Target: ₹325
CMP: ₹256.20
ONGC’s Q2-FY25 standalone EBITDA, at ₹18,200 crore, was slightly lower than JM Financial’s expectation of ₹18,800 crore (but in line with consensus of ₹18,200 crore) due to crude sales volume being 3 per cent below JMFe, but that was partly offset by net crude realisation being $1/bbl above JMFe at $ 74.3/bbl. Gas sales volume and realisation were largely in line.
However, ONGC’s standalone PAT, at ₹12,000 crore, was significantly above JMFe/consensus of ₹9,200 crore due to higher other income, lower dry well write-off and lower tax-rate. OVL’s crude and gas production continued to be weak; PAT was also lower QoQ due to higher opex.
We maintain Buy (revised TP of ₹325 from ₹340) given our expectation that OPEC+ will continue to support crude $75-80/bbl, and the government allowing ONGC/Oil India to make net crude realisation of $75/bbl. Further, ONGC is likely to see 10-15 per cent output growth with ramp-up of output from KG DW 98/2 block. Every $5/bbl rise/fall in net crude realisation results in increase/decrease in our EPS and valuation by 6-8 per cent.
ONGC is also a robust dividend play (4-6 per cent).
