Sharekhan has given Buy recommendation for Oil and Natural Gas Corporation with a target price of Rs. 200 in its research report issued on Jun 13, 2022

Sharekhan’s research report on Oil and Natural Gas Corporation

The earnings environment has turned favourable for upstream PSUs, given expectation of further 40-48% hike in domestic gas price to $8.5-9/mmbtu and elevated crude oil to >$100/bbl on geopolitical tensions. We expect a robust 18% PAT CAGR over FY22-FY24E for ONGC. ONGC has earmarked an exploration capex of $4 billion to augment production and has guided for impressive 4%/8% CAGR in oil/gas production over FY22-FY25E. KG-DWN-98/2 to be the key driver of volume growth with peak oil/gas production potential of 45kbpd/12mmscmd in CY2024 and provide upside to our volume CAGR assumption of 2% over FY22-FY24E. Earnings outlook for OVL and MRPL has also turned favourable with crude oil price >$100/bbl and Singapore complex GRM >$20/bbl and is expected to support consolidated profits of ONGC.

Outlook

We re-initiate coverage on ONGC with a Buy rating and PT of Rs. 200 as its CMP factors in oil price of only $60/bbl and ignores strong earnings tailwinds from high oil & gas price and dividend yield of 10-11%. Windfall tax is not justified as 60% of every $1/bbl rise in oil realisation goes to the government in the form of statutory levies, corporate tax, and dividend.

More Info

At 16:01 hrs Oil and Natural Gas Corporation was quoting at Rs 155.95, down Rs 3.55, or 2.23 percent.

It has touched an intraday high of Rs 160.45 and an intraday low of Rs 155.35.

It was trading with volumes of 415,163 shares, compared to its thirty day average of 1,070,894 shares, a decrease of -61.23 percent.

In the previous trading session, the share closed down 3.10 percent or Rs 5.10 at Rs 159.50.

The share touched its 52-week high Rs 194.60 and 52-week low Rs 108.50 on 08 March, 2022 and 20 August, 2021, respectively.

Currently, it is trading 19.86 percent below its 52-week high and 43.73 percent above its 52-week low.

Market capitalisation stands at Rs 196,189.45 crore.

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