Listed activated carbon manufacturer Haycarb Plc, a unit of listed Hayleys Plc, is on a roll! It enjoys a 16% share of the global market for activated carbon and is one of two companies providing supercapacitors to the US electric car giant Tesla. 

Its revenue has grown 70% over four years to Rs22.8 billion in the year to end March 2020, and profits have nearly doubled to Rs1.5 billion during this period. During the first nine months of the 2020/21 financial year, revenue increased by just 7% from a year earlier, but profits soared 120%. The coronavirus pandemic has little impact on sales. Activated carbon is an essential component of air and water purification systems that enjoyed high demand despite the pandemic. Haycarb was able to keep its manufacturing plants open while lockdowns in other parts of the world hurt its competitors. Also, surging demand for gold gave margins a boost because the gold extraction process requires granular activated carbon. 

According to First Capital Research forecasts, revenue is likely to grow by nearly 40% over the next three years to Rs33.8 billion by end-March 2023. However, profits at Haycarb will nearly triple to $4.3 billion as the company invests in R&D to develop high-margin products. 

“The company has over the last three years significantly invested in enhancing its value-added,high-margin product range. These include the activated carbon used in EDLC (Electric double-layer capacitors), impregnated carbon, pelletised carbon and premium cabin air carbon,” First Capital Research said in a valuation note titled ‘The Black Diamond’. 

While Haycarb will continue to enjoy secure demand from the gold mining and the air and water purification industries, the value-added products are also in high-growth industries, such as supercapacitors used by Tesla in its electric cars. Haycarb is also one of two suppliers of supercapacitors to Tesla, and this partnership will drive further growth, First Capital Research believes. 

“Growing global demand for electric vehicles and high requirement for activated carbon for the production of supercapacitors is likely to be a key revenue driver for Haycarb,” First Capital Research said. Tesla’s production expansion will be a material benefit for Haycarb, being one of the two suppliers of activated carbon for Tesla, it said.