Cairn India - Near-term triggers to help maintain momentum - Systematix

Cairn India's (Cairn) 2Q FY13 core PAT, adjusted for forex fluctuations, which are non-cash in nature, was in line with our expectations. Core PAT was 5% higher QoQ mainly driven by marginally higher production in its Rajasthan (RJ) block and higher other income. Cairn maintained its guidance on production exit rate @175,000bpd by end FY13E and close to 240,000bpd by end CY 2013. Completion of pipeline de-bottlenecking and timely receipt of government approvals are critical for Cairn to achieve its production guidance.

Key nearterm triggers include announcement of maiden dividend, which may include one-time special dividend too. Buy.

The management remains optimistic on ramp-up of Bhagyam output to 40,000bpd once the pipeline de-bottlenecking project is complete - likely by end of 1Q FY14. This, coupled with required government approvals, is critical to achieving the guidance of ~240,000bpd by end CY 2013. Announcement of dividend (including one-time special dividend) is an added near-term trigger for the stock. We maintain our DCF based TP at `374/share, which implies ~10% upside from current levels.

Source : Equity Bulls

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