Re: {LONGTERMINVESTORS} Cairn India
RAJESH DESAI
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CA. Rajesh Desai
RAJESH DESAI
Brokerages are positive and maintain 'buy' recommendations on the stock.
Goldman Sachs has a 'buy' on Cairn India with a target of Rs 400. Adjusted net profit was higher than expectations due to better-than-expected oil realizations, the brokerage says. It expects the ramp-up at the Bhagyam field and commencement of production at Aishwarya would be the key to drive medium-term growth.
According to a KIM ENG report, Cairn India's Q1 EPS beats expectations due to a large forex gain and low rate of tax.
"Q1 EPS of Cairn India is 34 per cent of our FY13F EPS of Rs 47. We expect the EPS to come down in the coming quarters due to the fall in benchmark brent crude prices. Our FY13F brent crude price is $105. However, we like Cairn because it is trading at an attractive PER of 6.8x FY13F and is confident of increasing its production by 70 per cent over the next 3 years from the Rajasthan field. Its surplus cash of US$1.9bn will support its CAPEX program to increase the output from the Rajasthan field," the report noted.
The brokerage has maintained 'buy' rating on the stock with a price target of Rs 350 per share.
IIFL expects Cairn India to achieve higher than 175,000 barrels of oil per day of peak production over the medium term.
"Considering this, the stock currently seems to be factoring in a long-term crude oil average price of $75/bbl against our expectations of $90/bbl. Additionally, the company has guided for a liberal dividend policy. Hence we maintain our buy rating with a revised 9-month price target of Rs 380," the IIFL report said.
IFCI Financial Services has ugraded the stock to buy from hold earlier. The brokerage has revised its FY13E EPS downward.
"We have lowered our FY13E EPS to Rs 45.7 (from Rs 53.4 earlier) as we have revised our assumption for the Rajasthan field production at 170 k bpd (from 190 k bpd earlier), brent crude to $100/bbl (from $115/bbl earlier), Rs/USD rate to Rs 53 from Rs 50 earlier and Rajasthan crude discount to Brent at 10.5 per cent from 12 per cent earlier," it said.
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CA Mihir Desai
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CA. Rajesh Desai
RAJESH DESAI
Cairn India block deal
-Book closed last night
-Block deal to be executed today on stock exchanges
-Cairn UK to sell 15.3 crore shares (8% equity)
-Price range Rs 318-328/share
-Offer size USD 940 million
-Cairn UK holding down to 10.3% post block deal
-Citigroup sole book-runner to Cairn India block
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CA. Rajesh Desai
Rajesh Desai
Cairn India has made its latest oil discovery, the 26th discovery so far in the RJ-ON-90/1 block, following recent policy clarity by Government of India (GoI) to conduct exploration activity in development blocks.
The Management Committee approved the exploration work programme for the RJON-90/1 block on 14 February, 2013, post which Cairn India, the operator of the block, commenced the drilling of its first Exploration well, Raageshwari-South-1 on February 25, 2013 located in the southern part of the block.
The technical evaluations indicate 10 metres of gross oil column within Dharvi Dungar Formation. Oil has been discovered and tested for the first time in Dharvi Dungar sands in Raageshwari-Tukaram area, where previous discoveries were in the shallower Thumbli sands. The volumes of oil in place and the potential resource base associated with this discovery are under evaluation.
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CA. Rajesh Desai
Rajesh Desai
§ The company today announced new oil discovery in Rajasthan Block which indicate 10 meters of gross oil column. The company has commenced drilling of exploration well in Raageshwari South-1 in Rajasthan Basin following the approval from the management committee.
§ This is the 26th discovery so far in Rajasthan and evaluation of volume and potential resource base are underway. Cairn is planning to drill almost 100 wells over the next three years. Earlier the company had mentioned that almost 530mmbbls reserve potential from Barmer hill and this discovery bode well for the company’s future prospects.
§ The stock is currently valuing a long term crude oil price of US$85/bbl against our expectation of US$110/bbl. Sudeep (sudeed...@idbicapital.com 91-22-43221190) maintains BUY rating on the stock.
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CA. Rajesh Desai
Rajesh Desai
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CA. Rajesh Desai
Rajesh Desai
Dear Sir/Madam,
Cairn India Limited(CIL) announced its Q1’14 results on July 24, 2013.
Cairn India Limited posted their Q1FY14 results which missed the consensus on the topline & EBITDA front. The company reported a Q1 topline of INR4062.93crores which declined both on QoQ & YoY basis while posted a growth of ~22% on QoQ basis in their bottomline to INR3127.23 crores. Both EBITDA margins and PAT margins are under pressure on yearly basis. Foreign exchange gain helped the company to achieve growth in quarterly PAT numbers.
The average daily gross operated production (boepd) for the Q1FY14 was 212442 against 202014 in Q4FY13 registering a growth of 5% however because of the lower average price realization (US$93.30 per boe vs. US$99.50per boe QoQ) the company reported a de-growth in their topline both on quarterly as well as on yearly basis.
A snapshot of the CIL’s quarterly performance on consolidated basis are as follows:
Particulars | Consensus | Actual | Variance % |
Sales | 41.28 |
40.62 |
-2% |
|
EBITDA |
30.37 |
29.09 |
-4% |
|
PAT |
27.95 |
31.27 |
12% |
|
EPS |
14.51 |
16.37 |
13% |
|
CAIRN INDIA LTD. | |||||
|
CONSOLIDATED | |||||
|
Description |
Q1'14 |
Q4'13 |
Q1'13 |
QoQ(%) |
YoY(%) |
|
Total Income |
4062.93 |
4363.36 |
4440.03 |
-6.89% |
-8.49% |
|
Total Expenditure |
1153.14 |
1470.92 |
983.14 |
|
|
|
PBIDT(ExclOI) |
2909.79 |
2892.44 |
3456.89 |
0.60% |
-15.83% |
|
EBITDA margins |
71.62% |
66.29% |
77.86% |
533bps |
(624)bps |
|
Other Income |
125.10 |
221.93 |
96.44 |
|
|
|
Operating Profit |
3034.89 |
3114.37 |
3553.33 |
|
|
|
Interest |
10.45 |
15.15 |
29.47 |
|
|
|
Exceptional Items |
682.00 |
-2.77 |
866.28 |
|
|
|
PBDT |
3706.44 |
3096.45 |
4390.14 |
|
|
|
Depreciation |
519.33 |
474.67 |
437.34 |
|
|
|
PBT |
3187.11 |
2621.78 |
3952.80 |
|
|
|
Tax |
59.88 |
58.18 |
127.06 |
|
|
|
Profit After Tax |
3127.23 |
2563.60 |
3825.74 |
21.99% |
-18.26% |
|
PAT margins |
76.97% |
58.75% |
86.16% |
1822bps |
(919)bps |
|
Equity Capital |
1910.29 |
1910.24 |
1907.87 |
|
|
|
Face Value(InRs) |
10.00 |
10.00 |
10.00 |
|
|
|
EPS |
16.37 |
13.42 |
20.05 |
|
|
|
Figures in INR Crore.EPS represents basic EPS | |||||
Regards,
Team Microsec Research
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CA. Rajesh Desai
Rajesh Desai
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CA. Rajesh Desai
Rajesh Desai
Reuters Market Eye - Credit Suisse has downgraded Cairn India(CAIL.NS) to "neutral" from "outperform" after saying its July-September profit-after-tax and revenue missed estimates.
The investment bank says lower crude realisations "explains almost the entire magnitude of the miss" in revenue.
"With the recent stock move, and with only 12 percent potential upside left, we downgrade to neutral," Credit Suisse said in a note on Wednesday, referring to its target price of 372 rupees.
Result Update: Cairn India Ltd - Kotak
¾ In Q2FY14, Cairn has reported profit after tax marginally lower than our estimates mainly on account of higher average discount on crude oil realization to Brent crude (13% in Q2FY14 as against 8.5% in Q1FY14) i.e lower crude oil realizaion, lower than expected production volume growth, etc.
¾ CIL has reported a PAT of Rs.33.85 Bn, higher by 8.2% QoQ and by 45.8% YoY mainly on account of 1). Higher realizations, 2). Weak rupee (11.3% QoQ), 3). Higher volumes, 4). Lower operating expenses, 5). Lower exploration cost w/off and 6). Forex gain (Rs.4.3 Bn).
¾ We expect EPS of Rs. 60.8 and of Rs. 60.6 for FY14E and FY15E respectively. In Q2FY14, the Company's Rajasthan crude oil realization was at discount of ~13% to Brent crude as against our assumption of 10% for the whole year. We have accordingly adjusted the discount rate in our model.
¾ Stock is fairly valued at 2.1x EV/EBIDTA and 5.5x P/E based on FY15E earnings estimates. We arrive at the fair value of the stock is Rs. 361/Share (earlier Rs.365/share). We recommend Accumulate (earlier BUY) rating on Cairn India Ltd due to limited upside.
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CA Mihir Desai
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CA. Rajesh Desai
Rajesh Desai
Cairn India can grow faster if the government policies are more sensible
Cairn India has come a long way in 20 years, having started with 3,000 barrels of oil a day, in Ravaa fields, to a current output of 180,000 barrels, representing 25% of India'sneeds, which are growing by the hour! They could notch to 300,000 barrels, a thousand leaps forward from the tiny step they took two decades ago. And, whenthey do, which is within their r each, they would be able to meet 35% of India's oil requirements.
Cairn India, along with its joint venture partner ONGC (Government of India company), holds 70% with the balance 30% stake held by the latter. They operate in four basins and have made 40 discoveries so far. Around 95% of its production is oil and the balance is gas, in which they have shown serious interest in recent times.
It may be recalled that the Rajasthan block initially covered an area of 11,108 sq kms but the licence was given to explore only 10,558 sq kms, as 550 sq km being the unexplored area, which was surrendered, by Cairn India, to the Government, in line with the norms laid down in the Barmer block. Now, once surrendered, it looks like it makes it obligatory for the government to go for an auction once again! This is what Veerappa Moily has recently mentioned in a statement.
It appears that Cairn India has now sought reinstatement of the block to the government and the appeal made by them to the Cabinet, if accepted, would be the right step in the right direction, as this would eliminate new processing cost and loss of time. In any case, we may bear in mind that it is now Cairn India is taking the risk in taking up the exploration costs that may or may not bear any oil or gas for that matter! Why not give them the chance?
Another important issue that has come up is that the contract for the Rajasthan block is valid till May 2020, hardly seven years away from now, which is, practically small lead time in the oil industry. Cairn India have approached the government that the contract should be actually extended to the full life and economic potential of the block, which, they estimate may be for about 20 years or so. Such a move would enable them to plan their exploration work, investment plans and options which are likely to involve capital expenditure of millions of dollars.
It must be borne in mind that the Rajasthan block was awarded much before the establishment of the New Exploration Licensing Policy (NELP), which does not stipulate any "expiry" date as such. Since this is the case for new contracts, why not apply to all existing contracts the same r ule?
While Cairn India investigates the prospects for oil and gas under the ground, they have, above on hand, clean cash reserves of over $3 billion! Thankfully, when the government permitted them to explore in existing, producing fields, Cairn India took expeditious action and have discovered oil and gas in Barmer basin in Rajasthan, and in Nagaylanka in Andhra Pradesh.
With these encouraging finds, Cairn India hope to invest a substantial portion of t his cash reserves in Rajasthan initially, and with others to follow in due course.
Moneylife has carried stories on Cairn India on a regular basis. It may be recalled that Cairn India had sought government clearance to go in for a swap arrangement by which they may be permitted to export the crude oil and gas from Barmer to get a better price in the international market (currently Rajasthan oil is being sold at about 8% to 13% cheaper then Brent) and, in lieu, import cheaper crude that can be supplied to Indian refineries who are designed to handle them with ease. For this, Cairn India had suggested that they would use the service of Indian Oil (a Government of India company), so that everyone benefits. For, at the moment, India imports crude and does not permit its export. Such a move would benefit refineries like Mangalore Refinery, which has been largely dependent upon Iranian crude.
A look at the web site of Cairn India is educative. The capital expenditure plans are on the anvil and it is apparent that they are awaiting government clearances to take major steps in the right direction. From the Rajasthan block itself, they project a production of 200,000 to 250,000 barrels a day by 2013-14, just in the next few months.
In addition to their development and expansion plans in India, Cairn India has taken steps to explore in the neighbouring unexplored areas in Sri Lanka, which looks promising, and South Africa. The onshore discovery of oil and gas in Nagaylanka in Andhra Pradesh involves additional investment of about Rs500 crore in the next 2/3 years, details of which are expected.
On the whole, in the next few months, Cairn India, being an active member of the Vedanta family, may spring pleasant surprises for its share holders, considering its huge cash reserves, and the capex plans ahead for its future expansion and development.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
CA. Rajesh Desai