Hold Oil and Natural Gas Corporation; target of Rs 110: ICICI Direct
ICICI Direct’s research report on Oil and Natural Gas Corporation
ONGC declared its O3FY20 results that were below our estimates on the profitability front, mainly due to higher depreciation & amortisation costs and lower other income. Revenues declined 3.2% QoQ at Rs 23710.1 crore (our estimate: Rs 22823.2 crore) on account of marginally lower realisations as well as sales volume QoQ. The oil & gas production was largely in line with our estimates. As per expectations, the quarter witnessed nil subsidy burden while net realisations were at US$ 59.7/bbl. EBITDA during the quarter declined 7.5% QoQ and came in at Rs 12298.3 crore (our estimate: Rs 11708.7 crore). Subsequently, reported PAT declined 33.7% QoQ to Rs 4151.6 crore (our estimate: Rs 5932.3 crore).
We have a HOLD rating on the stock with a target price of Rs 110/share. We value core business i.e. standalone & OVL at Rs 90/share (6x FY22E core earnings) & investments at Rs 20/share (50% discount to current MCap).
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