Cairn India:Operating performance in line:: Motilal Oswal

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 Operating performance in line: Cairn India reported 2QFY11 EBITDA of Rs21.7b (against our estimate of Rs22.2b);
up 16x YoY and 3x YoY. Reported PAT was Rs15.9b (in line with our estimate of Rs15.2b) up 238% YoY and 463%
QoQ. Strong YoY and QoQ performance was mainly due to crude sales from the Rajasthan block.




 Production ramp-up guidance maintained: Cairn maintained its production guidance of reaching 175kbpd in
2HCY11. We model 150kbpd from January 2011 and 175kbpd from August 2011, and an average of 102/172kbpd in
FY11/12. Cairn entered into crude sales agreements for 143kbpd so far. Cairn has guided for production of 150kbpd
in 4QFY11 and 175kbpd in 2HCY11 and to reach a peak of 240kbpd in 2012/13.
 Crude supplies largely through pipeline: Crude sales to private refiners have been through the Barmer-Salaya
pipeline. The pipeline portion of 80km from Salaya to Bhogat is under construction. Train 1, 2 and 3 at MPT are
operational and producing 125kbpd crude oil.
 Non-operating issues catch centre-stage: (1) In August 2010, Vedanta bid to take controlling stake in Cairn India
at Rs405/share including a non-compete fee of Rs50/share from Cairn Energy and at Rs355/share from minority
shareholders. Government approval is critical for the deal. Relative issues of ONGC's pre-emptive rights, resolution/
headway on royalty and cess issues will also have a bearing for the deal to go through. (2) The Cairn management
did not provide any clarity on media reports of the Management Committee (MC) not approving exploration capex for
further exploration in the block. Cairn indicated that it was continuing with the 2D and 3D seismic in the block.
 Valuation and view: Our long-term Brent price assumption is US$75/bbl. Cairn India trades at 7.5x FY12E EPS
of Rs42.6. At oil price of US$80/bbl, Cairn's FY12E EPS would be higher by 9% at Rs46.5. Our SOTP-based target
price for Cairn was Rs314 at a long-term Brent price of US$75/bbl. At long-term Brent price of US$80/bbl, our SOTP
value would increase to Rs332/share. Maintain Neutral.