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Cairn India
F a i r l y v a l u e d …
Cairn India’s revenues for Q1FY12 increased 342% YoY to | 3212.7 crore
while PAT increased 869% YoY to | 2726.6 crore in Q1FY12. The PAT
was higher than our estimates mainly due to lower operating expenses in
Rajasthan at US$2.5 per barrel (long-term projection maintained at US$5
per barrel) and lower tax expenses at | 90.9 crore (our estimates: | 290.9
crore) in Q1FY12. The average crude oil realisation increased from
US$71.8 per barrel in Q1FY11 to US$105.9 per barrel in Q1FY12 due to
higher crude oil prices. A postal ballot of all shareholders will be held to
decide on the GoI imposed conditions of making royalty cost recoverable
and withdrawal of the cess arbitration being pursued by Cairn India. The
production from the Bhagyam field and ramp up in crude oil production
at the Mangala field hinges on the company’s acceptance of the
preconditions set by GoI regarding royalty and cess. We estimate gross
production from the Rajasthan field at 1,51,261 boepd and 1,94,986
boepd in FY12E and FY13E, respectively. We have maintained a HOLD
rating with a price target of | 322.
ƒ Highlights of the quarter
Cairn’s gross production increased 80% YoY to 1,71,801 boepd and
net production increased 121% YoY to 99,640 boepd in Q1FY12.
The oil production from the Mangala field stood at 1,25,127 boepd
in Q1FY12. The company is awaiting government approval to ramp
up the production to 1,50,000 boepd from the Mangala field. If
royalty becomes cost recoverable, it would reduce Cairn India’s
revenues and PAT by | 1,291.6 crore in Q1FY12 (we have assumed
royalty to be cost recoverable in our estimates).
V a l u a t i o n
We have valued Cairn India on SOTP methodology, using DCF for Cairn’s
producing assets and EV/bbl of US$12.5 for other exploratory blocks. We
estimate Cairn’s fair value at | 322/share (MBA fields at | 242/share, |
4/share for Ravva field, | 2/share for Cambay field and other exploratory
upside at | 37/share). We have assumed long-term Brent crude prices at
US$100/bbl in our valuation model while Cairn’s current valuation
discounts US$96.5 bbl. We recommend the stock with a HOLD rating and
a price target of | 322
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cairn India
F a i r l y v a l u e d …
Cairn India’s revenues for Q1FY12 increased 342% YoY to | 3212.7 crore
while PAT increased 869% YoY to | 2726.6 crore in Q1FY12. The PAT
was higher than our estimates mainly due to lower operating expenses in
Rajasthan at US$2.5 per barrel (long-term projection maintained at US$5
per barrel) and lower tax expenses at | 90.9 crore (our estimates: | 290.9
crore) in Q1FY12. The average crude oil realisation increased from
US$71.8 per barrel in Q1FY11 to US$105.9 per barrel in Q1FY12 due to
higher crude oil prices. A postal ballot of all shareholders will be held to
decide on the GoI imposed conditions of making royalty cost recoverable
and withdrawal of the cess arbitration being pursued by Cairn India. The
production from the Bhagyam field and ramp up in crude oil production
at the Mangala field hinges on the company’s acceptance of the
preconditions set by GoI regarding royalty and cess. We estimate gross
production from the Rajasthan field at 1,51,261 boepd and 1,94,986
boepd in FY12E and FY13E, respectively. We have maintained a HOLD
rating with a price target of | 322.
ƒ Highlights of the quarter
Cairn’s gross production increased 80% YoY to 1,71,801 boepd and
net production increased 121% YoY to 99,640 boepd in Q1FY12.
The oil production from the Mangala field stood at 1,25,127 boepd
in Q1FY12. The company is awaiting government approval to ramp
up the production to 1,50,000 boepd from the Mangala field. If
royalty becomes cost recoverable, it would reduce Cairn India’s
revenues and PAT by | 1,291.6 crore in Q1FY12 (we have assumed
royalty to be cost recoverable in our estimates).
V a l u a t i o n
We have valued Cairn India on SOTP methodology, using DCF for Cairn’s
producing assets and EV/bbl of US$12.5 for other exploratory blocks. We
estimate Cairn’s fair value at | 322/share (MBA fields at | 242/share, |
4/share for Ravva field, | 2/share for Cambay field and other exploratory
upside at | 37/share). We have assumed long-term Brent crude prices at
US$100/bbl in our valuation model while Cairn’s current valuation
discounts US$96.5 bbl. We recommend the stock with a HOLD rating and
a price target of | 322
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