Cairn India- TP: INR370 Buy ::Motilal oswal,

Cairn India (CAIR) posted EBITDA of INR33b (+9% YoY, -1% QoQ) for 4QFY13, below
our estimate of INR35.6b primarily due to lower realization and higher opex at the
Cambay block. Rajasthan realization was USD99.7/bbl (our estimate: USD101.2/bbl)
and opex was USD4.9/bbl (our estimate: USD3.1/bbl; 9MFY13 average: USD2.9/bbl).
PAT impacted by exploration write-offs of INR3.7b: CAIR’s reported exploration
write-offs of INR3.7b included (a) INR2.7b of dry well write-off at Sri Lanka, and
(b) INR0.7b of 3D seismic survey expense in South Africa. This was partially offset
by (a) lower forex loss at INR28m (our estimate: INR1.5b), and (b) lower than
expected tax rate of 2.2% leading to a PAT of INR25.6b (our estimate: INR30.2b).
Rajasthan discount to Brent at ~12%; production averaged ~169kbpd: Rajasthan
realization was USD99.7/bbl (v/s USD108.5/bbl in 4QFY12 and USD95.6/bbl in
3QFY13), implying ~12% discount to Brent (v/s 13% in 3QFY13). Gross production
averaged 168.5kbpd (v/s 138kbpd in 4QFY12 and 170kbpd in 3QFY13).
Reiterates FY14 Rajasthan exit rate of 200-215kbpd; Mangala field might sustain:
The management indicated that if it gets approval to drill 48 infill wells at Mangala,
it could sustain/extend the current 150kbpd plateau, implying no decline at
Mangala in 4QFY14, contrary to our/consensus expectations. Update on key fields:
(a) Mangala: To drill 48 infill wells to sustain/extend plateau of 150kbpd (status:
approved by Operating Committee (OC), pending with Management Committee
(MC)), (b) Bhagyam: Expects to reach 40kbpd in 2HFY14 (~25kbpd now), ~30 wells
pending to be drilled as per the FDP, (c) Aishwariya: Has drilled nine of 11
development wells and plans to reach approved plateau of 10kbpd in next few
months, and (d) Barmer Hills: Has submitted development plan to OC and expects
to start production by end-FY14 subject to receiving MC approval.
Valuation and view: The stock trades at 5.3x FY14E EPS of INR55.8. Our SOTP value
for CAIR stands at INR370/share, implying 26% upside from current levels. Buy.

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