HONG KONG, Feb 10, 2021 - (ACN Newswire) -  Intco Medical (300677:CH), a leading Shenzhen listed personal protective equipment (PPE) provider, announced on 24 January a positive profit alert for the 12 months ended December 31, 2020. The company expected profit attributable to shareholders to range from RMB6,800 to RMB7,300 million during the review period, representing a year-on-year increase of 3713.45% to 3993.85%.  The sharp jump in earnings was driven by surging global demand for disposable protective gloves amid the COVID-19 pandemic. This backdrop spearheaded significant increase in the prices of the company's disposable protective gloves, thereby boosting both sales revenue and gross profit margin.

The company also passed the resolution of H-share listing plan at the extraordinary general meeting of shareholders on January 6. In response to its favorable corporate development, many securities companies released research reports on the company.  

Among these brokerage commentaries, Guosheng Securities pointed out that the operations and expansion of leading companies in Malaysia were constrained by the COVID-19 pandemic, but the Mainland-based market leaders have managed to become primary beneficiaries of the global capacity shift. Both volume and price of Intco Medical's glove business have risen in the wake of the pandemic, and the record high profit in turn generated abundant cash flow. As the industry leader, the company is expected to continue consolidating its dominant position in the domestic market. The planned H-share issuance is projected to further enhance capital strength. Leveraging its advantages in  technologies and innovation in materials and production facilities, capital and resources, supply chain, sales network and brand, Intco Medical is well positioned to capture market opportunities to enhance its leadership in the disposable glove industry and aims to become the world's most competitive company in the PPE industry.

Indeed, the COVID-19 pandemic has raised tremendously the health protection awareness of people worldwide, and has also made governments of most countries reckon the lack of investment in public health. China Galaxy Securities noted that the COVID-19 pandemic has caused a huge deficiency gap in the supply of personal protective equipment such as disposable gloves. The hollowing out of manufacturing facilities in many developed countries has led to a shrinkage in the productivity of PPE materials. Most developing countries except China also lack the necessary industrial production infrastructure. China-based companies, as represented by Intco Medical, are expanding actively their production capacities to seize market share by virtue of their integrated industry chain advantages. Even if the pandemic subsides in the future, they are expected to capitalize on the supply relationship established during the pandemic, maintain customer connection and raise their market share of disposable gloves perpetually, thus becoming global leaders in the disposable glove industry.

Prevention and Control Measures Will Continue and Boost Global Gloves demands
Everbright Securities is of the view that measures taken to prevent and control the pandemic will continue for another two years and demand for daily personal protective equipment will remain at high level. The global disposable gloves market is expected to continue facing dramatic supply shortages as manufacturers worldwide are unlikely to cope with the explosion in COVID-19 driven global demand due to lack of labor and the time lag in the construction of production facilities.  

Disposable glove processing equipment is not standardized, and each company needs to develop, design and construct by itself. It is extremely difficult for a production line to operate efficiently and stably with low energy consumption while ensuring product quality. All these require manufacturers to accumulate long-term production experience. At the same time, considering the construction costs of production lines, land, workshops, the investment threshold of a nitrile glove factory may exceed RMB300 million. Therefore, only leading manufacturers with capital and technological advantages manage to invest in large-scale nitrile glove factories. Furthermore, the construction cycle of the nitrile glove production line is quite long, and it takes at least 14 to 18 months for a project to start production from planning and site selection. Manufacturers who deploy production capacity earlier will gain the first-mover advantage.

Intco Medical - the largest disposable gloves provider in China and the second largest in the world
Intco Medical was the largest disposable gloves provider in China and the second largest in the world in terms of sales revenue in first half of 2020, according to the Frost & Sullivan Report.

The company has mapped out strategic locations proactively in a bid to expand production capacity. The company has established three production bases in Huaibei (Anhui, China), Qingzhou (Shandong, China) and Zibo (Shandong, China). In 2020, the company's newly added production capacity amounted to 17.0 billion pieces of non-latex disposable gloves, representing a growth rate of 89.5%. This was ranked the fastest ramp-up in the disposable gloves industry, according to the Frost & Sullivan Report.

As of February 2021, the production capacity of non-latex disposable gloves reached approximately 45.0 billion pieces. Based on the production capacity expansion plans, the company expects its annual production capacity for non-latex disposable gloves to reach approximately 120.0 billion pieces in the next 12 to 15 months.

The disposable gloves industry has experienced explosive growth against the backdrop of the COVID-19 outbreak since late 2019. According to the Frost & Sullivan Report, this market is expected to grow from US$8.7 billion in 2019 to US$24.9 billion in 2025 at a CAGR of 19.1%, in terms of sales revenue.

Intco Medical not only possesses innovative automated production facilities with advanced manufacturing process, but also owns a seasoned senior management team with rich experience and professional knowledge in the industry. Mr. Liu Fangyi, Chairman of Intco Medical, has been engaged in the international trade business of gloves and other products since the 1990s. He has achieved significant marketing results for major customers and understands well the development trend of the industry. Moreover, most members of the company's senior management team have a tenure of over 10 years. Led by a lean management system, the company encourages continuously innovation and efficiency.

Everbright Securities commented that the company has definitely been a leading high-end nitrile glove provider in China's domestic market commanding distinguished advantages of equipment integration, research and development in technology and location costs. The company is forecasted to become a global leading high-end medical-grade gloves provider in the long run.

Source: CNFOL.HK - Column


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