Buy ONGC; target of Rs 324: Angel Broking

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Buy ONGC; target of Rs 324: Angel Broking

Angel Broking is bullish on Oil and Natural Gas Corporation (ONGC) and has recommended buy rating on the stock with a target of Rs 324 in its November 4, 2011 research report.

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Angel Broking is bullish on Oil and Natural Gas Corporation (ONGC) and has recommended buy rating on the stock with a target of Rs 324 in its November 4, 2011 research report.

"For 2QFY2012, ONGC's top line grew by 24.3% yoy on account of higher realization. PAT for the quarter grew by 60.4% yoy due to a decline in depreciation, depletion and amortization (DD&A) expenses."

"ONGC's top line for the quarter grew by 24.3% yoy to Rs 22,616cr, in-line with our estimate of Rs 22,991cr. ONGC's top-line growth was driven by higher net realization, which grew by 33.4% yoy to US$83.7/bbl. Crude oil sales volume decreased by 1.6% yoy to 5.8mn tonnes. The company shared a subsidy burden of Rs 5,713cr in 2QFY2012 vs. Rs 3,019cr of subsidy shared in 2QFY2011 and Rs 12,046cr in 1QFY2012. Despite a 33.4% increase in crude oil realization, EBITDA margin expanded by only by 174bp yoy to 64.0% on account of a 36.0% yoy increase in royalty expenses to Rs 2,880cr. EBITDA registered a 27.8% yoy increase to Rs 14,469cr. DD&A expenses decreased by 25.5% yoy to Rs 3,337cr due to lower dry well write-offs. Consequently, net profit increased by 60.4% yoy to Rs 8,642cr, significantly above our estimate of Rs 6,161cr."

"Going forward, we expect incremental production from marginal fields to more than offset any decline in production from the ageing fields. ONGC's subsidiary, OVL is also expected to report a jump in volumes by FY2013 to ~12mn tonnes, with incremental productions. Although there is an FPO overhang on the stock in the near term, we believe increased volumes and net realization should offset these concerns. We maintain our Buy rating on the stock with a target price of Rs 324," says Angel Broking research report. 

Institutional holding more than 40% in Indian cos

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