Buy Cairn India Ltd. (CAIL.BO)
We are upgrading the 12-month target price of Cairn India to Rs290/share from Rs240/share and adding the stock to our Asia-Pacific Conviction Buy list (from Buy). Our new target price implies potential upside of 25% from current market levels.
We believe that with
1) the Rajasthan project being ready to start producing oil within next few weeks,
2) our concerns on the stock have materially reduced as the issues on oil pricing and off-take are getting addressed by the stake-holders,
3) our positive outlook on oil prices for 2H2009E and 2010E,
4) Cairn’s earnings leverage to oil prices and production growth profile being among the best in the peer group, Cairn India is now our top pick in the Indian E&P universe. Cairn India, in our view, is the best stock in India to take exposure to the improving fundamentals of the oil market.
We estimate a US$1/bbl change in the long term oil price changes Cairn’s earnings by up to 4.1% in FY10E, one of the highest in the region. The stock is currently implying long term Brent of US$60/bbl against our forecast of US$85/bbl from 2013E onwards. Rs/share
We are upgrading the 12-month target price of Cairn India to Rs290/share from Rs240/share and adding the stock to our Asia-Pacific Conviction Buy list (from Buy). Our new target price implies potential upside of 25% from current market levels.
We believe that with
1) the Rajasthan project being ready to start producing oil within next few weeks,
2) our concerns on the stock have materially reduced as the issues on oil pricing and off-take are getting addressed by the stake-holders,
3) our positive outlook on oil prices for 2H2009E and 2010E,
4) Cairn’s earnings leverage to oil prices and production growth profile being among the best in the peer group, Cairn India is now our top pick in the Indian E&P universe. Cairn India, in our view, is the best stock in India to take exposure to the improving fundamentals of the oil market.
We estimate a US$1/bbl change in the long term oil price changes Cairn’s earnings by up to 4.1% in FY10E, one of the highest in the region. The stock is currently implying long term Brent of US$60/bbl against our forecast of US$85/bbl from 2013E onwards. Rs/share
No comments:
Post a Comment