Reliance Money sees 25% downside in Cairn India

MUMBAI: Reliance Money has advised clients to “Sell” Cairn India as it expects a potential downside of 25 per cent in the stock from current levels.

“Cairn India, with a production ramp-up at the Mangala, Bhagyam and Aishwarya (MBA) fields in Rajasthan, is on a high growth path. With customers tied in for FY11 volumes and pipeline infrastructure expected to be complete by 2Q CY10, Cairn’s profits will grow at a CAGR of 99% through FY09-12E, in our view.

Although growth prospects look rosy, the current stock price reflects crude pruces of US $95/barrel to perpetuity, which we believe is aggressive and builds in execution, including enchanced oil recovery (EOR) upside. We advise cliends to SELL with a 12-month price targt of Rs 228, implying 25% potential downside from current levels,” the report said.

At 2:30 pm, shares of Cairn India were at Rs 292, down Rs 10 or 3.31 per cent on the NSE. The stock has touched a low of Rs 290.40 and high of Rs 300 in today’s trade.