Oil And Natural Gas Corporation Ltd. share price target

ONGC reported weak results in 1QFY17 mainly led by lower oil (-22% YoY) and gas (-34% YoY) realisations. EBITDA stands at Rs 93.9bn (-23% YoY) and APAT was Rs 42.3bn (-23% YoY). FY16 has been a mixed year for ONGC. A 43% drop in oil prices has reduced ONGC’s share towards oil UR by 97% to Rs 11bn. However, it negatively impacted the revenues of JV, OVL and other petroleum products. The benefits from lower oil UR don’t exist below the crude price of ~US$ 50/bbl. In fact, a lower price reduces JV/OVL and ONGC’s earnings.

ONGC’s share price will closely follow crude prices. Strong Shale oil supplies and a rise in output in Iran will act negatively. However, the talks between Russia and Saudi Arabia to cut supply will check the downside. The outlook for domestic gas prices remains bleak in line with the global gas realisations. We have raised our EBITDA for FY17/18 by ~7% factoring lower cess rate. Earlier understanding was that changed cess would be 20% of crude prices. However, the effective rate is only 16.7% (20/120).At current crude prices, risk-reward is unfavourable. Their TP is Rs 255/sh (10x FY18E standalone + OVL EPS and Rs 31 from investments). Maintain NEUTRAL

ONGC’s 1QFY17 EBITDA was above estimates at INR92.7b (est INR82b; -23% YoY, +55% QoQ) led by lower opex at INR35b (-22% YoY, -27% QoQ) as service costs have reduced. PAT was further boosted to INR42b (est INR32b; -22% YoY, -4% QoQ) led by lower D,D&A of INR37b (est INR45b; -19% YoY, -10% QoQ), partly negated by interest cost at INR2.9b (v/s almost nil earlier). The stock trades at 13.1x FY17E EPS of INR18.8 and 11.1x FY18E EPS of INR22.1. Implied dividend yield is at ~3-4%. Our DCF based fair value is at INR282. Buy.

 

ONGC declared its Q4FY16 results, which were largely in-line with our estimates. The topline declined 24.3% YoY to | 16384.8 crore (our estimate: | 15753.1 crore) while the reported PAT increased...

Along with crude prices, ONGC?s share has fallen ~60% in the past 1.5 year. Strong Shale oil supplies, rise in output in Iran and focus on market share by OPEC/Russia will restrict sharp recovery. However, at current valuations risk-reward is favourable. Maintain BUY with a TP of Rs 210/sh (10x FY18E standalone OVL EPS & Rs 22/sh from investments).

ICICI Securities Ltd | Retail Equity Research ONGC declared its Q3FY16 results, which were below our estimates. The topline increased 2.3% YoY to | 18498 crore (our estimate:...

ONGC reported an EBITDA of Rs 87.4bn (-9% YoY). The impact of high net oil realisation was negated by an increase in other expenses. Lower write-offs (-72%) boosted APAT to Rs 39bn ( 9%). As ONGC took an impairment of Rs 40bn to factor in lower crude prices, RPAT was Rs 12.8bn (-64%).

ONGC reported an EBITDA of Rs 105.1bn (-4% YoY). The impact of high net oil realisation ( 27%) was negated by an increase in other expenses ( 23%). Higher depreciation ( 17%) and lower other income (-16%) further dragged PAT to Rs 48.4bn (-11% YoY).

ONGC reported a muted FY15 primarily on account of lower sales volume (49.5 mmtoe, -3% YoY), muted crude realisation (-20%) and higher exploration write-offs on dry wells (Rs 109bn, 39%). Consequently, EBITDA fell and PAT cracked 20% to Rs 177bn.

Buy on dips to Rs 298 - Rs 307 for target of Rs 346 in 1 quarter