Weekly Market Report

Trading Week: 3 – 7 March, 2018

Summary

Main Topics

· TEDPIX falls 1.1% as commodities and car makers decline

· Pharmaceutical investment company launches IPO on TSE

· Gap between official-market exchange rates widens slightly

· CBI unveils non-bank marketplace for importers and exchange houses

 

Tehran Stock Exchange

The TSE Overall Index (TEDPIX) fell 1.1% to 96,860 over the week as the majority of indi­ces declined, including the commodity sector. The TSE30, an index of large cap compa­nies with a bias towards commodities, lost 1.4%. The index is still up by 39.4% since March last year compared to 26.2% for the TEDPIX. The average daily trading volume was USD 64 million, down 20% from last week.

 

The Automotive sector, with companies relatively sensitive to the business environment and exchange rate, fell 3.7% for its first weekly decline after four weeks of gains. Carmak­ers rose on Saturday, the first trading day of the week when the TEDPIX fell 0.6%, but could not sustain their gains.

 

Saipa Diesel Co. (SPDZ), a major truck maker which frequently hit the daily ceiling of 5% in February, fell 6.8% over the week. SPDZ had dropped15% after predicting a net loss of USD 27 million for the current fiscal year ending March 20, nearly three times its previous estimate made last September. Failure to raise capital, and consequently borrowing funds at a 12% interest rate, plus missing its sales target of 4,000 trucks were given by the com­pany in its filing as the main reasons for the earnings adjustment.  Despite the correction, SPDZ ended the week with a buying queue. Iran Khodro Diesel Co. (KAVR), another ma­jor truck maker, was nearly flat for the week although it ended with a selling queue.

 

Shafa Darou Investment Co. (SHFA) held its IPO and closed with a market cap of USD 109 million. SHFA is a holding company with majority stakes in a number of pharmaceuti­cal companies, including Dana Pharmaceutical Co. and three TSE-listed companies -- Jaber Ebne Hayyan Pharmaceutical Co (DJBR), Osveh Pharmaceutical Co. (DOSE) and Chemidaro (KIMI).

 

SHFA’s consolidated revenue and net income for the fiscal year ending March 2017 were USD 608 million and USD 60 million respectively. Net income attributable to shareholders of SHFA was USD 32 million. Nearly 60% of consolidated revenue comes from Razi Dis­tribution Co. which is a low profit margin company similar to most of its peers. Most of its remaining revenue is related to DJBR, DOSE, and KIMI.

 

Human medicine is the largest group of SHFA’s products, accounting for nearly 90% of total consolidated revenue. Gross profit margin for SHFA’s human medicines was report­ed as 24% though it is depressed by the high-weight but low-margin distribution business. The gross profit margin for some TSE-listed subsidiaries of SHFA is around 40%, alt­hough this figure is distorted by the relative old age of machinery which results in low de­preciation costs and inflated margins. SHFA’s balance sheet is another issue as almost 65% of total assets are in accounts receivables.

 

Commodity industries were also down, including Chemicals (-1.1%), Oil Products (-1.6%), Base Metals (-1.7%), and Metallic Ore (-2%). Meanwhile, Telecommunication (+0.4%) and Engineering Services (+1.2%) were among major industries to end the week higher. 

 

Iran Fara Bourse

The IFB Overall Index fell 1.1%, trimming its return since last March to 23.4%. Marun Pet­rochemical Co. (PMRZ), the largest listed olefin producer, fell nearly 1% even after raising its full-year net income by 19% to USD 426 million. Middle East Mines Industries Develop­ment Holding Co. (KHMZ), an investor in steel raw material suppliers and projects, added 2.3%.

 

IFB’s refineries also declined, despite the increase in the official exchange rate. Shiraz Oil Refining Co. (PRZZ) fell nearly 7% and closed with a forward P/E of 6.1x based on its own earnings estimate made in December. Lavan Oil Refining Co. (PNLZ) dropped 2.3%. PNLZ reported revenue of USD 587 million and net income of USD 24 million for the first nine months of its current fiscal year ending March 20. Revenue was up 32% compared to the same nine months last year, while net income nearly quadrupled.

 

Foreign Exchange Market

The US dollar market exchange rate gained 0.6% to IRR 44,872 in relatively stable trad­ing. The Central Bank of Iran (CBI) raised the official rate to IRR 37,415. Some months ago there were growing expectations of exchange rate unification, but now even the CBI admits that it is not feasible in the short term.

 

Economic Development

Importers were again allowed to register applications for non-bank dollar-based transac­tions but via a new centralized platform developed by the CBI. After calling for a ban on dollar-based imports last week, the CBI unveiled a new electronic marketplace, where im­porters and exchange houses can agree on non-bank transactions. The CBI, which pre­fers banks to exchange houses, hopes that the competition and transparency of the sys­tem will help to reduce exchange costs. The head of Iran’s confederation of exporters ear­lier pointed to the higher costs of non-dollar imports as sellers who work in dollars will de­mand that buyers pay for any currency conversion cost.

FX Information

Description

8 March 2018

1 March 2018

% Change

Official USD - IRR

37,440

37,330

0.3

Market USD - IRR

44,890

44,586

0.7

Official EUR - IRR

46,456

45,517

2.1

Market EUR - IRR

55,826

54,886

1.7

Official GBP - IRR

52,063

51,317

1.5

Market GBP - IRR

67,555

67,441

0.2

Market Information

Index Info

Close

Unit Change

% Change

%  Change from March 20, 2017

TSE Overall Index - TEDPIX

96,860

(1,101)

(1.1)

26.2

TSE30 Index

4,290

(60)

(1.4)

39.4

Iran Fara Bourse Overall Index

1,080

(12)

(1.1)

23.4

Description

This Period

Last Period

Market P/E

7.4

7.5

Trade Statistics

Description

This Period

Last Period

% Change

TSE Average Daily Trade Vol­ume (Million USD) **

64

79

(20)

IFB Average Daily Traded Val­ue (Million USD) **

108

37

191

Industry Index Information

Description

Close

% Change

Transportation & Logistics

3,643

2.1

Financial Markets Management

69

2.0

Engineering Services

684

1.2

Coal Mining

1,629

0.9

Leather Production & Products

1,974

0.7

Cement

582

0.6

Telecommunication

1,135

0.4

Machinery & Equipment

16,975

0.3

Wooden Products

61,746

0.2

IT & Communications

231

0.0

Medical & Measurement Products

10,244

0.0

Mining

12,058

0.0

Textile

1,259

(0.0)

Paper Products

10,863

(0.0)

IT

12,677

(0.3)

Pharmaceuticals

8,056

(0.5)

Banking

544

(0.6)

Sugar

9,000

(0.6)

Investment

2,046

(1.0)

Metallic Products

21,901

(1.0)

Machinery & Electric Equipment

475,766

(1.0)

Insurance

4,349

(1.1)

TSE All-Share Index

96,860

(1.1)

Chemicals

6,228

(1.1)

Industrial Conglomerates

9,625

(1.2)

Construction

653

(1.4)

Oil Products

346,745

(1.6)

Base Metals

58,605

(1.7)

Utility Service Providers

228

(1.8)

Metallic Ore

20,751

(2.0)

Ceramics & Tiles

1,686

(2.3)

Foods excluding Sugar

3,216

(2.4)

Rubber & Plastics

18,378

(2.6)

Agriculture

5,311

(3.2)

Automotive

16,581

(3.7)

Oil Drilling & Services

349

(3.7)

Non-Metallic Ores

2,096

(4.1)

Other Financial Services

2,211

(4.2)

Printing & Publishing

195,718

(6.3)

TSE Top 5 Gainers

Company

Close **

(USD Cents)

% Change

GSHI

Khorasan Shirin Sugar Co.

69.3

17.9

MNGZ

Iran Manganese Mines Co.

12.3

10.2

SKHS

Khash Cement Co.

22.5

9.2

ZMYD

Zamyad Co.

1.9

5.8

GMRO

Marvdasht Sugar Co.

9.1

5.4

TSE Top 5 Value Leaders

Company

Close **
(USD Cents)

Trade Value **

(Million USD)

ZMYD

Zamyad Co.

1.9

9.9

KSIM

Calcimine Co.

13.4

4.0

KAVR

Iran Khodro Diesel Co.

1.7

4.0

PNES

Esfahan Oil Refining Co. 

9.7

3.3

FOLD

Esfahan Mobarakeh Steel Co.

6.4

3.1

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

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