Off the floor Broker Talk Markets 5 March 2010 161 views No Comment  Print This Post  Email This Post

Haycarab PLC (HAYC) a 67.7% owned subsidiary of Hayleys PLC, which accounts for circa 16% of the global activated carbon production. As the leading coconut shell based Activated Carbon (AC) producer, it has an installed capacity of 22,000 MT per annum with 04 manufacturing plants strategically located in Sri Lanka, Thailand and Indonesia.

HAYC currently focuses more into activated carbon systems as well as high quality value added products targeting developed and developing countries. In Sri Lanka, HAYC has the largest market share in producing coconut shell based AC.

The net profit in FY08 was LKR179.9 mn with a 64.7% YoY growth in comparison with the previous year. We expect the bottom line to grow at a 3 year (2009-2012) CAGR of 39.5% due to HAYC's strong customer relationships and competitive pricing of AC and other value added products.

HAYC plans to expand its presence to India where activated carbon is produced mainly using wood charcoal and shell charcoal. This may lead the company for further diversification from shell based AC to wood based AC positively affecting the bottom line in the long run.

Backed by the growing global demand for environmental friendly coconut shell based AC we forecast the company to post a net profit of LKR545.8 mn in FY11E (up 7.5% YoY) and reach LKR611.4 mn in FY12E (up 10.7% YoY). The share currently trades on 9.6X forecast FY10E net profits whilst trading at 8.9X projected FY11E net earnings.

Sri Lanka Equity Analytics

World Trade Centre

Colombo, Sri Lanka

Email: info@srilankaequity.com

Web: www.srilankaequity.com

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