Cairn India -No respite :: HDFC Securities

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No respite
Cairn India’s 3QFY15 results were muted despite 11%
QoQ volume growth due to lower crude realisations
(-26% QoQ) and higher operating cost (non-ad
valorem cess). Revenues stood at Rs 35.0bn (-12%
QoQ) while EBITDA came in at Rs 20.2bn (-24%).
Higher depreciation and tax rate further dragged
profits to Rs 13.5bn (-41% QoQ).
Co. reiterated its guidance of (1) Flat output from
Rajasthan fields in FY15 (2) Production growth of 7-
10% CAGR over FY14-17E. Management laid
emphasis on free cash flow generation and prudent
dividend payouts, without any cut in key capex, by
focusing on operating efficiency.
First polymer injection in the Mangla field was done
in Oct-14. Production is expected to ramp-up from
1QFY16. Muted volumes and realisations will lead to
a decline in profits. We have reduced our PAT
estimates for FY16/17E by 23/13%, factoring lower
crudes prices. Maintain NEUTRAL with a TP of Rs
258/sh.
3QFY15 highlights
 Rajasthan production : 180k boepd (+10.3% QoQ, -
3.4% YoY). Sequential increase is due to lower
production in Q2 due to planned maintenance.
 Ravva production : 28k boepd (+35% QoQ, -0.3% YoY)
due to higher gas volumes.
 Cambay prod : 11k boepd (+4.3% QoQ, +8.1% YoY)
 Average realisation declined to USD 68.1/bbl (-26.1%
QoQ, 29.4% YoY). It was at 10.8% discount to Brent.
 Cess being non-ad valorem, increased by 10.9% QoQ to
Rs 7.3bn, in-line with the rising volumes.
 Cash and cash equivalent as of Dec-14 stood at Rs
178bn. ~74% of deposits are in INR.
 Our base case assumption for crude and INR-USD is
USD 80/bbl and 62 respectively for FY16/FY17. Please
refer to page-2 for a detailed sensitivity of FY16/17E
EPS and target price with crude price and INR-USD.

LINK
http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3010891