Buy Cairn India; tgt Rs 245-247: Merrill Lynch "FII"

Merrill Lynch maintains buy rating on Cairn India with price target of Rs 245 to Rs 247, in its report dated 04 February, 2008. “There may be 17-27% upside to 2P reserves in the MBA fields in Rajasthan. Our fair value and production rate now factors in 17% upside to reserves. We believe that the potential upside to MBA reserves, clarity on which is likely in March 2008, may be 20-27%. Eventual upside to gross 2P reserves in the RJ-ON-90/1 block could be almost 75% upside. This potential upside could come from more gains from EOR than assumed. Upside could also be from reserves accretion in fields other than MBA, in which in-place oil is 1.7 billion bbls but reserves and resources valued are just 68 million bbls. Reserves and resources valued implies only 4% recovery rate as against 33-43% assumed for the MBA fields.“

Report further says, “Our current PO offers potential upside of 17%. Given the bright prospects of reserve accretion, we think more valuation upside is likely to emerge. We retain our Buy on CIL.”