Surgical Glove Maker Catapults Into Poland’s Stock Benchmark

(Bloomberg) -- Mercator Medical SA will join Poland's main stock index, capping a stunning rise for once little-known company that tapped into surging global demand for medical gloves at the height of the pandemic. It's replacing Alior Bank SA.

The operator of a latex gloves factory in Thailand is valued at 3.7 billion zloty ($972 million) after a 4,141% rally last year. Hampered by virus-related provisions, Alior will lose its place in Warsaw's WIG20 index of the biggest and most-traded stocks, effective March 22, the bourse said in a statement. Mercator gained as much as 2.3% and Alior slumped 3% on Friday.

The family-run company, which for years has struggled to turn a profit, got a strong tailwind from the outbreak of the Covid-19 pandemic due to limited competition in Europe and runaway prices for medical equipment.

Mercator, covered by a single analyst, posted almost 1 billion zloty in profit last year, allowing it to repay all loans. The company sits on a 535 million zloty cash pile, which it plans to use for building a new plant and to pay dividends.

Still, its skyrocketing valuation, fueled mostly by home-confined retail traders, raises doubts over its sustainability once the pandemic subsides, according to BOS Bank SA.

It may be a “challenge” for Mercator to retain its place in the WIG20 index after paying out dividends as cash accounts for a “big chunk” of its current market value, BOS's analyst Tomasz Rodak said.

Mercator will have a weight of 0.6% in the gauge, which gradually diversifies away from energy companies and banks.

Alior, OncoArendi Therapeutics SA, Polenergia SA, Selvita SA, Stalprodukt SA will replace BNP Paribas Bank Polska SA, CI Games, PZ Cormay SA, Mabion SA and Mercator in mWIG40 index of mid-sized companies.

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