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Cairn India Buy
On track for production ramp-up in 2HCY11
3Q result: Cairn India reports INR20.1bn PAT; +591% YoY, +27% QoQ
Cairn India reported net profit of INR20.1bn, 12% above our estimate due
to higher than expected MAT credit entitlements. EBITDA at INR25.4bn
(+738% YoY, +19% QoQ) was 3% above our estimate due to higher Rajasthan sales volumes. Interest cost was lower than estimated at INR742mn
(-42% QoQ) due to reduction in short-term debt. Mangala crude oil discount
to Brent increased in the quarter to 13.5% and the management expects it
to remain at the higher end of the guidance (10-15% discount) in the near
term. The company has turned net cash positive (US$194mn) in the quarter
driven by strong operating cash flows (US$455mn in the quarter).
E&P activities on track; Rajasthan peak production by CY11-end
Development drilling in Rajasthan block is on track for approved peak production of 175k bpd by end-CY11. Mangala field is ready to increase
production to 150k bpd but is awaiting JV and Government approval. EOR
pilot project is also on track. Cairn expects to commence exploratory drilling
in Sri Lanka in July 2011.
Reiterate Buy as the preferred play on high oil prices
We reiterate our Buy on Cairn India with INR330/sh as we expect it to benefit
from high crude oil prices and ramp-up in Rajasthan production, which is
still not fully factored in its stock price. We estimate Rajasthan oil production
to increase from an average of 8,000 bpd in FY10 to 103,000 bpd in FY11,
165,000 bpd in FY12 and 195,000 bpd in FY13. Management has stated that
it will not accept any condition that will be detrimental to Cairn India's valuation.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cairn India Buy
On track for production ramp-up in 2HCY11
3Q result: Cairn India reports INR20.1bn PAT; +591% YoY, +27% QoQ
Cairn India reported net profit of INR20.1bn, 12% above our estimate due
to higher than expected MAT credit entitlements. EBITDA at INR25.4bn
(+738% YoY, +19% QoQ) was 3% above our estimate due to higher Rajasthan sales volumes. Interest cost was lower than estimated at INR742mn
(-42% QoQ) due to reduction in short-term debt. Mangala crude oil discount
to Brent increased in the quarter to 13.5% and the management expects it
to remain at the higher end of the guidance (10-15% discount) in the near
term. The company has turned net cash positive (US$194mn) in the quarter
driven by strong operating cash flows (US$455mn in the quarter).
E&P activities on track; Rajasthan peak production by CY11-end
Development drilling in Rajasthan block is on track for approved peak production of 175k bpd by end-CY11. Mangala field is ready to increase
production to 150k bpd but is awaiting JV and Government approval. EOR
pilot project is also on track. Cairn expects to commence exploratory drilling
in Sri Lanka in July 2011.
Reiterate Buy as the preferred play on high oil prices
We reiterate our Buy on Cairn India with INR330/sh as we expect it to benefit
from high crude oil prices and ramp-up in Rajasthan production, which is
still not fully factored in its stock price. We estimate Rajasthan oil production
to increase from an average of 8,000 bpd in FY10 to 103,000 bpd in FY11,
165,000 bpd in FY12 and 195,000 bpd in FY13. Management has stated that
it will not accept any condition that will be detrimental to Cairn India's valuation.
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