Summary

Equity Markets The TEDPIX index and junior Farabourse (IFB) declined 5% and 6% in IRR terms during this month ending February 2021. Based on the unofficial exchange rate, the month-on- month loss in dollar terms was 8% and 9% in TSE and Farabourse market, respectively. This was partly due to 3% depreciation of IRR per USD over the month.h.

Debt Markets For the start of the Iranian calendar year 1399 (March 2020) to the end of February 2021, total issuance on the fixed income market reached 8 billion US$ based on the unofficial exchange rate. Yield to maturity (YTM) remained stable at 21% at the end of February

Economic Review This issue reviews the latest GDP growth statistics published by Central Bank of . In addition, we have included a separate report covering the latest macroeconomic data Mar 2021 - Volume 15, No 169 published by relevant organizations and senior macroeconomic strategists in a fact-sheet summary, as well as an economic calendar released by local and international statistics centers.

1 Iran Investment Monthly Table of Contents 3 Market Overview 6 Performance & Updates

7 Historic Trends & Sector Insight

8 Industry at a Glance

9 Market Snapshot

10 TSE & Junior Market Performance

11 Top Ranked Companies

12 Iran’s Fixed Income Market 14 Economic Review

14 Latest Updates

16 Macroeconomic Data 17 News & Views

17 Recent Brokerage Reports

17 Turquoise News

2 Iran Investment Monthly Market Overview Mar 2021 Volume 15 No 169

Market Review

The TSE had its third consecutive negative month in February as the overall index fell by 7 percent in Euro terms and average daily trade volumes shrank by more than 33% percent compared to the previous month. The downtrend continued despite relative stability in the strength of the currency (the market declined 5% in Iranian Rial terms).

One of the measures that the policy makers took in February in order to slow down the pace of decline was to change the daily fluctuation range from +/- 5% to +6% and -2%. Market participants did not welcome the move and the decision led to an oversupply of shares offered at the minimum daily price level, resulting in what is regularly called a “selling queue” in the Iranian market. This also adversely impacted market liquidity and was one of the main contributing factors to the declining volumes this past month. The authorities have clarified that they will examine the impact of such decisions on a monthly basis. We do not believe that they will maintain the current measures for any longer than a couple of months. Shervin Shahriari Chief Inves‌tment Officer Valuation multiples have carried on their journey toward more sustainable levels. This is due to falling equity prices and increasing earnings of the listed companies for the last twelve months. The charts below show how the valuation metrics have changed over the course of the past year:

P/E

Source: TSE

3 Iran Investment Monthly Market Overview Mar 2021 Volume 15 No 169

P/B

Source: TSE

P/S

Source: TSE

Global commodity prices also continued to soar in February. We have worked out a customized commodity index for the Iranian market which takes into account the weighting of each related commodity in a sales basket of listed companies. In other words, the index is designed to follow the impact of global commodity price movements on the profitability of the relevant TSE companies.

4 Iran Investment Monthly Market Overview Mar 2021 Volume 15 No 169

Below is the trend line of this index in USD terms, normalized at 100 over the past 10 years:

Turquoise Commodity Index

Source: Turquoise Partners

Since February 2011, average commodity prices have hit a record high; this is a promising sign for the commodity-heavy Iranian stock market. It is estimated that more than 50% of the total weighting of the Iranian market capitalization is related to a basket of commodities covered by the index above.

On the currency side, we remain confident that the Iranian Rial (IRR) stability will remain over the short to medium term, namely the next 12 to 18 months. Iranian crude oil exports reached more than 800,000 bpd in February 2021 according to a recent piece by Reuters, beating the daily record of 790,000 bpd set in April 2019. Iranian oil was delivered mainly to China, a sign that the end of Donald Trump’s term may be changing buyer behavior. In addition to this, we believe that the fundamentals remain solid for the IRR in the short run. One way of looking at the IRR is through the lens of monetary measures.

5 Iran Investment Monthly Market Overview Mar 2021 Volume 15 No 169

Performance & Updates

11 - Year Average (2008-2021)1 Market Capitalization (billion US$) 120 TSE & Farabourse Junior Market P/E 7.5 x TSE Dividend Yield (%) 3 10% TSE Market Cap / GDP 53% TSE & Farabourse Total Turnover (billion US$),Average Annual 29 TSE TSE Overall Index Average Annual Growth (US$) 26% TSE

1 Annual data from 2008 to Feb 2021 2 Calculated based on unofficial IRR per US$ exchange rates.

Summary - Feb 2021 Market Capitalization (billion US$) 285 TSE & Farabourse Junior Market Free Float 22% TSE & Farabourse Junior Market Number of Listed Companies1 680 TSE & Farabourse Junior Market TSE Index Performance (US$)2,4 -8.1% (MTD) -13.8% (YTD) TSE Total Turnover (million US$)2 5,659 m$ TSE & Farabourse Junior Market Dividend Yield (%) 3 5.8% TSE P/E 13.9 x

1 171 companies are listed in Over-The-Counter (OTC) or off-exchange market named as “Base Market” in Farabourse junior market which trading of these companies are done directly between two parties. 2 Calculated based on unofficial IRR per US$ exchange rates. 3 Calculated based on the latest market data 4 TEDPIX Tehran Exchange Dividend Price Index (Dividend & Price Index) & Junior Market Trade by Value1 - Feb 2021

Iran Farabourse (Junior Market) Trade Volume (million US$)

Tehran Stock Exchange (Main Market)Trade Volume (million US$)

Since the beginning 2021, the market has recorded losses as the YTD performance of the TSE and IFB reached to 15% and 14% in IRR terms respectively. The loss in hard currency terms was 14% on the TSE and 13% on the IFB on a year-to-date basis. In February 2021, the TSE equity trade value declined to 4,552 million US$ from the 9,341 million US$ last twelve- month average. The total number of shares traded on the TSE decreased by 19% compared to a twelve-month average of 189 billion shares. US$ Million

Source: Tehran Stock Exchange Iran Farabourse Company All figures in US$ are converted from IRR at the free market rate 1 Trading volume month on month in US$ term - TSE includes mainly equity while Farabourse has more fixed income instruments and smaller equities.

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Historic Trends & Sector Insight

Long-Term Overall Index (Normalized in USD) Long-Term Iranian Market Cap ( Normalized in USD)

Historic Average: 196 Historic Average: 181

Feb 2021 : 408

Feb 2021 :402

TSE Best Performing Sectors & Overall Index (Normalized in USD)

92

84 Overall USD Diversified Industrial (Holdings) Refined Petroleum Products Computer

TSE Large Sectors (% Market Capitalization)

20% 14% 9% 8% 7% 5% 5% 4% 28% Other Metals* Monetary Diversified Chemicals Investment Companies Source: TSE, Bonbast, as of Feb 2021 Motor Vehicles Motor Vehicles And Auto Parts *Metals sector includes steel, copper and aluminum Metal Ores Mining Refined Petroleum

7 Iran Investment Monthly Market Overview Mar 2021 Volume 15 No 169

Industry at a Glance - Feb 2021

YTD 1-Year Return 5-Year Return Top Performing Companies Market Cap Sector Trailing (%) Trailing (%) Trailing (%) in Feb 2021 (MOM %) (Million USD) in USD in USD in USD

Kimia Zanjan Gostaran Co 77 -52% -69% 67% Metals* Asia Zarin Madan Co 120 43% 11% -31%

Petroleum Equipment Industries Company (PEIC) 58 69% 9% NA

Opal Kani Pars 1,409 NA NA NA

Mining Golgohar Mining and Industrial Company 4,636 -11% -8% NA

Bafgh Mining Company 249 -11% -11% 153%

Shiraz Oil Refining Company 472 -8% 1% 72%

Petroleum Bandar Abbas Oil Refining co 3,287 -8% 19% -32%

Tajhiz Niroo Zangan 26 -2% 231% 2162%

Loabiran Company 56 84% -50% 27%

Chemical Ranguin Industrial and Chemical Co. 43 62% 37% 2037%

Fars Chemical Industries 132 -17% 172% 168%

Parsian Bank 1,927 -88% -59% -68%

Banks Sarmayeh Bank 100 -87% 92% NA

Iran Zamin Bank 217 -84% 181% NA

TSE Large Sectors 5 -Year Performance (Normalized in USD) Metals Mining Petroleum Chemical Banks

312, Feb 2021 236, Feb 2021 172, Feb 2021 155, Feb 2021 127, Feb 2021

Source: TSE, Bonbast, as of ending Feb 2021 *Metals sector includes steel, copper and aluminum

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Market Snapshot -Feb 2021 Iran & Regional Markets

Iran: A 26-Year Snapshot, Asset Class Annualized Return in US$ (%) P/E Multiple Comparison MSCI Morocco 26.3 Kuwait 32.9 Qatar 18.7 12% MSCI Arabian Markets 21.4 MSCI GCC Countries 21.9 MSCI Egypt 8.5 6% 5% Saudi Arabia 35.7 UAE 21.8 Iran 13.9 % Turquoise Iran Fund 13.5 Sub Fund B/C, as of ending Feb 2021 Note: Annual data from 1995 to Feb 2021 Source: CBI, TSE, IFB All figures in US$ are converted from IRR at the free market rate

Iran & International Markets

3 4 Tehran Stock Exchange MSCI Emerging Markets MSCI Frontier Markets

Average P/E Average P/E Average P/E 13.9 23.3 14.6 1 1-Year Performance in $ 1-Year Performance in $ 1-Year Performance in $ 40.1% 37.1% 8.6% Annualized 10 Year in $ 2 Annualized 10 Year in $ Annualized 10 Year in $ 7.8% 4.7% 4.4%

20.0 Chemicals 20.8 Information Technology 33.7 Financials 13.7 Basic Metals 18.0 Consumer Discretionary 15.3 Communication Services 9.2 Refined Petroleum 16.8 Financials 14.2 Real Estate 7.6 Metal Ores Mining 11.3 Communication Services 11.7 Consumer Staples 7.3 Monetary Intermediation 8.2 Materials 8.7 Materials

Sector Breakdown (%) 42.2 Others Sector Breakdown (%) 24.9 Others Sector Breakdown (%) 16.4 Others

1.TEDPIX Tehran Exchange Dividend Price Index (Dividend & Price Index) performance calculated in US$ for the Period of Feb 2020 to Feb 2021 2.Overall Tehran Stock Exchange Index 10 year annualized performance calculated in US$ 3.MSCI Emerging Markets Index (US$) - Feb 2021 4.MSCI Frontier Markets Index (US$) - Feb 2021 Source: Tehran Stock Exchange - Central Bank of Iran - MSCI Inc., Kamcoonline. All figures in US$ are converted from IRR at the free market rate, unless otherwise indicated. 9 Iran Investment Monthly Market Overview Mar 2021 Volume 15 No 169

TSE & Junior Market Performance Tehran Stock Exchange: TEDPIX*, Feb 2021

Normalised in US$ Normalised in US$

Volume million shares Million Shares

Source: Tehran Stock Exchange *TEDPIX Tehran Exchange Dividend Price Index (Dividend & Price Index) All figures in US$ are converted from IRR at the free market rate, unless otherwise indicated.

Iran Farabourse (Junior Market): IFX*, Feb 2021

Normalised in US$ Normalised in US$

Volume million shares Million Shares

Source: Iran Farabourse Company *Iran Farabourse (Junior Market) Overall Index (Total Return) All figures in US$ are converted from IRR at the free market rate, unless otherwise indicated.

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Top Ranked Companies - Feb 2021 Turnover Value % Total Turnover (million US$) Opal kani pars 0.4% Opal Kani Pars Mineral Processing was founded in 2006 as one of mining and 17.3 subsidiaries of Parsian Investment Holding. The company is active in processing range of mining activities

Novin Investment Bank was founded in 2008. The Novin Investment 0.1% company offers a range of including Bank 3.5 M&A, corporate restructuring, risk management, debt and equity underwriting and private placements

Esfahan Mobarakeh Steel Company, one of the largest industrial complexes in the country, started its operation Mobarakeh Steel 0.1% in 1991 with a nominal capacity of 2.4 million tons per 3.5 annum. The company produces more than 50% of Iran’s steel and operates in seven industrial complexes.

The Social Security Social Security Investment Company established in 1986, The company has a diversified sector Investment Company 0.0%

Top 5 Traded by Value Traded 5 Top 1.8 investment portfolio including oil & gas, mining, pharmaceutical, energy, cement and banking sectors.

Eghtesad Novin Bank was founded in 2001 as the first private bank in Iran. The bank EN Bank 0.0% provides commercial banking services 1.6 including deposits, loans, and credit cards; asset management services including fund management and investment banking services. Market Cap % Total Market Cap. (million US$) National Iranian In 1972, Sarcheshmeh Copper Mines Joint Stock Co of Kerman was 5.4% established and, later, in 1976, it was renamed to National Iranian Copper Copper Ind. Co. 10,126 Industries Co. to cover all copper mines operations throughout the country. This company is active in extraction & utilization of copper mines, production of copper concentrates & manufacturing copper products

Persian Gulf Persian Gulf International Transportation founded in 1989 as a Petrochemical 5.2% joint private stock in Iran and was listed in 2010 in Tehran Stock 9,695 Exchange. The company operates as a distributor of products and Industry goods across the country.

Mobarakeh Steel Esfahan Mobarakeh Steel Company, one of the largest 5.0% industrial complexes in the country, started its operation 9,372 in 1991 with a nominal capacity of 2.4 million tons per annum. The company produces more than 50% of Iran’s steel and operates in seven industrial complexes. The Social Social Security Investment Company established in 1986, The company has a diversified sector Security Investment 3.3% investment portfolio including oil & gas, mining, Company 6,117 pharmaceutical, energy, cement and banking sectors.

Top 5 by Market Capitalization Top Founded in 1991, Golgohar Mining & Industrial Golgohar Mining and Company is one of the largest iron ore and 2.6% iron pellet producers in Iran. The company Industrial Company 4,939 operates in combined plants among six iron mine zones about 55 km southwest of Sirjan city near Kerman province.

Source: Tehran Stock Exchange, Firouzeh Asia Brokerage. All figures in US$ are converted from IRR at the unofficial rate.

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Iran’s Fixed Income Market For the start of the Iranian calendar year 1399 (March 2020) to the end of February 2021, total issuance on the fixed income market reached 8 billion US$ based on the unofficial exchange rate. Yield to maturity (YTM) remained stable at 21% at the end of February

Iran’s Debt Securities Market - Feb 2021* 0.7 10.0 Tehran Stock Exchange Iran Farabourse (Junior Market)

Market Value (billion US$)* 1.9 164.5 Tehran Stock Exchange Iran Farabourse (Junior Market)

Average Daily Trading Value (million US$)*

2,072,381 65,481,571 Tehran Stock Exchange Iran Farabourse (Junior Market)

Average Daily Trading Volume (bonds)

* As of Bahman1399 (20 Jan- 18 Feb 2021)

Value & Breakdown of Sukuk Issuance in Iran’s Capital Markets, 2021 (1399)** - (billion US$)

62% 24% 9% 5%

Murabaha Sukuk Islamic T-Bills Salaf (Salam) Other

Source: Iran Farabourse **Calculated by the unofficial exchange rate in the period of issuance, percentages have been rounded and may not total to 100.

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Iran’s Fixed Income Market

Snapshot of the Highest Yielding Debt Securtites1 - Feb 2021

Issuer Type YTM (p.a.) Maturity

Corporate Ijarah 0.218 27-Apr-25

Government TreasuryBill 0.218 6-Mar-23

Government TreasuryBill 0.218 12-Sep-22

Government TreasuryBill 0.218 9-Jan-23

Government TreasuryBill 0.217 29-Oct-23

Government TreasuryBill 0.217 30-Jan-23

Corporate Manfeat 0.217 6-Aug-23

Corporate Fixed Income 0.216 13-Mar-22

Government TreasuryBill 0.216 5-Sep-22

Corporate Ijarah 0.216 30-Nov-24

1 This snapshot is a selection of the highest yielding securities with minimum one year maturity in Iran’s debt markets and should not be considered as a solicitation or recommendation by Turquoise Partners.

Iran’s T-bills YTM in IRR Term

Feb 2021 0.21

Source: Tehran Stock Exchange - Iran Farabourse

13 Iran Investment Monthly Economic Review Mar 2021 - Volume 15 No 169

Latest Updates

Economic Growth

According to a recent Central Bank report, in the first nine months of the Iranian calendar year 1399 (March 2020 to December 2020), the real GDP on the supply side inched up 2.2% compared to the same period one year ago. The mining and oil extraction subsectors had considerable growth of 6% and 4%, respectively during the same period.

Growth of 4.6% in agriculture was also noteworthy. The services sector recorded no change and declined a mere 0.3% in the same period. Real non-oil GDP increased by 1.9% in the same period. On the demand side, real growth of 1.6% in government consumption and a decline of 33% in imports are interesting to note. A slight decrease in private consumption of 1.1% shows the slow reaction of Iranian households to the tightening economic conditions and the high inflation environment over the past two years. Investment (fixed capital formation) increased 0.2% over this period with higher weight to Housing subsector 0.8%. The decline in the machinery subsector was 1.7% in this period.

The IMF forecast for the GDP indicates that the economic recovery will start in 2021 with growth of 3.2% and is anticipated to be 1.2% in 2025.

Real Growth of GDP at Constant Prices (1390 Iranian Calendar Year)

Demand Side Real Growth (%)

Source: CBI Real GDP Real Growth of GDP at Constant Prices (1390 Iranian Calendar Year) (Mar-Dec 2020): 2.2%

Real GDP (Mar-Dec 2019): -6.5% Real Growth (%)

Source: CBI

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Real Growth of GDP at Constant Prices (1390 Iranian Calendar Year)

Supply Side Real Growth (%)

Real Non-Oil GDP (Mar-Dec 2020): Source: CBI 1.9% Real Growth of GDP at Constant Prices (1390 Iranian Calendar Year) Real Non-Oil GDP (Mar-Dec 2019): 1.5% Real Growth (%)

Source: CBI

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Macroeconomic Data Iran Economic & Market Data Data Macroeconomic Forecast Calendar Unit 2021/ 22 2022/ 23

SCI: CPI by Provinces in the Month of Real GDP Growth (%) 3.2 1.5 Bahman of the Year 1399

Released: 24 February 2021 Inflation (%) 30 25

SCI: Tables of the Quarterly National Source:IMF Accounts (2011-2020) Released: 15 December 2020 SCI: Production Index of Selected Actual Macroeconomic Data Industries (2011-2020) Released: 15 December 2020 Unit Period Value Comments

Population Growth % 2011- 2016 1.24% -

1399 Unemployment Rate % 9.4% - (Autumn 2020)

Inflation Rate % Feb-21 (Y/Y) 34% 2016 = 100

1399 Non-oil GDP Growth % -1.7% 2011 = 100 (Mar 20-Jun 20) 1399 GDP Growth % -3.5% 2011 = 100 (Mar 20-Jun 20)

Source: Statistical Center of Iran

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Recent Brokerage Report Turquoise News

Iran Daily Market Update – February 2021 February 2, 2020 Iran Fara Bourse, the junior equity market, hosted a subscription 28 Feb 2021 for units of a private equity fund on Monday -- the second of its kind.

27 Feb 2021 The fund is dubbed as Turquoise Servat Afarin Private Equity Fund and its ticker symbol is displayed on the IFB bulletin board 24 Feb 2021 as ‘Servat’. It is operated by Turquoise Partners, a leading finan- 23 Feb 2021 cial service company in Tehran, the IFB news portal reported.

22 Feb 2021 A PE fund is a pooled investment scheme used for investments in equities. Institutional and retail investors provide the capital for 21 Feb 2021 the private equity, and capital can be utilized to fund new tech- nology, expand working capital and bolster balance sheets of the companies. More Information

October 17, 2020 Ramin Rabii, Turquoise Partners CEO’s interview with The Economist on the recent boom and bust of the Iranian stock market:

“A steadily weaker Rial has over time boosted non-oil export industries, such as petrochemicals, metals, engineering services and even chocolate and pastries”, says Ramin Rabii of Turquoise Partners, a financial-services group.

The Stock market reflects this industrial diversity. There are hundreds of stocks in a variety of sectors. And because crude is a state-owned business, it better reflects the non-oil economy. The market had a good run last year thanks in large part to improving export earnings. People took notice. Here was an asset class that acted as a hedge against the Rial’s diminishing value. The scene was set for this year’s melt-up in share prices.

“The number of people active in the Stock market went from 700,000 to 5m in a matter of months”, says Mr Rabii. More Information

17 Iran Investment Monthly News & Views Mar 2021 - Volume 15 No 169

Asset • EU Regulated Equity Fund Management • EU Regulated Fixed Income Fund • Domestic Fixed Income Fund • Domestic ETF TSE-30 • Domestic Mutual Fund • Managed Accounts

Investment • Banking Services • M&A • ECM • DCM • Private Placement • Institutional Equity Sales • Retail Equity Sales • Market Entry Strategy

Principal Strategic Investments

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March 2021 - Volume 15, No 169 Turquoise Partners 7th floor, Mahdyar Building, Salehi Street, Niavaran Ave. Tehran, Iran Tel: + 98 21 22 70 62 38 Fax: +98 21 881 07 746 Email: [email protected]

Firouzeh Asia Brokerage 5th Floor No. 11, Mirza Hassani St. Ghaem Magham Farahani Ave. Tehran, Iran Tel: +98 21 881 06 106 Fax: +98 21 881 07 746 Email: [email protected]

DISCLAIMER This document has been issued by Turquoise Partners for information purposes only and is not to be construed as a solicitation or an offer to purchase or sell any security or other financial instrument or to any particular category of investors in jurisdictions in which such an offer or solicitation to the public or to any particular category of investors is illegal. Although the material in this report is based on information that Turquoise Partners considers reliable, Turquoise Partners does not make any warranty or representation (express or implied) in relation to the accuracy, completeness or reliability of the information contained herein. Any opinions expressed herein reflect a judgment at the date of publication and are subject to change. Turquoise Partners accepts no liability whatsoever for any direct, indirect or consequential loss or damage of any kind arising out of the use of all or any of this material. Where Turquoise Partners provides information in the document, it is provided exclusively for information purposes. The information does not constitute any form of recommendation related to the personal circumstances of investors or otherwise, nor does it constitute any specific or general recommendation to buy, hold, or sell financial instruments and does not thus create any relationship between Turquoise Partners and any investor. The document may not include all the up-to-date information required to make investment decisions. Other more accurate and relevant sources of information may exist. Investors should thus diligently inform themselves about the chances and risks of the investments prior to taking investment decisions. In addition to the financial aspects, this should include, in particular, the legal and tax aspects of the investments. It is strongly recommended that any potential investor should contact a financial adviser and, where required, a lawyer or tax adviser. Furthermore, it should also be considered that the future performance of financial instruments and their return cannot be inferred from their past performance. The value of investments may go down as well as up and investors in financial instruments should be capable of bearing a total loss of investment. Neither Turquoise Partners nor any third party content provider shall be liable for any errors, inaccuracy, delay or updating of the published content of the provided document. Turquoise Partners expressly disclaims all warranties as to the accuracy of the content provided, or as to the use of the information for any purpose, as far as legally possible. This material is for the use of intended recipients only and neither the whole nor any part of this material may be duplicated in any form or by any means. Neither should any of this material be redistributed or disclosed to anyone without the prior consent of Turquoise Partners. PERSONS DOMICILED, RESIDENT OR BASED IN THE UNITED STATES OF AMERICA ITS TERRITORIES OR POSSESSIONS OR WHO MAY OTHERWISE BE CONSIDERED AS UNITED STATES PERSONS, INCLUDING REPRESENTATIVES OF UNITED STATES COMPANIES OR NON-UNITED STATES SUBSIDIARIES OF UNITED STATES COMPANIES SHOULD NOT CARRY OUT ANY ACTION IN BREACH OF U.S. SANCTIONS LAWS.

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