Cairn India (CIL) reported higher-than-expected net profit of `2,458cr for 4QFY2011, driven by better-than-expected operating profit on account of lower operating expenditure during the quarter. Further, lower-than-expected interest cost and tax rate resulted in bottom line coming in above our estimates. We maintain our Neutral view on the stock.
Mangala production drives growth: CIL reported a 428% yoy increase in
its top line to `3,654cr (`693cr) in 4QFY2011. Gross production at the Mangala field stood at an average 118,151bpd in 4QFY2011. Current production from the field is hovering around 125,000bopd and is waiting for approval to ramp up to its potential of 150,000bpd. During the quarter, crude oil realisations registered an increase of 32.7% yoy to US$94.2/bbl (US$71/bbl).
its top line to `3,654cr (`693cr) in 4QFY2011. Gross production at the Mangala field stood at an average 118,151bpd in 4QFY2011. Current production from the field is hovering around 125,000bopd and is waiting for approval to ramp up to its potential of 150,000bpd. During the quarter, crude oil realisations registered an increase of 32.7% yoy to US$94.2/bbl (US$71/bbl).
Outlook and valuation: We expect earnings to improve in the coming quarters with Train-4 lined up for production, subject to approvals from management and the operating committee. However, the stock price seems to have factored in these positives. We are concerned about the resolution of the royalty issue in favour of ONGC. We are also skeptical about other regulatory issues bothering the Cairn-Vedanta deal. However, there are various exploratory upsides untapped in Barmer Hills and other fields waiting to be developed and commercialised. Further, operational visibilities and major finds in these fields could trigger our valuation upwards. We remain Neutral on the stock with an SOTP fair value of `355
