France's Gaztransport et technigaz SA (XPAR:GTT) is a prominent engineering firm specializing in containment systems for the shipping and storage of liquefied natural gas under cryogenic conditions, all while striving to become a carbon-neutral entity. The company provides an array of services including engineering, consultancy, training, maintenance support, and technical design. Through its exceptional expertise, dedication to innovation, and strong customer relationships, Gaztransport et technigaz SA (XPAR:GTT) has firmly established itself as a global leader in LNG shipping.

Innovation and Collaboration

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Gaztransport et technigaz SA (XPAR:GTT)'s innovation strategy is purposefully crafted to meet the operational efficiency and safety demands of customers, aligning with international maritime regulations. To achieve this, the company operates its own testing laboratory and actively collaborates with engineering companies, research institutions, laboratories, and universities. This collaborative approach enables Gaztransport et technigaz SA (XPAR:GTT) to continually advance its LNG containment technologies and explore solutions for other liquefied gases.

Expanding Offerings and Market Presence

In addition to its core LNG focus, Gaztransport et technigaz SA (XPAR:GTT) continually expands its offerings, catering to the offshore industry, multi-gas carriers, and various carrier sizes. The company is also at the forefront of capitalizing on the emerging market for LNG as a propulsion fuel. As part of its commitment to customer support, Gaztransport et technigaz SA (XPAR:GTT) continuously enhances its range of high-value services.

Investor Interest and ESG Strategy

The stock captured my attention when I saw a guru of European investing, Alexander Darwall invest in the company. He recently wrote:



Gaztransport et technigaz SA (XPAR:GTT) shares performed well after reporting excellent results. As a play on LNG, Gaztransport et technigaz SA (XPAR:GTT) is likely to flourish as LNG, for all the talk of renewables, is a vital and growing energy source. Many might wish it otherwise, but there is little doubt that demand for natural gas is likely to continue to increase.

Source: Alexander Darwall, Chief Investment Officer, Devon Equity Management August 2023 Newsletter for the European Opportunities Trust PLC (LSE:EOT).

ESG investors, who are influential in Europes markets, like Gaztransport et technigaz SA (XPAR:GTT) because of its clearly defined corporate social responsibility strategy which rests on three main pillars:

Self-Initiated Sustainability: Prioritizing safety, gender equality, talent retention, and anti-corruption initiatives within the company. Innovation Driven by Environmental Challenges: Focusing research and development on zero-carbon solutions in line with decarbonization strategies. Emissions Reduction Commitment: Demonstrating responsibility by significantly lowering emissions.

Four Cornerstones of Innovation

Growth investors, like Darwall, cite Gaztransport et technigaz SA (XPAR:GTT)s leadership in innovation which can be grouped into four areas.

Reliability: Gaztransport et technigaz SA (XPAR:GTT) is unwavering in its commitment to operational integrity, ensuring that its systems remain operational under all conditions. The company's technology has successfully navigated even the challenges of ice-breaking LNG carriers, attesting to its capability in extreme Arctic environments.

Thermal Performance: Gaztransport et technigaz SA (XPAR:GTT)'s technology is designed to securely transport gas while minimizing losses. Research primarily targets reducing vessel operating costs and LNG boil-off rates, with a focus on materials science.

Competitiveness: As a technological leader, Gaztransport et technigaz SA (XPAR:GTT) faces the competition head-on, continually improving its processes and materials to maintain its edge in the industry.

Exploring New Markets: Gaztransport et technigaz SA (XPAR:GTT)'s research also extends to adapting existing technologies to meet the needs of emerging sectors, such as bunkering and LNG distribution using smaller carriers.

H1 2023 Results and Future Projections

In the first half of 2023, Gaztransport et technigaz SA (XPAR:GTT) accomplished some significant milestones. The company made strides in the development of advanced containment technologies, particularly for LNG and liquid hydrogen transportation, electrolysis, carbon capture, ammonia compatibility, and gas management.

It was also successful in securing 43 new orders within its core business, with 42 pertaining to LNG Carriers and 1 for a Floating LNG vessel, reflecting a consistent market demand. Notably, Gaztransport et technigaz SA (XPAR:GTT) obtained approval for the construction of new fuel liquefaction facilities with an impressive annual capacity of 40 million tons.

The addition of three new independent Directors to the Board enhanced its governance and strengthens the leadership team. Further affirming its growth trajectory, Gaztransport et technigaz SA (XPAR:GTT) secured an order book comprising 302 energy clients with a total value of 1790 million ($1940 million), slated for delivery by June 2023, highlighting strong forward commitments.

The company's scope expanded as it received an order to design cryogenic tanks for ten LNG-powered ultra-large container ships, and it extended its services portfolio through the signing of a Technical Service Agreement to maintain and operate a fleet of 33 vessels.

Anticipated revenue from the existing order book amounted to 152 million ($165 million). Revenue sources were diverse, including royalties from the core business, revenue generated by its Elogen business, and income from service activities. Consolidated revenue for H1 2023 amounted to 177.8 million ($193 million), marking a substantial 23.3% increase compared to the same period in 2022. Demonstrating financial strength, Gaztransport et technigaz SA (XPAR:GTT) achieved a robust EBITDA of 104.2 million ($104 million), translating to an impressive margin of 58.6%. The company's operating income reached 99.6 million ($109 million) during H1 2023, while the net income for the same period totaled 84.0 million ($91 million). Gaztransport et technigaz SA (XPAR:GTT)'s proposed interim dividend of 1.85 ($2.01) per share marked a noteworthy 19.4% increase from the 2022 interim dividend, underlining the company's commitment to delivering value to shareholders.

Looking ahead to 2023, Gaztransport et technigaz SA (XPAR:GTT)'s projections indicate a positive outlook. The company's consolidated revenue I believe will be about 400 million ($435 million), reflecting continued growth. I think consolidated EBITDA is will be slightly more than 200 million ($217 million), highlighting sustained operational strength. In line with its commitment to rewarding shareholders, Gaztransport et technigaz SA (XPAR:GTT) aims to achieve a dividend payout for 2023 of at least 80% of consolidated net income, further reinforcing its shareholder-friendly approach. The companys main direct clients are ship building companies who are building ships for the energy industry to buy or charter.

Financial Analysis

The stock is rated Modestly Overvalued by GF Value, so its probably not worth buying right now. However, its excellent Altman Z-Score of 13.8 demonstrates the companys very strong financial position. GTT is a great 'play' on LNG

Conclusion

The stock is interesting with a bright long-term future and it's a leader in its field. Its firmly on my watchlist and Ill revisit it again once the valuation is more attractive.

This article first appeared on GuruFocus.