Weekly Market Report

Trading Week: 9 – 13 December 2017

Summary

Main Topics

· TSE All Share Index sets new record high as rial weakens and nuclear deal remains intact

· TSE30 advances 3.6%, taking gains since March to 31%

· CBI raises official rial-dollar rate above next year’s budget rate

· Details of next year’s budget are announced

 

Tehran Stock Exchange

The TSE Overall Index (TEDPIX) rose 2.4% for the week to close at 93,283, having set a new record high of 93,343. The TSE30, an index of large-cap companies, climbed 3.6%, lifted by large commodity-linked stocks benefiting from a weaker rial. The TSE30 has gained 31% since March, against 21.6% for the TEDPIX. Car makers also rose, boosted by the absence of moves by the US congress on the nuclear deal, effectively allowing the 60-day period to pass without taking specific action. Gains in the TEDPIX were supported by higher volumes, with the average daily trading value rising 17% to USD 68 million.

 

The Trump administration decertified Iran’s compliance with the nuclear agreement in Oc­tober but stopped short of asking Congress to re-impose sanctions. The administration’s decision was in line with expectations, as the US was not seen to have an immediate al­ternative or international support for terminating or re-negotiating the deal. A trip by UK Foreign Secretary Boris Johnson to Tehran this week was viewed by investors as lessen­ing risks of any immediate challenge to the nuclear pact.

 

Oil Products led gainers among major sectors by rising 6.8%, having fallen 2.9% last week. Refineries, a main component of the index, directly benefit from increases in the official dollar exchange rate.

 

Bandar Abbas Oil Refining Co. (PNBA) rose 7% to bring its total return over 12 months to nearly 70%. Esfahan Oil Refining Co. (PNES) and Tabriz Oil Refining Co. (PNTB) added more than 6% this week. Both companies are temporarily suspended from trading as they were scheduled to announce “significant adjustment” to their EPS estimates. PNES reve­nues for the first six months of its current fiscal year increased 27% while cost of goods sold rose 15% only, according to its unaudited interim reports published this week. As a result, gross margins rose nearly six-fold. PNTB said revenues increased 44% and net income for the six months was equal to 60% of last year’s total profits.

 

Other commodity-linked sectors also advanced for the week. Chemicals rose 2.1%. The sector’s largest stock, Persian Gulf Petrochemical Co. (PKLJ), fell 1.1%, but two other large holding companies, Parsian Oil & Gas Development Group Co. (PASN) and Tamin Petroleum and Petrochemical Investment Co. (PTAP), rose nearly 7%. PASN has expo­sure to refineries.  Base Metals rose 3.2%, with Mobarakeh Steel Co. (FOLD) climbing 5.6%. Metallic Ores added 5.9%.

 

HiWeb (HWEB), an ICT company which made its IPO this year, jumped 24.4% before be­ing suspended from trading for the second time in two months because of “the lack of clar­ity in data”. HWEB recently made a big acquisition and has released a number of related disclosures.

 

Several sectors outside commodities also made progress this week, including Automotive (+3.2%), Pharmaceuticals (+0.7%), Banks (+0.6%), Foods ex. Sugar (+ 2.2%) and Sugar (+1.7%).

 

Iran Fara Bourse

The IFB Overall Index rose 2.9%, boosted by steel, chemicals, and oil products. Esfahan Steel Co. (ZOBZ), the largest steel profiles and rods producer, rose 12.9% and ended the week with a buying queue. ZOBZ reported losses last year, and a net loss of USD 28 mil­lion on a 4% increase in revenues in the first half of the current year. ZOBZ is highly lever­aged, with 87% of assets financed with debt. First half interest payments more than elimi­nated all gross profit.

 

ZOBZ seemed to have difficulty in selling its value-added steel products. Sales of H-profiles fell 56% to 292,000 tonnes while rods fell 26% to 325,000 tonnes compared to the same period last year. But sales of lower-value steel bars rose 77% to 411,000 tonnes. The long recession in the housing and construction sector and limited public expenditure on infrastructure projects have dampened demand for ZOBZ’s value-added products.

 

Hormuzgan Steel Co. (FOHZ), a medium-size sponge iron and steel billet producer and exporter with a market cap of USD 768 million, rose 11.6% for the week and closed with a buying queue. Mobarakeh Steel Co, (FOLD) owns 95% of the company’s shares. Marun Petrochemical Co. (PMRZ), the largest company listed on IFB, rose 5.4% and closed with a P/E of 9.15 based on the company’s own EPS estimate. Zagros Petrochemical Co. (PZGZ) added 2.4% after coming back from suspension. PZGZ raised its EPS estimate by 40% but market reaction indicated it was already priced in.

 

Foreign Exchange Market

The Central Bank of Iran (CBI) raised the official rial-usd rate by 0.6% to IRR 35,599, which is above the IRR 35,000 rate assumed in the budget bill. The market rate rose 0.3% to IRR 41,920. The CBI has had little success in reducing the gap between the two rates but raising the official rate provides the government with substantial flexibility in financing. This may reduce the pressure for debt issuance, which could help lower interest rates.

 

Economic Development

President Rouhani submitted the budget bill for the next Iranian fiscal year starting March 2018, showing a 10% increase in spending to around USD 101 billion, which is in line with inflation. Spending on infrastructure projects fell 10% in nominal terms. The budget is based on two key parameters set by the government: a dollar rate of IRR 35,000 and the price of oil at USD 55 per barrel. Dollar rate and price of oil in the budget law of the current fiscal year were IRR 33,000 and USD 50 per barrel respectively.

FX Information

Description

14 December 2017

7 December 2017

% Change

Official USD - IRR

35,599

35,374

0.6

Market USD - IRR

41,920

41,805

0.3

Official EUR - IRR

42,117

41,742

0.9

Market EUR - IRR

50,076

49,880

0.4

Official GBP - IRR

47,823

47,330

1.0

Market GBP - IRR

57,600

58,000

(0.7)

Market Information

Index Info

Close

Unit Change

% Change

%  Change from March 20, 2017

TSE Overall Index - TEDPIX

93,283

2,191

2.4

21.6

TSE30 Index

4,030

138

3.6

31.0

Iran Fara Bourse Overall Index

1,042

29

2.9

19.1

Description

This Period

Last Period

Market P/E

7.1

6.9

Trade Statistics

Description

This Period

Last Period

% Change

TSE Average Daily Trade Vol­ume (Million USD) **

68

58

17

IFB Average Daily Traded Val­ue (Million USD) **

70

50

40

Industry Index Information

Description

Close

% Change

IT & Communications

231

24.4

Oil Products

333,134

6.8

Oil Drilling & Services

469

6.7

Metallic Ore

18,881

5.9

Paper Products

13,082

5.0

Industrial Conglomerates

8,840

4.6

Transportation & Logistics

3,966

4.5

Automotive

17,451

3.2

Base Metals

54,644

3.2

Wooden Products

51,125

3.0

TSE All-Share Index

93,284

2.4

Foods excluding Sugar

3,602

2.2

Chemicals

5,491

2.1

Construction

686

2.1

Non-Metallic Ores

2,304

2.0

Investment

2,063

1.8

Sugar

9,225

1.7

Utility Service Providers

220

1.1

Engineering Services

774

0.7

Pharmaceuticals

8,917

0.7

Banking

574

0.6

Other Financial Services

2,122

0.2

Medical & Measurement Products

10,244

0.0

Mining

12,058

0.0

Textile

1,282

(0.0)

Machinery & Equipment

16,078

(0.3)

Cement

626

(0.4)

Telecommunication

1,112

(0.5)

Leather Production & Products

2,050

(0.6)

Insurance

4,643

(0.7)

Metallic Products

24,398

(1.0)

Printing & Publishing

192,803

(1.2)

IT

12,056

(1.2)

Machinery & Electric Equipment

485,889

(1.9)

Ceramics & Tiles

2,079

(2.9)

Agriculture

6,420

(3.1)

Rubber & Plastics

20,117

(4.7)

Coal Mining

1,368

(7.7)

TSE Top 5 Gainers

Company

Close **

(USD Cents)

% Change

HWEB

Hi Web Co.

14.2

18.8

DODE

Doodeh Sanati Pars Co.

10.7

18.4

HJPT

Petro. Trans. Engineering Co.

8.9

10.3

CHML

Chadormalu Mining and Ind. Co.

4.7

10.0

PTEH

Tehran Oil Refining Co.

9.0

7.3

TSE Top 5 Value Leaders

Company

Close **
(USD Cents)

Trade Value **

(Million USD)

HWEB

Hi Web Co.

14.2

45.7

FOLD

Esfahan Mobarakeh Steel Co.

6.8

14.6

IKCO

Iran Khodro

7.0

11.3

PNES

Esfahan Oil Refining Co. 

10.4

9.1

ALIR

Iran Aluminum Co.

3.9

7.7

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

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