Cairn India - Nirmal Bang

- Cairn India posted a net profit of Rs31.3bn (up 22% QoQ, down 18% YoY) compared to Bloomberg consensus estimate of Rs28.0bn and our estimate of Rs30.5bn.

- The company posted higher profit compared to Bloomberg consensus estimate on account of: (1) Forex gain of Rs6.8bn on US dollar deposits and receivables, (2) Lower operating costs, and (3) Decline in exploration costs, despite profit petroleum from DA1 increasing to 30% from 20%.

- We have retained our Buy rating on Cairn India with a target price of Rs370 taking into account catalysts from: (1) Gradual ramp-up in production from Bhagyam and Aishwariya fields, (2) The management reiterating its exit rate guidance of 200kbpd-215kbpd for FY14E, and sounding quite confident in achieving its exit rate guidance even without government approvals, (3) Improvement in visibility on the reserves front from potential exploration success, (4) Integrated drilling services for 150 development wells in the Rajasthan block over two-three years, (5) The stock price discounting crude oil price at US$83/bbl in perpetuity, and (6) The company being one of the key beneficiaries of a depreciating rupee and rising crude oil prices.

Source : Equity Bulls

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