: This pillar encompasses the company’s ESG commitments beyond the environment, including targets for gender diversity (35% women among managers and professionals by 2025) and ensuring all employees benefit from a common basis of care coverage.²⁰

B. Performance Against Promises: A Scorecard of Execution

A strategy is only as good as its execution, and on this front, Air Liquide’s performance has been exemplary. The company is not just meeting its ambitious ADVANCE targets; in many cases, it is significantly exceeding them, building substantial credibility with investors.

Table 4: ADVANCE Strategic Plan Scorecard

Metric/Target	ADVANCE Plan Goal (2022-2025)	Current Status (as of H1 2025)
Comparable Sales Growth	+5% to +6% CAGR	Achieved: +6.5% CAGR (2021-2024) 5
Recurring ROCE	>10% from 2023 onwards	Exceeded: 10.7% in FY 2024, 11.0% in H1 2025 15
CO2 Emissions	Inflection point around 2025	On Track: -11% reduction vs. 2020 achieved by YE 2024 4
Investment Decisions	~€16 billion (2022-2025)	On Track: €12.7B decided by YE 2024 5
Operating Margin Improvement	Initially +160 bps (2022-2025)	Significantly Exceeded & Raised: New target of +460 bps (2022-2026) 19

Source: ⁴

The most impressive area of execution has been on operating margin. The initial 2022 target of a +160 basis point improvement by 2025 proved to be too conservative. Driven by strong pricing, record efficiencies, and active portfolio management, the company first doubled the ambition to +320 basis points in early 2024.³⁶ Then, in early 2025, it raised the target again, extending it by a year to an “unprecedented” total increase of +460 basis points over the 2022-2026 period.⁴ The latest results from H1 2025, which showed a +100 basis point improvement (excluding the energy pass-through effect), demonstrate that the company remains firmly on track to meet this much higher goal.³

A company does not raise a key strategic target of this magnitude twice in two years unless its performance is running substantially ahead of its own expectations. This signals that management has high confidence in the sustainability of its operational improvement levers. It suggests that the positive changes are structural, not temporary, and that there is a clear and credible line of sight to achieving a significantly higher level of profitability. This directly addresses the historical performance gap with Linde and is the central pillar of the valuation re-rating thesis.

C. The Transformation Program: Enhancing Agility

To support the achievement of these ambitious goals, Air Liquide announced a significant organizational simplification program in mid-2024.³⁷ The initiative is designed to reduce layers of management and create a single, worldwide Group Industrial Direction.⁷ The stated goals are to boost performance sustainably, facilitate quicker and more agile decision-making, and improve the delivery of value to customers and stakeholders.³⁷

This is not merely a cost-cutting exercise. It is a proactive and necessary measure to ensure the company can efficiently manage its record-level investment pipeline and capitalize on market opportunities without being encumbered by the bureaucratic inertia that can plague large, global organizations. This transformation is a key enabler for the ambitious margin targets of the ADVANCE plan, ensuring the operational structure is fit for purpose to deliver on the strategy.

IV. The Decarbonization Megatrend: Quantifying the Hydrogen Opportunity

While Air Liquide is a diversified company, its most significant long-term growth opportunity lies in its leadership role in the global energy transition. The company is positioning itself as an indispensable partner for industries seeking to decarbonize, a multi-trillion-dollar undertaking that will unfold over decades.

A. Leading the Energy Transition

Air Liquide’s role as an enabler of decarbonization extends across a portfolio of technologies. This includes supplying low-carbon oxygen for innovative projects like ExxonMobil’s blue hydrogen facility in Texas, which will be the largest of its kind in the Americas.⁴ It also involves deploying proprietary technologies like Cryocap™, a cryogenic solution for capturing and liquefying CO2 from industrial processes, which is being deployed at cement plants and other hard-to-abate facilities.¹³

The company is backing this strategy with substantial capital. Half of its planned €16 billion in investment decisions between 2022 and 2025 are explicitly dedicated to energy transition projects, signaling a definitive strategic pivot.³⁴

B. The Hydrogen Bet: A Calculated Strategy

Within the energy transition, hydrogen represents the largest and most transformative opportunity. Air Liquide is not a newcomer to this molecule; it is a pioneer with over 50 years of experience across the entire value chain, from production to storage and distribution.²⁰ The company’s hydrogen strategy is not a speculative venture but a well-defined, ambitious, and, crucially, de-risked industrial plan.

The key pillars of the hydrogen strategy are:

• Massive Investment: A commitment to invest approximately €8 billion in the low-carbon hydrogen value chain by the year 2035.²⁰
• Ambitious Revenue Target: A goal to at least triple its hydrogen-related turnover from a base of roughly €2 billion to over €6 billion by 2035.²⁰
• Electrolysis Capacity Goal: A plan to build and operate 3 gigawatts (GW) of electrolysis capacity by 2030, which is essential for producing green hydrogen from renewable electricity.²³
• Flagship Projects: The strategy is not abstract; it is anchored by large-scale, tangible projects that are already underway. These include the 200 MW Normand’Hy PEM electrolyzer in France, which will be one of the world’s largest, and the ELYgator project, another 200 MW electrolyzer in the Netherlands.³
• Control of Core Technology: A critical and differentiating element of the strategy is the joint venture with Siemens Energy. Together, they have built a state-of-the-art gigafactory in Berlin to mass-produce the Proton Exchange Membrane (PEM) electrolyzers that are the core technology for green hydrogen production.¹³ This vertical integration gives Air Liquide control over its supply chain for this critical component, helps drive down costs through scale, and ensures it has the technology needed to execute its own ambitious project pipeline.

The hydrogen economy is a massive opportunity, but it is also fraught with risks, including high capital requirements, technological hurdles, and demand uncertainty. Air Liquide’s strategy is intelligently designed to mitigate these risks. The company is not building speculative merchant plants and hoping customers will appear. Instead, it is applying its traditional Large Industries business model to this new market. It is co-developing projects and signing long-term offtake agreements with industrial giants like TotalEnergies and ExxonMobil, effectively locking in demand before major capital is committed.²³ It is focusing on creating integrated “industrial basins” where producers and consumers of hydrogen are co-located, optimizing logistics and creating powerful network effects.²⁰

This disciplined, industrial approach transforms the high-potential hydrogen market from a speculative bet into a core, long-term industrial business with a much higher probability of success and profitable returns. Air Liquide is not just adapting to the energy transition; it is actively engineering its future leadership role within it.

V. Financial Analysis and Capital Allocation

A deep dive into Air Liquide’s financial performance and capital allocation strategy reveals a company with a long history of compounding value, strong recent momentum, and a clear plan for financing future growth while rewarding its shareholders.

A. Historical Performance Review (10-Year)

Air Liquide’s long-term track record is a testament to the resilience and compounding nature of its business model. Over a 30-year period, the company has delivered a compound annual growth rate (CAGR) in revenue of +7.1% and in earnings per share (EPS) of +5.9%.⁵ This consistency has translated into strong shareholder returns, with a 10-year total shareholder return of a robust 173.6%.⁴⁰ The dividend has been a core part of this return, growing reliably with a 5-year CAGR of 8.14%.⁴¹ This history of steady, profitable growth demonstrates the company’s ability to create value through economic cycles.

Table 1: 10-Year Consolidated Financial Summary

Fiscal Year	Revenue (€M)	Recurring Net Profit (€M)	EPS (€)	Dividend Per Share (€)
2015	16,378	1,770	3.78	2.55
2016	18,135	1,844	3.51	2.60
2017	20,349	1,967	3.75	2.60
2018	21,011	2,112	3.99	2.65
2019	21,920	2,242	4.25	2.65
2020	20,485	2,435	4.61	2.75
2021	23,335	2,572	4.86	2.75
2022	29,934	2,759	5.22	2.95
2023	27,608	3,078	5.90	3.20
2024	27,058	3,300 (est.)	5.74	3.30

Source: Compiled from.² Note: Data is based on multiple sources and may include slight variations due to reporting standards (e.g., IFRS, TTM) and currency conversions. EPS and Dividend are adjusted for stock splits and free share attributions where applicable.

B. Recent Financial Performance (FY 2024 & H1 2025)

The company’s recent performance has been particularly strong, demonstrating the early success of the ADVANCE plan even in a sluggish global macroeconomic context.⁴

• Full Year 2024: Air Liquide reported revenue of €27.1 billion, representing comparable growth of +2.6%. Operating Income Recurring (OIR) grew by a much stronger +10.7% on a comparable basis to €5.4 billion. Net profit reached €3.3 billion, and the recurring ROCE stood at an impressive 10.7%.¹³
• First Half 2025: The momentum continued into the new year. H1 2025 revenue was €13.7 billion, up +1.8% on a comparable basis. OIR reached €2.7 billion, showing comparable growth of +7.2%. Net profit was €1.8 billion, and recurring ROCE improved further to 11.0%.¹⁶

The most critical trend evident in these results is the powerful operating leverage at play. In the first half of 2025, OIR grew at four times the rate of comparable sales (+7.2% vs. +1.8%).³ This highlights the profound impact of the margin improvement initiatives at the heart of the ADVANCE plan. The company is successfully translating modest top-line growth into much stronger bottom-line profit growth.

Table 2: FY 2024 & H1 2025 Financial Highlights

Metric	FY 2024	FY 2023	Change	H1 2025	H1 2024	Change
Revenue (€M)	27,058	27,608	-2.0%	13,722	13,379	+2.6%
Comparable Revenue Growth	+2.6%			+1.8%
OIR (€M)	5,391	5,068	+6.4%	2,737	2,601	+5.2%
Comparable OIR Growth	+10.7%			+7.2%
OIR Margin (ex-energy)	N/A		+110 bps	N/A		+100 bps
Recurring Net Profit (€M)	3,078	2,759	+11.6%	1,842	1,681	+9.6%
Recurring EPS (€)	5.90	5.22	+13.3%	3.12 (pub.)	2.92 (pub.)	+6.8%
Recurring ROCE	10.7%	10.6%	+10 bps	11.0%	10.5%	+50 bps

Source:.³ Note: OIR Margin improvement ex-energy is a key performance indicator from the ADVANCE plan.

C. Capital Allocation Strategy: Fueling Growth, Rewarding Loyalty

Air Liquide’s capital allocation strategy strikes a clear and disciplined balance between reinvesting for future growth and providing consistent returns to its shareholders.

• Investment for Growth: The company is in a period of record-level investment, driven by the opportunities in the energy transition and electronics. The ADVANCE plan targets approximately €16 billion in investment decisions over the 2022-2025 period.³⁴ The company is well on its way to meeting this goal, having already made €12.7 billion in decisions by the end of 2024.⁵ The pace of investment is accelerating, with a record €4.4 billion in decisions made in 2024, followed by a record first-half decision level of €2.3 billion in H1 2025.¹⁶ This has driven the investment backlog—a portfolio of projects that have been decided but are not yet contributing to sales—to a new record high of €4.6 billion.⁴⁶ This backlog provides strong, tangible visibility into future growth, independent of the broader economic climate.
• Rewarding Shareholders: Air Liquide has a deep-rooted culture of rewarding its shareholders, particularly the large cohort of long-term individual investors. The dividend policy is central to this, with a target payout ratio typically in the range of 55-60% of net profit.⁴¹ A unique and powerful feature of its shareholder policy is the loyalty bonus. Shareholders who hold their shares in registered form for more than two full calendar years receive a 10% premium on their dividends and are allocated 10% more free shares during the company’s regular free share attributions.²⁸

This loyalty program is a distinct strategic asset. It fosters an exceptionally stable and “sticky” long-term shareholder base. This stability affords management the latitude to pursue large, capital-intensive projects with long payback periods—such as those in the hydrogen sector—without being unduly pressured by the short-term performance demands that can dominate the thinking of more transient institutional investors. It is a symbiotic relationship that underpins the company’s ability to execute its long-term vision.

VI. Valuation: Assessing the Investment Proposition

Synthesizing the operational and strategic analysis, the final step is to assess whether Air Liquide’s stock is attractively priced. The valuation case rests on the potential for the company’s valuation multiple to expand as it successfully delivers on its strategic promises, thereby closing the gap with its main competitor.

A. Relative Valuation

As established, Air Liquide trades at a persistent and significant valuation discount to its larger peer, Linde plc. This is evident across the primary valuation multiples used for mature industrial companies.

• Price-to-Earnings (P/E) Ratio: Air Liquide’s trailing twelve months (TTM) P/E ratio is in the 26x to 30x range.²⁶ In contrast, Linde commands a higher multiple in the 32x to 34x range.²⁴
• Enterprise Value to EBITDA (EV/EBITDA): This multiple, which accounts for debt, tells a similar story. Air Liquide’s TTM EV/EBITDA is approximately 13.5x to 15.5x ³², while Linde’s is notably higher at around 18x to 19x.³³

From a historical perspective, Air Liquide’s current valuation is above its own 10-year average P/E of roughly 24.6x.³⁰ This suggests that the market is beginning to recognize and price in some of the progress made under the ADVANCE plan. However, the wide and persistent gap relative to its closest and most relevant peer remains the most salient feature of its valuation.

Table 5: Peer Valuation and Performance Matrix

Metric	Air Liquide (AI.PA)	Linde plc (LIN)	Air Products (APD)
Market Cap	~€100B	~$215B	~$60B
LTM Revenue	~€27.1B	~$33.0B	~$12.1B
LTM Operating Margin	~20.0%	~27.4%	~21.5%
LTM ROCE / ROIC	~10.7%	~11.8%	~8.6%
TTM P/E Ratio	~29.1x	~32.7x	~23.9x
Forward P/E Ratio	~26.0x	~34.4x	~21.0x
TTM EV/EBITDA	~15.4x	~18.9x	~17.8x

Source: Compiled from.¹⁶ Note: Figures are approximate and based on the latest available trailing-twelve-month (TTM) or full-year data from multiple sources. Market caps are dynamic.

B. Justifying the Multiple: The Path to a Re-Rating

The investment case for Air Liquide does not depend on the company being “cheap” in an absolute sense. It is a high-quality industrial leader and is valued as such. Instead, the case rests on the high probability of a valuation re-rating driven by a narrowing of the discount to Linde.

The primary catalyst for this re-rating is the direct and measurable execution of the ADVANCE plan’s margin improvement target. The historical valuation gap can be largely attributed to Linde’s superior profitability. If Air Liquide successfully delivers on its unprecedented +460 basis point margin improvement target by 2026, its profitability profile will converge significantly towards that of Linde. At that point, the justification for the current wide valuation discount would be substantially eroded.

The market currently appears to be taking a “wait and see” approach. It has rewarded Air Liquide for the progress made so far—pushing its multiple above its historical average—but it has not yet fully priced in the successful achievement of the ultimate 2026 goals. This creates the investment opportunity. An investment in Air Liquide today is a bet on continued execution. If management continues to deliver on its promises, as its track record strongly suggests it will, investors stand to benefit from a powerful “double-win”: first, from the underlying growth in earnings driven by sales and margin expansion, and second, from the expansion of the valuation multiple as the market recognizes the company’s enhanced and more sustainable profitability profile.

VII. Risk Assessment

A comprehensive analysis requires a clear-eyed and objective assessment of the potential risks to the investment thesis. While Air Liquide’s business model is inherently resilient, it is not without risks that investors must consider.

A. Macroeconomic and Geopolitical Risks

As a large, global industrial company, Air Liquide is inherently exposed to the broader economic environment. A severe global recession could impact industrial production and thus demand for its products, particularly in the more cyclical parts of its portfolio. The company is also exposed to inflation and fluctuations in energy prices, and its global footprint exposes it to geopolitical tensions and trade disputes.⁴⁷ The energy situation in Europe, while having stabilized since the 2022 crisis, remains a background risk given the region’s importance to the Group’s revenue.⁴⁹

Mitigants: These risks are substantially mitigated by the core strengths of the business model. The diversification across defensive (Healthcare) and cyclical (Industrial) end-markets provides a natural buffer. Most importantly, the contractual framework with its take-or-pay clauses and, crucially, the automatic pass-through of energy and inflation costs, provides a powerful and proven shield for profitability, as demonstrated during the recent period of extreme volatility.⁷ Finally, the balanced geographic footprint helps to smooth out the impact of downturns in any single region.³

B. Execution and Competitive Risks

Air Liquide is undertaking a record level of capital investment, with a significant portion allocated to large, complex, and sometimes first-of-a-kind projects in the energy transition space. There is inherent execution risk in delivering these projects on time and on budget. Delays or cost overruns could negatively impact projected returns. Furthermore, competition in the industrial gas oligopoly remains intense. Both Linde and Air Products are formidable competitors who are also investing heavily in hydrogen and other growth areas, which could lead to pricing pressure or a fight for the most attractive projects.²⁴

Mitigants: Air Liquide possesses a long and successful track record of executing large-scale capital projects around the world. Its strategy of de-risking major hydrogen investments by securing long-term offtake agreements with blue-chip partners before committing capital significantly reduces demand risk. The rational nature of the oligopolistic market structure has historically tended to promote disciplined pricing behavior, limiting the risk of value-destructive price wars.

C. Regulatory and Transition Risks

The economics of the energy transition, particularly for large-scale green hydrogen and CCUS projects, are currently dependent on supportive government policies, regulations, and subsidy schemes (such as the U.S. Inflation Reduction Act). A significant negative shift in the political or regulatory landscape could alter the financial viability of some of these future projects. There are also technological risks associated with scaling new solutions from the pilot phase to full industrial deployment.

Mitigants: The global political and societal momentum behind decarbonization is immense and represents a powerful, multi-decade tailwind that is unlikely to reverse. If anything, the regulatory pressure is more likely to intensify, further increasing demand for Air Liquide’s solutions. The company’s strategic investment in controlling core technologies, exemplified by the Siemens Energy electrolyzer joint venture, gives it greater command over its own technological roadmap and reduces reliance on third-party innovation.³⁹

VIII. Concluding Remarks and Investment Recommendation

The analysis of Air Liquide reveals a company at a pivotal moment in its long and successful history. It is leveraging its foundational strengths—a resilient, diversified, and contractually protected business model—to execute a clear and ambitious strategy that positions it for decades of profitable growth.

• The Bull Case: The investment thesis is clear and compelling. Air Liquide is a best-in-class industrial leader that is successfully transforming its profitability profile through the rigorous execution of its ADVANCE strategic plan. The repeated upward revisions of its margin targets demonstrate management’s confidence and capability. The company is a primary and de-risked beneficiary of the powerful, secular decarbonization megatrend, with a credible and industry-leading strategy in hydrogen. Despite this strong performance and clear outlook, the stock trades at an unjustified valuation discount to its main peer, Linde plc, offering a distinct and tangible opportunity for a valuation re-rating as the profitability gap narrows.
• The Bear Case: The counterarguments center on valuation and execution. The stock’s valuation is not cheap in absolute terms and already sits above its long-term historical averages. The successful achievement of the ambitious hydrogen and margin improvement targets, while progressing well, is not guaranteed and carries significant execution risk associated with the record level of capital deployment. Finally, intense competition from an equally strong and well-managed peer in Linde could potentially cap margin potential and returns.

Air Liquide is a high-quality compounder that offers a rare combination of defensive stability and significant exposure to secular growth. The market appears to be underappreciating the credibility of management’s execution on the ADVANCE plan and the structural nature of the margin improvements being delivered. The current valuation does not fully reflect the successful de-risking of its energy transition strategy and the high probability that the company will achieve its ambitious 2026 financial targets. Therefore, an investment in Air Liquide SA today offers a compelling risk/reward proposition, with the potential for strong returns driven by the dual levers of solid earnings growth and a narrowing of its valuation discount to its peers.

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