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Recommendations India

Cairn India 4QFY2014 performance highlights and results update

April 25, 2014, Friday, 14:36 GMT | 09:36 EST | 18:06 IST | 20:36 SGT
Contributed by Angel Broking

Cairn India (Cairn)’s 4QFY2014 adjusted net profit has come in in line with our estimates. We recommend an Accumulate rating on the stock.

Higher volumes and rupee realizations boost top-line: The company’s top-line increased by 15.7% yoy to Rs.5,049cr (below our expectation of Rs.5,250cr) due to increase in both volumes as well as realizations (in INR terms). The company’s gross production averaged 224,429boepd (+11.0% yoy) during the quarter. Gross crude oil realization decreased 5.0% yoy to US$95.7/bbl, although it grew in INR terms on the back of INR depreciation against the USD.

Adjusted PAT up 27.9% yoy: The EBITDA grew by 18.0% yoy to Rs.3,844cr, in line with increase in the top-line. The other income increased by 83.4% yoy to Rs.407cr mainly due to increase in investment income realized from gains on maturity of investible funds. The company reported an exceptional forex loss of Rs.243cr. Tax expenses grew by 181.9% yoy to Rs.164cr. Thus the adjusted net profit grew by 27.9% yoy to Rs.3,278cr (in line with our estimate of Rs.3,289cr).

FY2015 guidance of a flat output: The company guided at a flat production growth for FY2015 compared to FY2014 exit production rate of 200kboepd for the Rajasthan block and has also maintained its capex guidance of US$3bn over the coming three years.

Outlook and valuation: Cairn received approvals to increase production rate from Aishwarya field to 20kbpd while it will start Mangala Polymer flood Enhanced Oil Recovery (EOR) implementation from FY2016. Further, there are various untapped exploratory upsides in Barmer Hills and other fields waiting to be developed. Hence, we recommend an Accumulate rating on the stock with a target price of Rs.389.