Emkay sees over 23% upside on ONGC after stock hit 52-week high; do you own?
Emkay Global Financial Services has reiterated a ‘buy’ on Oil and Natural Gas Corporation (ONGC) after the stock scored a 52-week high at ₹180.25 during Monday’s session, after the state-run refiner on August 11 reported a surge of 102 per cent in consolidated net profit at ₹17,383 crore in the April-June quarter of fiscal 2023-24 (Q1FY24). ONGC shares opened two per cent higher at ₹180 during today’s session, compared to its previous close of ₹177.15 on Friday.
Emkay Global sees a potential upside of 23.9 per cent on ONGC’s stock over the next 12 months against its current market price (CMP) of ₹177.2. ONGC reported a sizable 20 per cent beat on EBITDA, of Rs177.5 billion in Q1FY24, mainly led by better-than-expected realizations and lower dry-well write-offs. PAT surpassed expectations by 25 per cent, standing at Rs100.2 billion, according to the brokerage.
Also Read: ONGC Q1 Results: Consolidated net profit more than doubles to ₹17,383 crore, revenue drops 10% YoY
The state-run petroleum giant’s revenue from operations during the first quarter of current fiscal stood at ₹1,63,823 crore, registering a decline of 10 per cent, compared to ₹1,82,894 crore in the year-ago period.
Oil/gas production was largely in-line (down 3 per cent YoY each), at 5.31mmt/5.22bcm, while management attributed the output decline to temporary shut-downs and Cyclone Biparjoy. ONGC has officially stated its first KG-basin oil to start from Q3FY24 which will hence improve output, as per the brokerage.
‘’We keep FY24E/25E SA EPS largely unchanged, while slightly raising Mar-24E TP by 2 per cent to Rs220/sh (on value of investments and annual-report update). We maintain our positive stance on the upstream sector mainly on stable earnings outlook, attractive valuation and healthy dividend yield. We reiterate BUY on ONGC,” said Emkay Global.
The crude oil output of the oil marketing company (OMC) declined 3.3 per cent to 5.311 million metric tonnes (MMT) in the June quarter, compared to 5.495 MMT in the year-ago period. Similarly, the gas output was 3 per cent lower in the June quarter at 5.221 BCM, compared to 5.383 BCM last year.
In the June quarter, ONGC declared a total of four discoveries (one in onland and three in offshore) in its operated acreages. Out of these, three are prospect (offshore) and one pool discovery (onland). Out of all discoveries, Gopavaram-21 has already been monetized, according to the state-run OMC.
‘’We value ONGC on DCF-based SOTP, comprising of SA, KG 98/2, OVL, and OPaL. Investments are valued at our TP/CMP, with a 30 per cent holdco discount. Key risks: Adverse oil-gas prices, policy issues, local tensions, cost overruns, outages and dry holes,” said Emkay Global in its report.
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Updated: 14 Aug 2023, 10:02 PM IST
