Why ONGC shares rallied 8% today; stock price targets, triggers & more
JM Financial assigned 'Buy' on ONGC, as it sees risk-reward favourable. The stock climbed 7.60 per cent to Rs 329.50 on BSE. The scrip has climbed 90 per cent in the past one year.
- Aug 7, 2024,
- Updated Aug 7, 2024 12:36 PM IST
Oil and Natural Gas Corporation Ltd (ONGC) saw its shares rallying 8 per cent in Wednesday's trade following the PSU firm's June quarter results. Analysts tracking the oil & gas sector said ONGC's Ebitda was higher than expectations on better value-added product sales. A ramp-up of the KG basin asset remains the key performance driver for ONGC over FY25-26, they said, adding "it remains the key to production growth and earnings strength."
JM Financial assigned a 'Buy' rating on ONGC with a target price of Rs 325, as it saw risk-reward reasonable. That target got broken in today's trade itself, as the stock climbed 7.60 per cent to Rs 329.50 on BSE. The scrip has climbed 90 per cent in the past one year.
The brokerage said oil cartel OPEC+ may support crude around $75-80 a barrel, adding that the government may allow ONGC to make net crude realisation of $75 a barrel.
"Further, ONGC is likely to see 10-15 per cent output growth with ramp-up of output from KG DW 98/2 block. ONGC is also a robust dividend play (4-6 per cent). At CMP, it trades at 6.2 times FY26E consolidated EPS and 1 time FY26E BV.
Anand Rathi, which prefers upstream companies due to greater clarity on oil & gas realisations and volume growth, sees crude oil prices at $80-90 barrel, as it expects higher supplies from non-OPEC and weak demand to be counter-balanced by OPEC members’ production cuts.
"We increase our ONGC estimates to factor in changes in HPC’s earnings and reiterate our Buy rating, with a higher target of Rs 405 apiece, 4.5 times FY26e EV/Ebitda (earlier 4 times FY25e) and add the value of investments at a 20 per cent discount to market prices," the domestic brokerage said.
YES Securities said ONGC's Q1 crude and gas production was in line but net crude realisation fell short of expectations. "OVL's topline performance improved in crude and gas but the volumes stood flat for crude and lagged in gas production. OVL’s profitability improved YoY on better realisations & QoQ with no exceptional like in Q4FY24. We maintain a BUY rating on ONGC, with a revised target price of Rs 391 per share (Rs 385 earlier)," said YES Securities.
ICICI Securities said ONGC's gas price realisation at Rs 21.1 per scm was flattish sequentially, driven by APM gas price capped at $6.5 per mmBtu for FY24 and FY25.
"However, given KG basin’s gas eligibility for premium pricing and the recent proposal for new well production to get a 20 per cent premium to APM prices, we see net gas realisation averaging Rs 22.6 per scm over FY25–27E, above Rs 19.7 per scm seen in FY24. We note these prices compare quite favourably with FY18–23’s average blended price of Rs 10.9/scm," it said.
MOFSL has cut its domestic production assumptions for FY25 and FY26. Considering the weak 1Q performance by MRPL and HPCL, it reduced its FY25 and FY26 consolidated PAT estimates for ONGC by 4-5 per cent. This accounts for likely LPG under recoveries.
"We value the standalone business at 8 times FY26E adj. EPS of Rs 32 and add the value of investments to arrive at a TP of Rs 360," MOFSL.
Oil and Natural Gas Corporation Ltd (ONGC) saw its shares rallying 8 per cent in Wednesday's trade following the PSU firm's June quarter results. Analysts tracking the oil & gas sector said ONGC's Ebitda was higher than expectations on better value-added product sales. A ramp-up of the KG basin asset remains the key performance driver for ONGC over FY25-26, they said, adding "it remains the key to production growth and earnings strength."
JM Financial assigned a 'Buy' rating on ONGC with a target price of Rs 325, as it saw risk-reward reasonable. That target got broken in today's trade itself, as the stock climbed 7.60 per cent to Rs 329.50 on BSE. The scrip has climbed 90 per cent in the past one year.
The brokerage said oil cartel OPEC+ may support crude around $75-80 a barrel, adding that the government may allow ONGC to make net crude realisation of $75 a barrel.
"Further, ONGC is likely to see 10-15 per cent output growth with ramp-up of output from KG DW 98/2 block. ONGC is also a robust dividend play (4-6 per cent). At CMP, it trades at 6.2 times FY26E consolidated EPS and 1 time FY26E BV.
Anand Rathi, which prefers upstream companies due to greater clarity on oil & gas realisations and volume growth, sees crude oil prices at $80-90 barrel, as it expects higher supplies from non-OPEC and weak demand to be counter-balanced by OPEC members’ production cuts.
"We increase our ONGC estimates to factor in changes in HPC’s earnings and reiterate our Buy rating, with a higher target of Rs 405 apiece, 4.5 times FY26e EV/Ebitda (earlier 4 times FY25e) and add the value of investments at a 20 per cent discount to market prices," the domestic brokerage said.
YES Securities said ONGC's Q1 crude and gas production was in line but net crude realisation fell short of expectations. "OVL's topline performance improved in crude and gas but the volumes stood flat for crude and lagged in gas production. OVL’s profitability improved YoY on better realisations & QoQ with no exceptional like in Q4FY24. We maintain a BUY rating on ONGC, with a revised target price of Rs 391 per share (Rs 385 earlier)," said YES Securities.
ICICI Securities said ONGC's gas price realisation at Rs 21.1 per scm was flattish sequentially, driven by APM gas price capped at $6.5 per mmBtu for FY24 and FY25.
"However, given KG basin’s gas eligibility for premium pricing and the recent proposal for new well production to get a 20 per cent premium to APM prices, we see net gas realisation averaging Rs 22.6 per scm over FY25–27E, above Rs 19.7 per scm seen in FY24. We note these prices compare quite favourably with FY18–23’s average blended price of Rs 10.9/scm," it said.
MOFSL has cut its domestic production assumptions for FY25 and FY26. Considering the weak 1Q performance by MRPL and HPCL, it reduced its FY25 and FY26 consolidated PAT estimates for ONGC by 4-5 per cent. This accounts for likely LPG under recoveries.
"We value the standalone business at 8 times FY26E adj. EPS of Rs 32 and add the value of investments to arrive at a TP of Rs 360," MOFSL.