Cairn India - March 2013 Results Preview - Motilal Oswal

- Cairn India's 4QFY13E operational performance to be largely similar to 3QFY13, with gross Rajasthan oil sales of 169kbpd and net sales of 127kboepd (v/s 107kboepd in 4QFY12 and 128kboepd in 3QFY13).

- We expect the company to report net sales of INR45b (v/s INR43b in 3QFY13), led by stable production at its Rajasthan block. We estimate EBITDA at INR35.6b v/s INR30b in 4QFY12 and INR33b in 3QFY13.

- We estimate other income to increase led by higher cash balance. We assume a forex loss of INR1.5b v/s profit of INR2.4b in 3QFY13 due to ~2% rupee appreciation as on March 31, 2013 v/s December 31, 2012.

- We model Brent crude price of USD110/bbl in FY13E/14E/15E and long term price of USD95/bbl, and take a quality discount for Cairn India of 10.8% in FY13E and 13% long term.

- Cairn has begun production from its Aishwariya block on March 23, 2013 and is expected to ramp up to 10kbpd soon. Key operational factors to watch in the medium term would be (a) production rampup and (b) reserve updates, with ongoing 100-well exploration program at Rajasthan. With increasing cash on the balance sheet, clarity on utilization will be a positive.

- The stock trades at 5.6x FY15E EPS of INR49.8. Maintain Buy.

Source : Equity Bulls

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