Brokerage house ICICIdirect.com has recommended a hold rating on Cairn India with a target price of Rs 361 per share in its April 28, 2014 research report.
"Cairn India reported its Q4FY14 results with revenues at Rs 5048.9 crore and PAT at Rs 3035.4 crore. The topline was in line with our estimates. However, the PAT was is marginally above our estimates (Rs 2,951.3 crore) mainly due to lower-than-estimated operating expenses and higher-than-estimated other income Gross production from the Rajasthan block in Q4FY14 stood at 1,90,881 bopd (our estimate: 1,98,334 bopd) whereas the net oil & gas production for the company stood at 1,42,796 boepd (our estimate: 1,48,956 boepd). Although the FY14 MBA exit production was at 2,00,000 boepd, the production guidance for FY15 is muted, as the production from the MBA field is expected to remain flat."
"Although the ongoing buyback programme of up to Rs 5725 crore and yearly capex plan of USD1 billion for the next three years does address concerns of cash utilisation partially, it is not enough as the cash is piling up (currently at ~USD3.5 billion). This high level of cash will keep the concern of cash diversion to Vedanta alive, which has to repay high debt up to FY15E. With a total dividend payout of Rs 12.5/share for FY14, we arrive at a dividend yield of ~ 3.7 percent. Cairn is currently trading with an implied Brent crude price of USD89/barrel. Although Rajasthan production is expected to remain flat in FY15, the IDP policy will ensure the Barmer Hill production will start contributing significantly from FY16 onwards. Also, a ramp-up is expected to be witnessed in FY16, once the EOR programme is extended to Bhagyam and Aishwariya. We estimate Cairn's fair value at Rs 361/share (Rajasthan fields at Rs 230/share) with a HOLD recommendation on the stock", says ICICIdirect.com research report.
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