Maintain 'buy' on Cairn India - TP Rs.344 - Geojit BNP Paribas Financial Services

- 4QFY13 EBITDA at Rs.2890 crore is down 11% qoq, primarily owing to a dry well charge of Rs. 270 crore in Sri Lanka and Rs.72.6 crore spent in South African prospects.

- Excluding the above costs, operating EBITDA at Rs.3200 crore is in line with analysts' estimates.

- Rajasthan production averaged 169000 bpd in FY13.

- It is estimated that the MBA pricing discount to Brent in FY14 would be 8-13%.

- After a lackluster FY13 due to approval delays and unexpected decline in Bhagyam, Cairn India expects to exit FY14 at 200000 - 215000 bpd.

- The company is confident of achieving its guidance.

- The previously expected decline at Mangala now seems reversible based on the 48 infill well program.

- It is expected that the recent decline in crude along with production related concerns to weigh on the stock in the near term. It also seems that lack of clarity on production drivers will result in a wait and approach before production upsides are captured.

- However, the stock is expected to go up from the current level, as the reserve base remains intact.

- Cairn is launching a 450 well drilling programme in FY14-16 with a net capex of USD2.4 billion and addressing production issues to enhance production from current levels.

- Maintain 'buy' with a target price of RS.344. Production delays would be the key risk to target price.

Source : Equity Bulls

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