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The following segment is taken from this funding letter.


Chart Industries, Inc. (NYSE: GTLS)

We initiated a position in Graphic Industries, Inc.one of the world’s leading manufacturers of high-tech cryogenic equipment used in liquid gas supply chains supporting industrial gas, natural gas, liquefied natural gas (LNG) and emerging clean energy end markets.

Chart’s primary products are heat exchangers and cryogenic storage tanks backed by upstream engineering, service and repair. CEO Jill Evanko took over a more cyclical fossil fuel-focused business in mid-2018 and revamped the business by leveraging strong market positioning in key cryogenic technology and deploying strategic capital to create a lean picks and shovels supplier serving not only historical industrial gas and LNG customers, but also specialty markets such as hydrogen, carbon capture, water treatment and food and beverage.

This broader end-market focus has led to multiple orders and one-of-a-kind customer wins, with an impressive 402 new customers added in 2021. Jill has also focused on and grown a repair business , service and rental with long-term contracts. that provide stable recurring revenue streams. Chart maintains a high market share given its long history (over 100 years!) of operations, the depth and breadth of its quality products and solutions (87% of products include Chart intellectual property ) and its global operational footprint.

Chart is also one of the few companies that can manufacture brazed aluminum heat exchangers, a key part of liquefaction processes, and has the two largest brazing furnaces in the world.

At its Investor Day in early 2022, the company released 2025 targets of revenue CAGR above 17% and EPS CAGR above 25% from 2022 levels, primarily due to growth in the LNG and specialized markets. The world’s limited investment in natural gas and LNG infrastructure over the past decade, highlighted by the ongoing conflict between Russia and Ukraine, and a growing mentality towards cleaner and greenerboth play into Chart’s base abilities.

Within LNG, Chart is benefiting from strong demand for large-scale export terminals, small-scale/utility projects and infrastructure equipment. Within specialty markets, the fastest growing, highest margin segment, global decarbonization and sustainability trends will drive increased demand for hydrogen, carbon capture and processing. water, with segment revenue expected to grow from $433 million in 2021 to more than $1 billion over the next few years. years.

We believe we buy the stock at a very reasonable multiple of 2023 EBITDA, and that the company can exceed its 2025 targets and continue to grow revenue at mid to high single digit CAGR, and EBITDA at a faster pace until the end. of the decade. Given its small-cap manufacturing model, the company will generate significant free cash flow (mid-teens % of revenue) to be used for strategic mergers and acquisitions and returning capital to shareholders.

We believe Chart can generate cash flow at a rate from mid-teens through the end of the decade with a demand profile driven more by clients’ long-term investment decisions and less by macroeconomic factors at short term, making it a great addition to our industrial products. assets and existing portfolio.


Editor’s note: The summary bullet points for this article were chosen by the Seeking Alpha editors.