Chart Industries (GTLS): Why the Undervalued Clean Energy Play Shouldn’t Be Overlooked

Chart Industries (GTLS), a leader in cryogenic equipment for energy transition sectors, has delivered a Q1 2025 report card that mixes near-term turbulence with undeniable long-term promise. While its Cryo Tank Solutions segment faces headwinds, the company’s high-margin Heat Transfer and Specialty Products divisions are firing on all cylinders, backed by a record backlog and management’s unwavering guidance. With shares trading at just $135.87—nearly 30% below the average analyst target of $197.67—the stock presents a compelling entry point for investors willing to look past short-term noise.

The Case for Resilience: High-Margin Segments Lead the Charge

While GTLS’s Cryo Tank Solutions (CTS) segment saw year-over-year order declines, the sequential uptick in demand signals stabilization. More importantly, the company’s Heat Transfer Systems (HTS) and Specialty Products divisions are driving margin expansion and backlog growth.

• HTS Segment: Orders dipped 7% YoY, but sales surged 5.4% to $267.3 million, fueled by LNG and data center projects. Gross margins jumped 330 basis points to 30.9%, with operating margins soaring 460 bps to 25.5%. Management highlighted “robust demand” in these sectors, suggesting HTS’s momentum is far from peaking.
• Specialty Products: Orders exploded 24.6% YoY to $487.7 million, driven by nuclear, space exploration, and hydrogen-powered vehicle tanks (HLNG). Sales rose 16.7%, while gross margins hit 30.3%—the first time above 30% since Q3 2022. A landmark deal with Volvo-Eicher for HLNG tanks and a partnership with Honeywell UOP underscore the segment’s strategic importance in decarbonization.

These divisions now account for 76% of total backlog ($4.1 billion combined), a clear sign that GTLS is leaning into high-margin markets with secular tailwinds.

Backlog & Guidance: A Strong Foundation for Growth

GTLS’s total backlog hit a record $5.14 billion as of Q1 2025, with HTS and Specialty Products each exceeding $2 billion. Management expects a Q2 book-to-bill ratio >1.0, a critical signal of demand sustainability. Despite CTS’s softness, the company reaffirmed 2025 guidance of $4.65–4.85 billion in sales and $12.00–13.00 adjusted EPS—a testament to its confidence in backlog conversion and margin expansion.

Valuation: A Discounted Play with a High Safety Margin

At current prices, GTLS trades at just 10.9x forward EV/EBITDA, a stark discount to its 5-year average of 14.2x. Meanwhile, its Piotroski F-Score of 9/9—a rare feat—reflects strong financial health, with improving margins, free cash flow (FCF) visibility, and debt reduction plans. Management aims to lower net leverage to 2.0–2.5x by year-end, freeing capital for reinvestment in high-return projects.

The stock’s disconnect from analyst targets is puzzling. The average price target of $197.67 implies a 45% upside, supported by:
1. LNG Infrastructure Boom: Global LNG capacity is set to grow by 25% by 2030, with GTLS positioned as a key supplier for liquefaction terminals.
2. Hydrogen & Nuclear: The Specialty Products segment’s 22.8% YoY backlog growth in nuclear and hydrogen markets aligns with the $1.2 trillion U.S. infrastructure bill and EU’s green hydrogen targets.
3. Data Center Cooling: HTS’s 25.5% operating margins in this segment reflect recurring demand for advanced cooling systems in hyperscale data centers.

Near-Term Risks vs. Structural Opportunities

Critics will point to tariffs and CTS softness as reasons to avoid GTLS. The company estimates tariff impacts of $50 million in 2025, but its mitigation strategies—such as regional supply chains and price hikes—are already in motion. While CTS’s backlog is down 13.5% YoY, its sequential order growth and stabilization in Q1 suggest the worst is behind this segment.

Conclusion: Buy the Dip in a Clean Energy Winner

GTLS is a classic “value trap” candidate—except it’s no trap. Its backlog, margin trajectory, and exposure to $1.2 trillion in global energy transition spending make it a buy at current levels. With shares priced for continued weakness in low-margin segments, investors are being compensated handsomely to bet on the company’s high-margin, structural growth drivers.

Action: Investors should accumulate GTLS now, targeting a 2025 EPS of $13.00 and a 15x P/E multiple—implying a $195 price target. The stock’s robust FCF generation, improving margins, and undeterred demand in LNG, hydrogen, and data centers justify a buy rating.