Buy Cairn India, target Rs 288: CLSA

CLSA has maintained buy rating on Cairn India with target price of Rs 288 in its February 05, 2008 report. "Cairn’s latest corporate presentation indicates an 8% upgrade to Mangala 2P gross in-place resources to 1.293 billion boe. Recoverable resources are more relevant where we expect a 10-12% upgrade to 475mboe allowing the 125kbpd peak production to sustain for another year. The impact on fair value is minor at 3% but increases our confidence in the Rajasthan resource base and should allow Cairn to re-rate faster to a going concern valuation framework. Cairn remains our top E&P pick. The impact on fair value is relatively minor at this time at Rs 8-10/share (USD 350 million at $8.5/boe) but increases the stability of cashflow even further. This should allow Cairn to re-rate faster to a going concern valuation framework – especially as the first-oil date nears (now estimated by Cairn to be 2H-2009). Cairn’s relatively inexpensive cashflow based valuation multiples (4.2x 2010 P/CF) and its strong leverage to oil prices (1.5% for every USD change in crude) in a tight long term crude market makes it our top pick in the sector. BUY," says CLSA report.