Motilal Oswal neutral on Cairn India

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Motilal Oswal neutral on Cairn India

Motilal Oswal has maintained neutral rating on Cairn India with a target of Rs 321, in its January 24, 2012 research report.

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Motilal Oswal has maintained neutral rating on Cairn India with a target of Rs 321, in its January 24, 2012 research report.

"Cairn India (CAIR) reported an EBITDA of INR25.5b for 3QFY12, lower than our estimate of INR27.8b. This is due to profit petroleum being higher at INR5.7b v/s our estimate of INR4.2b, led by lower capex (profit petroleum is shared post capex). The impact of (1) lower than expected forex gain at INR3b (v/s our estimate of INR4.8b), and (2) higher DD&A at INR5.6b (v/s our estimate of INR4.7b) due to dry well write-off in Sri Lanka, was partly compensated by lower tax rate at 5.7% (v/s our estimate of 16%). Reported PAT was INR22.6b (v/s our estimate of INR24.8b), up 13% YoY and 7% QoQ. Rajasthan realization was USD100.3/bbl (v/s USD101.6/bbl in 2QFY12 and USD74.8/bbl in 3QFY11), implying 8.3% discount to Brent price (long-term discount guidance of 10-15%). CAIR maintains its guidance of production ramp-up to 175kbpd by March 2012 from Mangala and Bhagyam and an average of 175kbpd (+5-10% likely) in FY13. Management guidance of Rajasthan gross capex at USD1b-1.25b for FY13 is at the upper end of the earlier guidance of USD0.5b-1b. Capex will be largely towards processing facilities, augmentation of pipeline capacity and well completion."

"We are reducing our EPS estimate for FY12 by 4% to factor 4QFY12 Rajasthan production at 142kbpd (earlier 150kbpd) and are increasing our EPS estimate for FY13 by 9% to factor in the change in our INR/USD assumption to 50 (earlier at 48) and lower tax rate assumption at 10% (based on guidance) v/s 16% earlier. For FY13/FY14/FY15/long-term, we model Brent oil price at USD100/95/90/ 90 per bbl and INR/USD at 50/48/47/45. Our SOTP-based target price stands at INR 321. For every USD10/bbl change in oil price, our target price changes by ~INR30/share," says Motilal Oswal research report. 

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