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Cairn India
Performance Highlights
Y/E March (` cr) Net sales EBITDA EBITDA margin (%) Adjusted PAT 3FY2012 3QFY2011 3,097 2,546 82.2 1,960 3,096 2,598 83.9 2,010 % chg (yoy) 2QFY2012 % chg (qoq) (2.0) (169)bp (2.5) 2,652 2,104 79.3 232 16.8 21.0 287bp 745.1
ACCUMULATE
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (Rs) BSE Sensex Nifty Reuters Code Bloomberg Code Oil & Gas 64,648 0.8 372/250 1570856 10 17,194 5,199 CAIR.BO CAIR@IN
`340 `367
12 Months
Cairn Indias (CIL) 3QFY2012 net sales remained flat yoy despite increased crude realization due to higher profit petroleum and royalty payment. The companys adjusted PAT decreased by 2.5% yoy. We recommend Accumulate on the stock. Higher profit petroleum and royalty dent 3QFY2012 performance: CILs top line remained flat yoy and stood at `3,097cr despite crude oil realization increasing by 33.0% yoy due to higher profit petroleum and royalty payment. CILs OPM contracted by 169bp yoy to 82.2%, resulting in a 2.0% yoy decline in operating profit to `2,546cr, while adjusted net profit declined by 2.5% yoy to `1,960cr during the quarter. CIL aims to increase production to 240kbopd by CY2013: Management maintained its guidance to reach exit capacity of 175kbpod by 4QFY2012-end. The company also aims to reach an exit capacity of 240kbopd by CY2013-end. Outlook and valuation: CIL has the infrastructure in place to ramp up production to meet its targets; however, currently it is awaiting approvals from the government. We expect production to gradually increase in the coming quarters to reach a capacity of 175kbopd by FY2013 and 225kbopd by FY2014. Further, there are various exploratory untapped upsides in Barmer Hills and other fields waiting to be developed. Hence, we recommend Accumulate on the stock with a target price of `367.
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 52.1 7.7 6.6 33.6
3m (2.9) 13.7
FY2010 1,623 13.3 1,051 30.8 60.4 5.4 63.4 1.9 3.2 1.7 41.7 69.0
FY2011 10,278 533.3 6,334 502.6 80.2 33.3 10.3 1.6 17.1 17.4 6.2 7.7
FY2012E 13,170 28.1 8,381 32.3 77.6 43.9 7.8 1.3 18.8 18.9 4.4 5.7
FY2013E 14,715 11.7 9,893 18.0 80.4 51.8 6.6 1.1 18.4 18.7 3.3 4.1
Bhavesh Chauhan
Tel: 022 - 3935 7800 Ext: 6821 Bhaveshu.chauhan@angelbroking.com
3QFY2012 3QFY2011 % chg (yoy) 2QFY2012 % chg (qoq) 3,097 465 86 2,546 82.2 112 379 176 24 301 2,380 76.9 118 5.0 2,262 1,960 63.3 2,010 64.9 (2.5) 3,096 458 41 2,598 83.9 287 22 74 2,215 71.5 205 9.2 2,010 12.5 (42.1) 7.5 (67.7) 31.9 0.0 1.7 108.3 (2.0) 2,652 471 77 2,104 79.3 62 314 39 123 (531) 2,221 83.7 103 4.6 1,355 763 232 8.7 745.1 196.4 15.1 7.2 81.3 20.5 353.5 (80.5) 16.8 (1.2) 11.1 21.0
Payment of royalty affects sales growth: CILs top line remained flat yoy to `3,097cr (above our expectation of `2,917cr). Average crude oil realization increased by 33.0% yoy to US$101.1/bbl. However, the positive impact of higher realization was offset by `570cr of profit petroleum and royalty payment of `630cr. The companys gross production averaged 169,580boepd (-2.7% yoy). CIL remained optimistic to end the capacity from Mangala and Bhagyam field at 175,000bopd by FY2012E.
(` cr)
OPM contracts by 169bp yoy: OPM contracted by 169bp yoy to 82.2%, resulting in a 2.0% yoy decline in operating profit to `2,546cr during the quarter.
85.9
(` cr)
2,000 1,500 1,000 500 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12
Operating profit Operating margin (RHS)
60 50 40
(%)
70
(%)
600
(` cr)
Timelines uncertain on production growth beyond FY2012: CIL informed that Bhagyam block development is on track and ready to commence production in 3QFY2012, subject to government approvals. Also, the company is optimistic to reach an exit capacity of 175,000bopd by FY2012. However, management opined that due to constraints in pipeline capacity, further meaningful growth in production could be pushed beyond CY2012.
(%)
519.3
600.0
Investment arguments
CIL aims to increase production to 240kbopd by CY2013
CIL commenced production from Bhagyam oil field during 4QFY2012, where it aims to gradually increase its capacity to 40kbopd. CIL maintained its guidance to reach exit capacity of 175kbpod by 4QFY2012-end. The company also aims to reach an exit capacity of 240kbopd by CY2013-end.
Bloomberg Consensus
41.3 49.6
Variation (%)
6.3 4.5
43.9 51.8
FY2009 988 295 121 (146) 293 1,552 (3,161) (2,506) 152 (5,516) 2,552 3,746 (72) 6,226 2,262 150 2,413
FY2010 1,016 178 (708) (175) 234 545 (3,366) 2,529 236 (601) 2 (880) (168) (1,045) (1,102) 2,413 637
FY2011 6,890 1,223 (1,009) (1,259) (486) 6,331 (2,565) 624 (2,957) (4,897) 67 (733) (199) (866) 568 637 1,205
FY2012E 8,916 1,272 (2,472) (328) (535) 6,853 (1,700) 328 (1,372) 185 (1,200) (1,015) 4,466 4,485 8,951
FY2013E 10,551 1,440 (312) (462) (658) 10,559 (1,520) 462 (1,058) (700) (700) 8,801 8,951 17,752
Profit before tax Depreciation Change in Working Capital Less: Other income Direct taxes paid Others Cash Flow from Operations (Inc.)/ Dec. in Fixed Assets (Inc.)/ Dec. in Investments Others Other income Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Interest Paid (Incl. Tax) Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances
Key Ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV/Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage (EBIT/Interest) (0.1) (2.4) 73.6 0.1 2.5 21.1 (0.0) (0.2) 24.2 (0.2) (0.7) 25.2 (0.3) (1.4) 34.1 0.7 36.9 36.5 575.4 (121.1) 0.7 51.6 51.5 615.3 (102.2) 0.7 11.0 31.8 202.0 9.1 0.4 24.5 45.5 123.1 49.5 0.3 37.9 47.4 91.1 78.8 1.4 1.8 2.6 1.7 2.4 3.2 17.4 23.3 17.1 18.9 25.6 18.8 18.7 27.7 18.4 4.1 4.1 6.4 172.5 5.4 5.4 7.4 178.1 33.3 33.3 39.4 211.9 43.9 43.9 50.6 256.9 51.8 51.8 59.4 308.9 84.2 53.4 2.0 0.0 44.0 69.3 1.7 63.4 46.5 1.9 0.0 41.7 69.0 1.8 10.3 8.7 1.6 0.0 6.2 7.7 1.5 7.8 6.8 1.3 0.0 4.4 5.7 1.1 6.6 5.8 1.1 0.0 3.3 4.1 0.8 FY2009 FY2010 FY2011 FY2012E FY2013E
10
E-mail: research@angelbroking.com
Website: www.angelbroking.com
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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
Cairn India No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors.
Ratings (Returns):
11