Cairn India - 1QFY2014 Result Update - Angel Broking

For 1QFY2014, Cairn India (Cairn) reported a lower-than-expected performance, both on the top-line and profitability front. We maintain our Buy rating on the stock.

Higher share of profit petroleum drags top-line: The company's top line decreased by 8.5% yoy to Rs.4,062cr (below our expectation of Rs.4,232cr) due to increase in the profit petroleum shared with the government for the Rajasthan block. The company's gross production averaged 212,442boepd (+3.0% yoy) during the quarter. Although gross crude oil realization decreased by 6.0% yoy to US$94.6/bbl, the impact was offset marginally by INR's depreciation against the USD.

Adjusted PAT falls 17.4% yoy: The company recorded an exceptional forex gain of Rs.682cr on account of forex fluctuation during 1QFY2014. Excluding this exceptional gain, the adjusted net profit declined by 17.4% yoy to Rs.2,445cr (below our estimate of Rs.2,857cr). The reported net profit also declined by 18.3% yoy to Rs.3,127cr.

Outlook and valuation: Cairn has in place the infrastructure required to ramp up production to meet its targets. Hence, we expect the company's production to gradually increase in the coming quarters to reach a capacity of 200kbopd by FY2014. Further, there are various untapped exploratory upsides in Barmer Hills and other fields waiting to be developed. Hence, we recommend a Buy rating on the stock with a target price of Rs.364.

Source : Equity Bulls

Keywords