Emkay Global Financial has given Buy recommendation for ONGC with a target price of Rs. 130 in its research report issued on Feb 18, 2021

Emkay Global Financial’s report on ONGC

We reiterate our Buy rating and OW stance on ONGC on the back of buoyant oil prices and potential overhaul in nominated block (APM) gas pricing. Brent prices have risen to USD65/bbl, driven by demand recovery, OPEC+ cuts, stimulus and extreme cold weather. Arrival of summer-driving season in US-Europe and shift to personal mobility should support oil prices further. Hence, there is upside risk to our USD55/bbl Brent assumption for FY22. Subsidy risk based on Union Budget and LPG price hikes is low in our view. ONGC management has remained upbeat on the government agreeing to remunerative gas pricing, which should at least cover the USD3.5-3.7/mmbtu cost of production. Every USD1/mmbtu rise in APM rate implies Rs2.6/sh EPS increase for the company.


We value ONGC at 4x FY23E EV/EBITDA to arrive at Rs130 TP, assuming USD2.3/2.7 APM prices for FY22/23. Under a blue sky scenario – USD60/bbl Brent, USD3.5/mmbtu gas price and KG-DWN-98/2 ramp up, FV comes above Rs170/sh.