Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
Cairn India Ltd. (CAIL.BO)
Neutral Equity Research
In line with expectations; acceptance of GOI terms to affect EPS/NAV
What surprised us
Cairn India reported 1QFY12 net profit of Rs27.3bn, up 11% qoq and largely
in line with our estimate of Rs27.6bn. Mangala production averaged 125K
b/d, in line with our estimate, and oil price realization at US$104.5/bbl was at
11% discount to Brent. While Rajasthan operating costs came in at
US$2.5/bbl, the company kept its long-term cost guidance at US$5/bbl, as it
stated workover costs could add to operating costs going forward.
Management stated that as per its interpretation of the PSC, royalty is not cost
recoverable. However, subsequent to a requisition received from Cairn UK to
convene an EGM and consider deal conditions imposed by the government,
the Board has decided to hold a postal ballot of all shareholders to consider
the same. We had expected Bhagyam production to commence in September,
though this could now be delayed because of deal-related procedural issues.
The company now expects it to commence in 4QCY11.
What to do with the stock
We note that the two big shareholders – Cairn Plc (62.2%) and Vedanta
Group (18.5%) – have been trying to close the deal since Aug 2010. If the
GOI conditions for the deal were to be implemented, we estimate Cairn
India’s FY12E/FY13E EPS could potentially decline by 27% each to
Rs52/Rs61 and NAV could potentially be impacted by about -14% to
Rs350/share. We believe that management guidance on future growth
strategy and deployment of cash flows from Rajasthan would be key to
stock performance going forward. Maintain Neutral on Cairn India and our
12-m NAV-based TP of Rs405 (excluding any royalty payment). Key risks
include rise in global crude oil prices and delay in production ramp-up.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
Cairn India Ltd. (CAIL.BO)
Neutral Equity Research
In line with expectations; acceptance of GOI terms to affect EPS/NAV
What surprised us
Cairn India reported 1QFY12 net profit of Rs27.3bn, up 11% qoq and largely
in line with our estimate of Rs27.6bn. Mangala production averaged 125K
b/d, in line with our estimate, and oil price realization at US$104.5/bbl was at
11% discount to Brent. While Rajasthan operating costs came in at
US$2.5/bbl, the company kept its long-term cost guidance at US$5/bbl, as it
stated workover costs could add to operating costs going forward.
Management stated that as per its interpretation of the PSC, royalty is not cost
recoverable. However, subsequent to a requisition received from Cairn UK to
convene an EGM and consider deal conditions imposed by the government,
the Board has decided to hold a postal ballot of all shareholders to consider
the same. We had expected Bhagyam production to commence in September,
though this could now be delayed because of deal-related procedural issues.
The company now expects it to commence in 4QCY11.
What to do with the stock
We note that the two big shareholders – Cairn Plc (62.2%) and Vedanta
Group (18.5%) – have been trying to close the deal since Aug 2010. If the
GOI conditions for the deal were to be implemented, we estimate Cairn
India’s FY12E/FY13E EPS could potentially decline by 27% each to
Rs52/Rs61 and NAV could potentially be impacted by about -14% to
Rs350/share. We believe that management guidance on future growth
strategy and deployment of cash flows from Rajasthan would be key to
stock performance going forward. Maintain Neutral on Cairn India and our
12-m NAV-based TP of Rs405 (excluding any royalty payment). Key risks
include rise in global crude oil prices and delay in production ramp-up.
No comments:
Post a Comment