Disinfectant Sales Help Pakistan Descon as Its Top Clients Shut
Disinfectant Sales Help Pakistan Descon as Its Top Clients Shut
(Bloomberg) -- A surge in demand for disinfectants is helping Descon Oxychem Ltd. at a time when a lockdown in Pakistan to contain the coronavirus outbreak has shuttered textile mills, the chemical maker’s biggest buyers.
Descon’s shares have surged 53% since March 25 when it began selling hydrogen peroxide, used to kill the virus, to banks such as MCB Bank Ltd., Faysal Bank Ltd. and Dubai Islamic Bank’s Pakistan unit, according to Descon’s Chief Executive Officer Imran Qureshi. The demand for the disinfectant came just as textile companies, which account for 70% of sales of the chemical, closed under the lockdown.
The new product “is really helping us continue our operations,” Qureshi said by phone. “Any industries re-opening right now will only put us in a better position.”
Most of the South Asian nation is under a lockdown for the past two weeks with about 4,000 confirmed cases. Factories and businesses are slowly resuming operations and that may propel demand further. Pakistan’s largest province Punjab opened cement factories last week ordering companies to disinfect daily, while Sindh province may ease restrictions next week.
“The company is being cherry picked by investors,” said Suleman Rafiq Maniya, a Karachi-based independent analyst. “The rally will continue since it will see major costs dropping that will improve its bottom-line significantly and it is entering new high-margin areas.”
Still, unless textile companies resume operation, there’s a risk the company will miss analysts’ target of boosting sales growth by 30% in the year ending June 30.
More than half a dozen companies including Engro Corp., one of the nation’s largest business groups, are using the odorless chemical, which can be used during office hours and also works as a sanitizer, Qureshi said.
The company is also benefiting from the drop in prices of liquefied natural gas, the key ingredient for making the chemical. Descon is one of the two publicly traded makers of the disinfectant and plans to increase production by a quarter to 42,000 tons a year in the third quarter, said Qureshi.
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