Buy ONGC; target of Rs 305: Motilal Oswal

Motilal Oswal's research report on ONGC

ONGC’s 3QFY25 EBITDA was in line with our estimate at INR189.7b, as crude oil/gas sales came in line. Both crude oil and natural gas production trends were flat QoQ. With higher-than-estimated DDA, PAT stood 13% below our estimate. ONGC reported an oil realization of USD72.6/bbl in 3Q, at USD2.7/bb discount to Brent. Amid tighter US sanctions on Russian and Iranian oil exports and elevated seasonal energy demand, Brent has averaged USD78.3 in 4QFY25YTD. After scrapping the windfall tax, higher QoQ crude prices shall result in higher realization in 4Q for ONGC. ONGC is currently trading at 5.6x consolidated FY26E P/E, below its one-year fwd. LTA mean P/E of 6.8x. With FY26E RoE at ~14.4%, the current valuations appear attractive. We see limited downside from the current levels as we build in crude prices to average USD70/bbl in FY26/FY27. We value the company at 7x Dec’26E adj. EPS of INR29 and add the value of investments to arrive at our TP of INR305 (implying 23% upside potential). We reiterate our BUY rating on the stock.

Outlook

We value the company at 7x Dec’26E adj. EPS of INR29 and add the value of investments to arrive at our TP of INR305 (implying 23% upside potential). We reiterate our BUY rating on the stock.