Weekly Market Report

Trading Week: 23 – 27 December 2017

Summary

Main Topics

· Commodity producers push TEDPIX to new record

· Market and official exchange rate gap narrows as CBI raises dollar further

· Inflation rises to 10% from 9.6%

· Housing market transactions and prices increase

 

Tehran Stock Exchange

The TSE Overall Index (TEDPIX) rose 2.5% to close at 97,899, just shy of its record high of 98,627 set earlier this week. The average daily trading volume fell 15% from last week to USD 64 million. The TSE30 index rose 2.7%, bringing its return since March to 39% versus 27.6% for TEDPIX.  Indices of commodity producers such as Chemicals, Oil Prod­ucts, Metallic Ore, and Base Metals, which have a heavy weighting in the TEDPIX, were positive while Telecommunication, Automotive, Engineering, Pharmaceuticals, and Ce­ment declined. 

 

Chemicals rose 6%, the highest among sectors. Persian Gulf Petrochemical Co. (PKLJ), the largest publicly listed Iranian company, rose 11.2%. PKLJ owns 60% of Pars Petro­chemical Co. shares, an ethane supplier which directly benefits from higher official ex­change rates. Final petrochemical products are generally priced based on the market rate but middle products, such as ethane, are priced based on the official rate. Ghadir Invest­ment Co. (GDIR), a holding company which directly owns 20% of Pars Petrochemical Co., rose 3.8%. GDIR is a constituent of the Industrial Conglomerates sector which rose 3.4% this week. Parsian Oil & Gas Development Co. (PASN), a subsidiary of GDIR which holds another 20% of Pars Petrochemical Co., added 2.5%.

 

Kharg Petrochemical Co. (PKHA), a methanol and LPG exporter, resumed trading after one month and ended the week with a rise of 26.4% to become the top gainer of the week. PKHA released its interim reports for the first half of its fiscal year ending March 2018. Revenues increased 46% to USD 163 million while net income doubled to USD 79 million. PKHA also raised its EPS estimate by 33% and closed with a P/E of 6.27x. PKHA, which generates all its revenue from exports, assumed a rial-usd exchange rate of IRR 40,000 for the remaining three months of its fiscal year, which is still below the current market rate of IRR 41,780.

 

Oil Products rose 5.4% this week as investors reacted to another increase in the official exchange rate and rising global crude oil prices. Base Metals added 3.2%, lifted by large cap steel and copper producers.  Calcimin Co. (KSIM), a main zinc and lead producer, rose 4% before being suspended from trading for publishing a significant adjustment to its EPS guidance. KSIM raised its EPS forecast by 34% while its assumption of a rial-usd exchange rate of IRR 38,000 is closer to the official rate than the market rate. KSIM closed with a P/E of 5.4x based on its own earnings estimate.

 

Most companies in the automotive industry fell and the index ended down 2.7%. Iran Khodro Co. (IKCO) and Saipa Co. (SIPA), the two largest Iranian car makers, fell 6.4% and 1.2% respectively.  Domestic car prices rose recently in response to falls in the rial and expected increases in import tariffs.

 

Iran Fara Bourse

The IFB Overall Index rose 0.1%, taking its return since March to 23.7%.  The steel sector was mixed. Middle East Mines & Mineral Industries Development Holding Co (KHMZ) rose 11.6%, for a two-week gain of 34%. KHMZ generates revenue from sales of iron ore, sponge steel and pellet as well as services. KHMZ’s recent rally started a few days after the company published its first half results for the fiscal year ending March 2018. KHMZ’s six-month consolidated revenue increased 84% to USD 270 million while net income at­tributed to common shareholders rose 33% to USD 41 million. Revenue was split almost equally between sales of raw materials and services, with gross profit margins of 30% and 8.5% respectively.

 

Three other IFB-listed companies in the steel industry fell this week. Esfahan Steel Co. (ZOBZ) lost 10.8% in significant trading volume, more than eliminating all last week’s gains. ZOBZ’s board proposed a capital increase of 22%. Hormozgan Steel Co. (FOHZ) and Arfa Iron and Steel Co. (ARFZ) also fell.

 

Marun Petrochemical Co. (PMRZ), the largest company listed on the IFB, fell 3.5%, trim­ming recent gains. PMRZ was a major drag on the IFB Overall Index this week. Else­where, Zagros Petrochemical Co. (PZGZ) added 4.5%. TSE-listed PASN owns 35% of PZGZ.

 

Foreign Exchange Market

The rial was relatively stable on the open market with the dollar at IRR 41,780. The Cen­tral Bank of Iran (CBI) raised the official dollar rate by 0.5% to IRR 36,000, reducing the gap between the two rates for a second week. The official rate is above the IRR 35,000 proposed for next year’s budget (Apr-Mar).

 

Economic Development

The Consumer Price Index (CPI) rose 1.9% in December from November, the CBI report­ed. The CPI was up 10% on a year-on-year basis, compared to 9.6% in November. All sub-groups of consumer products rose, led by Foods and Drinks which gained 3.4% in a single month. A recent jump in the price of eggs, which has become a hot topic in Iran these days, may have distorted the CPI data. Egg prices have jumped 18.7% in two weeks, based on the CBI’s weekly Tehran groceries report. However, prices of most other items, including chicken, were relatively stable. Officials say an outbreak of avian flu, and the subsequent culling of millions of chickens, was responsible for the recent increase and they expect egg prices to decline due to imports. 

 

The latest CBI housing report shows that transactions and prices have increased in Teh­ran. The number of apartments sold in the capital totaled 17,700 in December, up 20% from November and 50% higher than a year ago. The average price of USD 1,217 per square meter was up 4.1% month-on-month and 14.9% higher over 12 months.

FX Information

Description

28 December 2017

21 December 2017

% Change

Official USD - IRR

36,074

35,859

0.6

Market USD - IRR

41,780

41,809

(0.1)

Official EUR - IRR

42,979

42,551

1.0

Market EUR - IRR

49,865

49,721

0.3

Official GBP - IRR

48,410

47,917

1.0

Market GBP - IRR

56,978

56,747

0.4

Market Information

Index Info

Close

Unit Change

% Change

%  Change from March 20, 2017

TSE Overall Index - TEDPIX

97,899

2,390

2.5

27.6

TSE30 Index

4,278

112

2.7

39.0

Iran Fara Bourse Overall Index

1,083

0.8

0.1

23.7

Description

This Period

Last Period

Market P/E

7.5

7.3

Trade Statistics

Description

This Period

Last Period

% Change

TSE Average Daily Trade Vol­ume (Million USD) **

64

74

15

IFB Average Daily Traded Val­ue (Million USD) **

36

123

(71)

Industry Index Information

Description

Close

% Change

Chemicals

6,059

6.0

Utility Service Providers

240

5.7

Oil Products

358,388

5.3

Metallic Products

25,275

4.3

Metallic Ore

20,029

3.7

Industrial Conglomerates

9,505

3.4

Base Metals

58,789

3.2

TSE All-Share Index

97,899

2.5

Wooden Products

51,722

1.9

Insurance

4,754

1.4

Foods excluding Sugar

3,504

0.2

IT & Communications

231

0.0

Medical & Measurement Products

10,244

0.0

Mining

12,058

0.0

Financial Markets Management

74

0.0

Banking

583

(0.1)

IT

12,030

(0.1)

Sugar

9,065

(0.2)

Investment

2,118

(0.2)

Leather Production & Products

2,027

(0.2)

Non-Metallic Ores

2,305

(0.3)

Other Financial Services

2,109

(0.3)

Pharmaceuticals

8,881

(0.5)

Telecommunication

1,098

(0.6)

Construction

696

(0.6)

Ceramics & Tiles

2,028

(0.7)

Rubber & Plastics

20,908

(0.8)

Machinery & Electric Equipment

483,068

(0.8)

Textile

1,270

(0.8)

Cement

621

(0.8)

Transportation & Logistics

3,926

(0.8)

Machinery & Equipment

15,985

(0.9)

Coal Mining

1,395

(2.1)

Engineering Services

767

(2.5)

Automotive

17,618

(2.7)

Agriculture

6,603

(2.7)

Oil Drilling & Services

451

(3.0)

Printing & Publishing

207,817

(5.2)

Paper Products

11,860

(6.7)

TSE Top 5 Gainers

Company

Close **

(USD Cents)

% Change

PKHA

Kharg Petrochemical Co.

52.3

26.4

OMID

Omid Investment Banking

4.6

19.1

LAMI

Lamiran Co.

18.0

10.1

SBHN

Behbahan Cement Co.

34.8

6.3

TKIN

Techinco Co.

28.7

6.1

TSE Top 5 Value Leaders

Company

Close **
(USD Cents)

Trade Value **

(Million USD)

FOLD

Esfahan Mobarakeh Steel Co.

7.3

20.7

OMID

Omid Investment Banking

4.6

13.8

PTEH

Tehran Oil Refining Co.

10.1

10.2

PNES

Esfahan Oil Refining Co. 

11.6

9.9

IKCO

Iran Khodro

6.9

9.6

** All figures in USD are converted from IRR at the free market rate

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All Rights Reserved - 2017

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