Cairn India

Credit Suisse increases the target price of Cairn India from Rs 223 to Rs 243. It, however, maintains the `Underperform' rating. Cairn recently provided Rajasthan resource updates - increasing 2P numbers by 7% (mostly outside the MBA fields) and establishing an exploration upside of 2.5 billion bbls of oil in place. More importantly, peak production guidance has increased to 240 kbopd - backed by higher production at Mangala, Aishwarya and 30 kbopd from other fields. With development of others lagging MBA and Barmer development, the 240 is some time away. Faster production without reserve upsides means declines will be faster. A lot of work - wells drilled - is needed to establish, delineate and develop the upside potential of 2.5 billion bbl. Cairn has secured sales agreements for 143 kbpd but needs to find more. With this release, Cairn has set out medium-term production and exploration targets - which it now has to execute. Oil prices remain the largest driver of valuations. Given spare capacity and in-built growth expectations, Credit Suisse does not see a significant upside.