J&T Banka Czech Morning Note: 08/12/17: Philip Morris CR, macro

Index PX: 1,056 points (up 0.3% d/d); volume: CZK 367m (USD 17m)

 

Market comment

The Prague Stock Exchange finished in black in relatively stable trading as the PX Index added 0.26%. The recorded volumes were however very subpar. The biggest volume (CZK 91m) went to Komercni banka which ended up 0.23% weaker at CZK 894.1. The Thursday’s drop was probably due to a target price cut by a major foreign broker (to CZK 876). CEZ has been showing rather stable trading in the last few days. The stock finished up 0.12% at CZK 491 on a relatively weak volume of CZK 85m. As a result, CEZ’s closing prices this week were all in a narrow interval of CZK 1.10. VIG posted the biggest gain of 1.28% to a closing price of CZK 646.50, albeit on a very thin volume of CZK 1.7m.

 

PMCR: Neutral/negative. LT: Hold. Target price: Pending.

The Senate failed yesterday to weaken the smoking ban in restaurants. Among the proposals was the permission of smoking in pubs up to 50 sqm and allowing other restaurants to have separate smoking areas. Some lawmakers said that acting now is premature in part because the Constitutional Court has not yet ruled on the smoking ban act. We see the information as slightly negative, but as we have already mentioned, PMCR with its IQOS is not covered by the current legislation. Additionally, we saw rather small probability for the changes to pass.

 

Industrial Production - October

Industrial production in October, as expected, rose by 10.5% y/y. The results were positively influenced by calendar effects (2 working days more). Seasonally-adjusted industrial production declined by 1.5% m/m and in year-on-year terms was up by 5.5% (7.4% in September). The domestic industry in October, by its slowdown, followed the same pattern as the German industry. The high growth in the year-on-year comparison is caused in half by calendar effects. However, the overall picture of industry has remained unchanged – the growth has been continuing, the October slowdown may be a one-off fluctuation. The prospect of solid growth was supported by the increase in new orders (10% y/y). In 2017, we expect the full-year industrial growth of slightly less than 6% (2.8% last year).

 

Trade balance - October

The trade balance recorded a surplus of CZK 9.7bn (15bn in October 2016) in October, below expectations (15bn). In comparison to last year, the trade balance surplus was reduced mainly due to a higher deficit in trade with basic metals and crude oil. Higher imports in these commodities reflect higher economic activity (higher volume) and higher commodity prices. Besides the trade with commodities, there was no change in trends. Total exports increased by 10% y/y and imports were up by 12% in October. For the January-October period, the trade balance showed a cumulative surplus of CZK 145 billion. We expect the full-year surplus to be close to CZK 140bn (164bn in 2016).

 

 

Milan Vanicek

Head of Research

phone.: +420 221 710 607

mobile: +420 739 529 520

e-mail: vanicek@jtbank.cz

 

Jan Pavlík

Head of Equity Sales

phone.: +420 221 710 628

e-mail: jpavlik@jtbank.cz

 

J&T BANKA, a.s.
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phone: +420 221 710 666

fax: +420 221 710 626

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