>CAIRN INDIA LIMITED (MOTILAL OSWAL)

■ Rajasthan crude boosts profits: Cairn India reported sales of Rs5b for 3QFY10 (v/s our estimate of Rs4.6b),
up 2.4x YoY and 116% QoQ. Sales growth was driven primarily by higher net volumes (+32% QoQ at 24.6kboepd) and higher realization (+12% QoQ at US$66.9/boe). Rajasthan production accounted for 44% of the Cairn’s working interest production of 24.6kboepd. EBITDA was Rs3.5b (v/s our estimate of Rs3b), up 3.7x YoY and 161% QoQ. Reported PAT was Rs2.9b, much higher than our estimate of Rs780m due to (1) lower DD&A expenses – Rs300m v/ s our estimate of Rs1.4b, and (2) lower interest costs – Rs260m v/s our estimate of Rs1.1b.

■ 2010 ramp-up delayed, but management maintains 2011 guidance: Production from the Rajasthan block
averaged 15.4kbpd (gross) and is currently 20kbpd. Management expects production to reach 125kbpd by early 2HCY10 (delay of ~3 months) and 175kbpd by early 2011. We are reducing our average FY11 production estimate to 104kbpd (earlier 132kbpd) but maintain our FY12 production assumption at 180kbpd.

■ Multiple factors to guide Rajasthan ramp-up: Apart from Cairn’s ability to produce crude, pipeline connectivity and customer’s ability to process crude will guide the Rajasthan block’s production ramp-up. Currently, Cairn is selling its crude to Reliance Industries and MRPL, and expects to commence supplies to IOC and Essar Oil, soon.

■ Cutting FY11 estimates; maintain Buy: We are reducing our FY11 EPS estimate by 26% to Rs19.4 led by cut in production, but maintain our FY12 EPS estimate at Rs35. We model Brent oil price of US$70/bbl and 12.5%
discount for Cairn’s waxy crude in Rajasthan. At US$80/bbl of average Brent price for FY11 our EPS would stand increased from Rs19.4 to Rs24. Our SOTP-based target price for Cairn India is Rs275 (including potential upside of Rs64). Maintain Buy.

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