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Research
Neutral on Cairn India - 4QFY12 Results Update - Motilal Oswal
Posted On : 2012-04-23 10:56:09( TIMEZONE : IST )
4QFY12 in-line: Cairn India's reported 4QFY12 EBITDA and PAT were in-line. EBITDA stood at INR29.8b (-5% YoY, +17% QoQ) and PAT stood at INR21.9b (-11% YoY, -3% QoQ). Lower than expected forex loss at INR2.2b (v/s est of INR3b) and lower D,D&A at INR4.7b (v/s estimate of INR5b) offset the impact of higher interest at INR0.3b (v/s estimate of INR0.2b) and lower other income at INR0.9b (v/s estimate of INR1.4b).
- Cairn reports long awaited resource/reserve upgrade: Cairn India increased the in-place resource base estimates at Rajasthan by 12% from 6.5bbboe to 7.3bboe. Further, it also increased estimated ultimate recovery (EUR) reserves by 21% from 1.4bboe to 1.7bboe. The resource/reserve upgrade will eventually help Cairn India to achieve 300kbpd (subject to government approvals).
- Dividend policy of 20% payout announced: Cairn India announced its dividend payout policy of 20% of annual consolidated net profit. Board will consider the first dividend payment after the corporate reorganization which is expected to be completed by end 1QFY13.
- Rajasthan production at 175kbpd: Post the government approval, Mangala field production was increased from 125 to 150kbpd, leading to overall production at 175kbpd (Mangala - 150, Bhagyam - 25). Further ramp-up will be contingent to increase in the pipeline capacity. We model in Rajasthan production at 185kbpd in FY13 (earlier 175kbpd) and 223kbpd in FY14 (unchanged).
- Key events to watch out: (1) Debottlenecking of pipeline; (2) Production ramp-up; (3) Approvals for further exploration in Rajasthan block, and (4) likely special dividend given the comfortable cash position.
- Raising estimates; maintain Neutral: We are increasing our FY13 EPS by 6% to factor in higher production at 185kbpd (from 175kbpd) as pipeline de-bottlenecking in 2HFY13 would help Bhagyam ramp-up. For FY13/FY14/15/long-term, we model in Brent oil price at USD110/100/90/90 and INRUSD at 50/48/47/45. Our SOTP stands increased to INR330/share (INR305/share) on the back of (1) increase in overall Rajasthan recovery to 1.1bboe from 1bboe led by increase in plateau from 240 to 250kbpd (in FY16) supported by higher resource base, and (2) increase in discovered resource upside from INR18/share to INR23/share. Neutral.
