Iran Sanctions Reprieve Lifts Turkey’s Gubretas: Istanbul Mover

Gubre Fabrikalari TAS, the Turkish maker of fertilizers with operations in Iran, headed for a five-week high after the European Union eased sanctions against the Persian Gulf state.

Gubretas, as the company is known, rose 1.2 percent to 3.42 liras at the 12:30 p.m. midday break in Istanbul, bringing its two-day gain to 8.6 percent. The benchmark Borsa Istanbul 100 Index gained 1.4 percent, heading for its biggest advance since Jan. 10.

The EU suspended some sanctions, including those on petrochemicals, on the Islamic republic for six months yesterday, according to regulations published in its Official Journal. The change followed United Nations inspectors verifying that Iran froze its most sensitive nuclear activities, complying with demands made by world powers in line with the Nov. 24 accord agreed in Geneva.

“The improving risk sentiment on Iran is having an effect on Gubretas shares,” Evrim Dairecioglu, an analyst at Erste Securities in Istanbul, said by phone today. “The EU decision has become a catalyst.” Dairecioglu has an accumulate recommendation on the stock, with a 12-month price target of 4.63 lira.

The Turkish company owns 49 percent of Razi Petrochemical Co., an Iranian company that produces fertilizers and feedstock. Razi has an annual production capacity of 3.52 million metric tons, according to a Jan. 15 investor presentation on the Gubretas website. Razi’s profit is forecast at $207 million this year, corresponding to 39 percent of Gubretas’ forecast net income, according to the document.

Important Investment

“Razi is important for us and investors know it,” Huseyin Karakus, head of investor relations at Istanbul-based Gubretas, said by phone today. “It is Turkey’s biggest industrial investment abroad. Positive developments about Iran naturally have a positive effect on the shares.”

Gubretas slumped 22 percent in Istanbul trading last year, trailing the 13 percent decline in the benchmark index. The shares have advanced 24 percent this month. Ten analysts recommend buying the shares, while three say hold, data compiled by Bloomberg show.

The stock trades at 6.7 times estimated 12-month earnings, data compiled by Bloomberg show. That compares with a multiple of 13 for Istanbul-based Bagfas Bandirma Gubre Fabrikalari AS and 13.1 for Tel Aviv-based Israel Chemicals Ltd.

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