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India Equity Research Reports, IPO and Stock News
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http://www.kotaksecurities.com/pdf/dmb/MorningInsight27032012.pdf
CAIRN INDIA LTD. (CIL)
PRICE: RS.347 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.370 FY13E P/E: 6.1X
q Recently, Mr. Jaipal Reddy (India's oil minister) has suggested that he
will take actions to boost investment and raise oil & gas production. We
believe this will speed up the process of approvals for production rampup from Rajasthan fields, this should be significantly positive for Cairn
India.
q Also, India has cut down its crude oil sourcing from Iran. This also demands for higher domestic oil production along with other diversified
sources.
q Cairn's higher crude oil production at elevated international crude oil
price (Brent $124-125/bbls) along with weakening rupee will partly mitigate the negative impact of increased oil cess to Rs.4500/Mt (wef FY13)
from Rs.2500/MT (announced in the 2012-13 budget). The cess rate was
last revised in FY07.
q Cairn India has approached the petroleum minister, seeking support in
making a case for a rollback of cess hike to the finance ministry, as per
media reports. Any immediate rollback of cess looks unlikely, we opine.
q Also, the recent correction in the stock price discounts most of the negatives, we opine.
q In FY13, it is expected that refineries like RIL, Essar Oil and IOC will increase their crude oil off take from Cairn India (Rajasthan oil fields). With
the commissioning of Essar Oil's expanded capacity the demand of CIL's
crude oil will increase. Further, CIL has been pursuing with the Directorate-General of Foreign Trade (DGFT) permission to sell crude oil to RIL's
second 29-mt refinery at Jamnagar, which is a SEZ refinery.
q Dividend policy announcement to be a key trigger: Dividend policy to be
announced by the company will abate concerns regarding the utilization
of cash. The Company's management has indicated to announce a sound
dividend policy. We are positive on the same.
q Our earnings estimates are based on our Brent oil price assumptions of
US$112/bbl for F2013E and US$100/bbl in F2014E.
q We also believe that there is a possibility of upward revision in the
company's Rajasthan crude oil reserves potential which the market has
not discounted yet.
q Further, any significant reserves declaration from Sri Lankan block can
add major value to the Company. Currently, the block is in E&D phase so
the same is yet not been priced in. However, we are bullish on the
growth prospects of Sri Lankan block.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://www.kotaksecurities.com/pdf/dmb/MorningInsight27032012.pdf
CAIRN INDIA LTD. (CIL)
PRICE: RS.347 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.370 FY13E P/E: 6.1X
q Recently, Mr. Jaipal Reddy (India's oil minister) has suggested that he
will take actions to boost investment and raise oil & gas production. We
believe this will speed up the process of approvals for production rampup from Rajasthan fields, this should be significantly positive for Cairn
India.
q Also, India has cut down its crude oil sourcing from Iran. This also demands for higher domestic oil production along with other diversified
sources.
q Cairn's higher crude oil production at elevated international crude oil
price (Brent $124-125/bbls) along with weakening rupee will partly mitigate the negative impact of increased oil cess to Rs.4500/Mt (wef FY13)
from Rs.2500/MT (announced in the 2012-13 budget). The cess rate was
last revised in FY07.
q Cairn India has approached the petroleum minister, seeking support in
making a case for a rollback of cess hike to the finance ministry, as per
media reports. Any immediate rollback of cess looks unlikely, we opine.
q Also, the recent correction in the stock price discounts most of the negatives, we opine.
q In FY13, it is expected that refineries like RIL, Essar Oil and IOC will increase their crude oil off take from Cairn India (Rajasthan oil fields). With
the commissioning of Essar Oil's expanded capacity the demand of CIL's
crude oil will increase. Further, CIL has been pursuing with the Directorate-General of Foreign Trade (DGFT) permission to sell crude oil to RIL's
second 29-mt refinery at Jamnagar, which is a SEZ refinery.
q Dividend policy announcement to be a key trigger: Dividend policy to be
announced by the company will abate concerns regarding the utilization
of cash. The Company's management has indicated to announce a sound
dividend policy. We are positive on the same.
q Our earnings estimates are based on our Brent oil price assumptions of
US$112/bbl for F2013E and US$100/bbl in F2014E.
q We also believe that there is a possibility of upward revision in the
company's Rajasthan crude oil reserves potential which the market has
not discounted yet.
q Further, any significant reserves declaration from Sri Lankan block can
add major value to the Company. Currently, the block is in E&D phase so
the same is yet not been priced in. However, we are bullish on the
growth prospects of Sri Lankan block.
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