Maintain 'BUY' on Cairn India – TP Rs.355 - Geojit BNP Paribas

- The company announced in-line results, with operating EBITDA coming in at Rs.3400 crores. Other income came in higher with a one-time gain of Rs.110 crores from the sale of its 10% stake in KG deepwater block

- Reported PAT fell to Rs.2300 crores, QoQ, due to forex loss of Rs.790 crores.

- Mangala, Bhagyam and Aishwariya (MBA) field's realization was at USD 97.6/bbl. This was a decrease, QoQ, because of higher discount to Brent, at 10.8%.

- Bhagyam field reported a 10% production decline and management clarified that this was due to downtime and the total hit on production would only be around 2%.

- The company intends to use Drag Reducing Agents (DRA) to reduce friction and increase pipeline capacity. DRA testing has been positive, with results submitted to the JV.

- Long-term value would be driven by development success at Barmer basin, and the pace of regulatory approvals would also determine if Cairn can enhance its production profile from the existing reserve base.

- The dividend announcement on 31 October will shed further light on cash usage.

- The Buy rating on the stock is reiterated with a target price of Rs.355 and we recommend accumulating the shares as there are limited triggers in the near-term.

- Near term, Cairn needs regulatory approvals and pipeline augmentation to reach its stated goal of 240,000 bpd in CY13. This limits potential catalysts for the near term that are not already included the price.

- Key Risk to Target Price: Decline in crude prices.

Source : Equity Bulls

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