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Brokerages lower Cairn India target price post Q4 nos

Operationally, it was a tough quarter for Cairn India with oil prices falling 29% QoQ and Rajasthan oil production slipping 3% QoQ on challenges in Bhagyam field.

April 24, 2015 / 14:02 IST
     
     
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    Moneycontrol Bureau

    Cairn India posted a fourth-quarter loss of Rs 241 crore on revenues of Rs 2,677 crore, compared to a profit of Rs 1,350 crore on revenues of Rs 3504 crore in the third quarter.

    Brokerages such as UBS, Credit Suisse, CLSA, among others, have lowered their price targets for the stock following the weak numbers.

    Excerpts from the brokerage reviews of Cairn earnings:

    UBS:Price target: Rs 260 (Rs 285 earlier)

    The management guided for flat FY16 production; but is optimistic on reserve accretions. It reiterated that capex for FY16 will be cut to USD 500 million versus USD 1.2 billion planned earlier, with USD 1.1 billion spent in FY15.

    The focus will be on improving production from existing fields and staying free cash flow positive; doubling gas production and developing Raageshwari Deep Gas field.

    Key risks are

    1) liability arising from recent IT tax demand of USD 3.3 bn (appealed against) and

    2) potential merger as part of Vedanta's group restructuring

    CLSA:

    Price target: Lowered marginally to Rs 250

    The management indicated production may not rise in the next two years as the firm limits growth capex in the low crude price environment.

    Building lower production and raising depreciation estimate drives a 15% cut in FY16-17 EPS.

    Maintain 'underperform' on regulatory overhangs, continued concerns on leakage of cash to Vedanta and lack of any improvement in core production

    Credit Suisse:

    Price target: Rs 245 (Rs 280 earlier)

    Management expects FY16/17 Rajasthan production to stay flat at FY15 levels based on current investment plans (assuming US$55/bbl oil).

    If crude prices see a sustained uptrend, management may revisit these plans.

    With production momentum weak and regulatory overhangs (PSC extension, tax demand), see limited upside to Cairn.

    Bank of America Merrill

    Price target: Rs 232 (Rs 231 earlier)

    We were assuming Rajasthan oil production growth of 7-13% in FY16-17. We have now cut our Rajasthan oil production estimate by 6-17% to assume flat volume.

    We cut CIL's FY16-17E recurring EPS by 3-18%, mainly on the cut in the Rajasthan production estimate.

    We now expect CIL's FY16E EPS to decline by 38% YoY, based on a Brent forecast of US$56/bbl.

    first published: Apr 24, 2015 11:24 am

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