Praxair (China) Investment Co. Ltd, the Chinese unit of Praxair Inc. (PX) recently signed a contract with a leading steel and iron enterprise in Shandong province, North China, the Shandong Guangfu Group Co. The contract will strengthen the company’s foothold in North China.
As per the terms of the combustion equipment contract, Praxair will provide its proprietary oxy-fuel technology to Shandong Guangfu Group. One set of Praxair’s gas injection system will be installed at the 100-ton electric arc furnace of the steel mill of Shandong Guangfu Group. The injection system includes three oxygen gas injectors and other related equipment.
Praxair’s oxy-fuel technology is primarily used in steel and non-ferrous metal industries and is widely used in North China, including the provinces of Shanghai, Jiangsu, Zhejiang, Guangdong and Hubei. The technology enhances operation safety, cost saving, productivity and environmental protection.
We believe Praxair’s constant efforts in expanding its activities within its areas of operation and new regions by adding new customers will accelerate profit growth in the future. High project backlog of $2.5 billion at the end of the first quarter 2011 will also add abundantly to its business expansion plan.
For the long run, the company has set a goal to achieve annual organic sales growth of 8%-12%, while it is anticipated that emerging markets, including South America, Asia, and Mexico, would account for approximately 45% of total sales by 2015 compared with 36% in the fiscal year 2010.
The company is slated to release its second quarter financial results on July 27, 2011. Currently, the Zacks Consensus Estimate for the quarter is $1.37, representing a year- over-year increase of 15.44%. Estimate for the fiscal year 2011 and 2012 is $5.47 and $6.27, respectively.
Praxair faces stiff competition from Air Products and Chemicals Inc.(APD) and Airgas Inc. (ARG). We currently maintain a Neutral recommendation on Praxair.
