Cairn India climbs 5% even as Q3 net falls 99%

NEW DELHI: Shares of Cairn India surged nearly 5 per cent in Monday's trade after a host of brokerages retained their ratings on the stock even as the company posted a 99 per cent YoY drop in net profit to Rs 9 crore in the December quarter.

The stock rose 4.87 per cent to hit a high of Rs 118.40 on the BSE. At the prevailing price, the stock is up 11 per cent from its 52-week low of Rs 106.60 on January 19. The company said its net profit tumbled 42 per cent YoY to Rs 2,039 crore, largely due to a sharp drop in crude oil prices during the quarter.

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CLSA has maintained a buy rating on Cairn India with a target of Rs 200. The foreign brokerage said the stock is trading at a nearly 25 per cent discount to cash holding per share of Rs 147. It pointed out that the bottom line of the oil company fell due to a huge discount on Rajasthan crude and low other income.

Reduced corporate governance concerns should drive an 80 per cent upside in 2016, said the brokerage.

Macquarie has maintained an outperform rating on the stock. However, it cut the target price for the stock to Rs 150 from Rs 166 earlier. The broker believes the prevailing stock price is adequately reflecting the near-term pain in crude.

Capex cuts may be heightened to maintain FCF-positive operations. The company is engaging with the government to improve crude realisations via export allowance, the brokerage said, adding that “the existing Cairn-Vedanta open offer may not be profitable for all, especially for LIC.”

Deutsche Bank has maintained a hold rating on the stock with a target of Rs 135.

Low oil prices may challenge development of newer fields, the brokerage said, while increasing its assumption of Rajasthan oil discount from 10.5 per cent to 15 per cent to align with M9FY15 results.

Deustche Bank expects Cairn’s EPS to fall 43 per cent over FY15- 17E due to lack of production growth in low price environment.