Sharekhan has given Hold recommendation for Oil and Natural Gas Corporation with a target price of Rs. 148 in its research report issued on Aug 16, 2022

Sharekhan’s research report on Oil and Natural Gas Corporation

Q1FY23 standalone PAT grew strongly by 72% q-o-q to Rs. 15,206 crore but missed our estimate by 4.5% due to lower-than-expected oil & gas volumes and net oil realisation that was partially offset by higher other income. Oil/gas sales volume stood at 5 mmt/4.1 bcm, down 2% q-o-q/up 1.5% q-o-q missed our estimate by 2%/4%; net oil realization grew by 14% q-o-q to $108.5/bbl (slightly below estimate) while gas realisations were up 94% q-o-q to $6.5/mmBtu. OVL’s earnings were hit by lower oil & gas production given sanctions on Russia and impairments. MRPL benefited from sharply higher GRM of $24.5/bbl ($5/bbl in Q1FY22) and a 40% y-o-y rise in throughput to 4.3 mmt.

Outlook

We maintain our Hold rating on ONGC with a revised PT of Rs. 148 as ad-hoc tax policy changes create earnings uncertainty and concern on valuation. Dividend yield of ~8% limits meaningful downside from current level.

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