Dipped Products, Haycarb well-positioned to benefit from possible COVID-19 third wave

• Says Dipped Products could further benefit from ban on Top Glove products by US 
• Haycarb witnesses demand for its products from non-traditional export markets

Hayleys Group’s Dipped Products PLC (DPL) and Haycarb PLC are well-positioned to benefit most from a potential COVID-19 third wave globally, which could ramp up the demand for personal protective equipment (PPE), according to a research report by an equity brokerage.  

Despite the global vaccine drive, there has been a spike in COVID–19 cases globally, dominated by new variants, particularly in India, Thailand and Italy, indicating signs of a possible COVID-19 third wave. 

“From a local context, companies such as Dipped Products PLC and Haycarb PLC are set to gain the most from the rise in demand for PPE and the inelastic nature of demand that exists in the activated carbon industry,” SC Securities said in a research note. 

Further, rubber glove-maker DPL is expected to benefit from the blanket ban imposed by the US on the world’s largest rubber glove-maker Malaysia-based Top Glove, last month.
The US banned all disposable gloves originating in Top Glove factories in Malaysia, after discovering evidence of labour violations in its plants. 

“This, however, represents a perfect opportunity for the local players such as Dipped Products, who specialise in rubber gloves. As they are a key export player in rubber PPE, they can further enhance their profit generation by capturing some of the void left by the Top Gloves ban by the US,” SC Securities opined.

DPL Chairman Mohan Pandithage and its Managing Director Ng Soon Huat in the company’s recent annual report highlighted that DPL is well-positioned to capitalise on the emerging opportunities in the PPE and rubber glove spheres. 

“The outlook for the hand protection sector remains promising. Increasing global focus on health and safety considerations have led to a surge in demand for essential personal protective equipment and rubber gloves; given our recent capacity expansions and product development, we are in good stead to capitalise on these opportunities. The order books are strong and we will continue to fulfil customer requirements while pursuing growth aspirations in our key product verticals. We will continue to expand our manufacturing capacity,” they elaborated. 

DPL saw its profits increasing by a record 447 percent year-on-year to Rs.3.5 billion for the nine months ended on December 31, 2020. According to SC Securities, activated carbon-maker Haycarb is also expected to see an increase in demand on the back of its prominence in the application of face masks production, coupled with the traditionally inelastic nature of demand that exists in that market segment.

The company has announced plans to increase its manufacturing capacity with focused investments to enhance the capacity to manufacture value-added activated carbon. 

“The company will continue to invest in research and development to acquire the capability to manufacture new value-added products, re-engineer processes and acquire new technologies,” Haycarb stated in its recent annual report.

With the emergence of the COVID-19 pandemic, the company has witnessed growth in its sales volumes in non-traditional markets such as Russia, West Africa, South East Asia and China, in addition to traditional export markets. 

“The marketing team of Haycarb USA Inc. supported by the central marketing and technical teams will continue to work on increasing Haycarb’s market share in the North American market while the Eurocarb team is engaged in initiatives in Europe to expand value-added segments such as premium cabin air, general air, personal respirator protection, including impregnated carbons and human consumption carbons,” Haycarb annual report stated.  

Haycarb’s profit soared by a record 120 percent year-on-year to Rs.2.4 billion for the nine months ended on December 31, 2020.

SC Securities expects that the attractive propositions of the two units of Hayleys Group to have a direct impact on the group’s performance on the Colombo Stock Exchange as well. 

In addition, SC Securities also expects the group’s plantation companies with significant exposure to rubber to benefit from the pandemic and due to the current import controls in place.
“Plantation companies such as Kegalle Plantations PLC, Kelani Valley Plantations PLC, Agalawatte Plantations PLC and Namunakula Plantations PLC stand to benefit the most from this,” it noted. (NF)