Buy Cairn India, target of Rs 224: Edelweiss

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

Edelweiss’s report on Cairn IndiaCairn India (CAIR) reported a subdued Q2FY16 with EBITDAX (down 29% QoQ, 65% YoY) 20% below estimates. Earnings were impacted by the sharp 22% QoQ fall in realisation against 18% QoQ fall in Brent, as discount of Cairn’s heavy-crude widened against Brent (14.3% from 10% QoQ). Operating cost increased 11% QoQ to USD6.4/bbl due to higher polymer injection and 4% QoQ rise in water-flood opex amid lower volumes. Reversal of tax expense (INR1.3bn) and higher forex gains resulted in a better PAT performance (13% above estimates). Lower energy prices is resulting in better cost efficiencies, with 13% savings in procurement cost and a 15% cut in well drilling costs. Management remained confident about a 10-year PSC extension beyond 2020 and a possible reduction in cess, while retaining the production guidance for FY16. Merger risks, though unlikely, will continue to weigh on the stock. However, Cairn’s huge cash pile (~60% of current value) and handsome dividend yield (6%) will effectively cap potential downside. Maintain ‘BUY’, but lower TP to INR 224 (INR 241 earlier) factoring higher price discount for Rajasthan crude.Outlook and valuations: Cash caps downside; maintain ‘BUY’  The stock price is currently discounting “zero” value to existing cash (~60% of the current market value). Merger risks will remain an overhang. At current valuations of 9.5x FY17E PER, risk‐reward looks extremely favourable given 6% dividend yield and healthy cash generation. Maintain ‘BUY/SO’ with target price of INR 224, says Edelweiss Securities Limited research report.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.

Read More