Buy Cairn India; target of Rs 144:KRChoksey

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26 Aug, 2025 12:21

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KRChoksey's research report on Cairn IndiaCairn India reported revenue of INR 20390 Mn, down 42% YoY; Production from DA1 was down 1% YoY and up 2% QoQ at 150,496 bopd. Production from DA2 was down 29% YoY and 4% QoQ at 19,948 bopd. EBITDA stood at INR 6660 Mn down 67% YoY and 27% QoQ mainly due to higher production expenses of INR. 5430 Mn in Q3FY16 as compared to INR 5170 Mn in Q2FY16. The EBITDA margins came in lower at 33% down QoQ due to higher operating costs (increase in polymer injection volumes). Exploration cost write off stood at INR 725 Mn down 54% YoY and up 6% QoQ as there was no exceptional write off this quarter. Operating costs at Rajasthan block stood at USD 5.1/bbl (compared to earlier costs of USD 5.5/bbl). Depreciation and Depletion charge for the quarter was at INR 8930 Mn, compared to INR 8640 Mn in Q2FY16, unchanged YoY and up 3% QoQ. Profit after Tax (before exceptional item) in Q3 FY16 was INR 90 Mn, down by 90% QoQ primarily due to lower EBITDA, higher depreciation and lower forex gain. A favorable movement in the currency resulted into forex gain of INR 488 Mn, a 87%% QoQ decrease. Other income increased by 18% QoQ to INR 1420 M due to timing difference in the maturity of investments. There was reversal of tax expense by INR 494 Mn in the third quarter against the reversal of INR 1310 Mn in Q2FY16.The long term prospects of the company remain strong with the potential exploration upside of RJ block. However the near term performance of the stock will be under pressure due to flat production for FY16-17 from RJ fields, issues on cash utilization due to loan to Vedanta, lower realizations due to lower crude prices and PSC extension uncertainty. Cairn has further scaled down capex from USD 500m to USD 300m due to falling crude prices. We have valued Cairn’s core business (excluding cash and investments) @ INR. 48.7 per share based on DCF Model. Company has cash & cash equivalents of INR 184700 Mn (INR 98.5/share). Hence a merger with parent Vedanta remains unfavorable for minority shareholders and adds to the weight if crude prices increases. We maintain our BUY rating on stock with price objective of INR 147/share.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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