These two giants are helping contain COVID-19, and these actions could benefit their investors.
Although they aren’t part of the healthcare industry, China Petroleum & Chemical Corp (SEHK:386), also known as Sinopec, and BYD Co Ltd (SEHK:1211) are helping China fight against COVID-19, which has caused widespread economic pain across the world.
Here’s how these two companies fighting the pandemic could benefit their stockholders and bolster economic recovery.
Sinopec is a leading oil and gas producer in China. It’s also a leading refiner and distributor of oil.
As a state-owned enterprise, Sinopec has shifted some of its considerable resources to help contain COVID-19. The company has produced masks and melt blow fabric, which is a mesh of synthetic polymer fibers necessary for mask making.
Due to the mask shortage, there is a shortage of melt-blow fabric, which has caused a bottleneck. Given its expertise as a refiner and its financial resources, Sinopec is well-positioned to help with this issue.
Although making masks and melt blow fabric are not going to make a big financial impact for a company Sinopec’s size, Sinopec nevertheless benefits from making masks and helping address the melt-blow fabric shortage.
Certain types of masks will help reduce COVID-19 transmission. The melt blow fabric will help with the creation of the masks used by medical professionals. Such masks will help prevent severe second or third waves of COVID-19 infections in China. They can also be exported and shipped overseas.
This considered, a quicker global recovery and a decrease in China’s COVID-19 cases could lead to more demand for oil, bolstering Sinopec’s sales.
BYD is one of China’s leading electric car and battery manufacturers.
As early as late January, BYD began to help with the production of disinfection gels and masks. These were critical supplies needed to combat COVID-19.
Due to the efforts of over 3,000 engineers, BYD was able to produce these products at a much faster rate than normal. As a result, BYD is now producing around 5 million masks, as well as 300,000 bottles of disinfectant every day.
This said, like Sinopec, BYD’s mask-making business will probably not make a big difference in the company’s overall financial results.
The decline in electric car sales has been too great.
However, BYD’s production of masks will bring secondary benefits. As noted during the Sinopec section, the use of masks and disinfectants reduces the chance of COVID-19 cases spiking again in China.
This will help protect car sales in the future.
BYD will win goodwill from the Chinese government for helping fight the virus. If BYD exports some masks to other countries, it could raise itself in those countries’ eyes, as well.
BYD’s shift from producing cars and batteries to producing masks shows how flexible the company can be. The company’s management can spot future opportunities and execute quickly. These traits should give investors additional confidence in BYD’s future.
BYD and Sinopec are helping contain COVID-19 by making masks.
Although the mask making won’t help their bottom lines by much, the products could help contain the outbreak and prevent more demand destruction. Beyond that, the companies’ quick response to the pandemic should be viewed as a positive, indicating strong management that can identify problems and execute solutions.