International brokerage Jefferies retained its buy call on ONGC, noting that the central government's policy continuity should keep the oil PSU's profitability elevated.
ONGC shares jumped over three percent in early trade on June 11, quoting Rs 267.6 on the NSE at 9.25 am. The oil player was the top gainer on the Nifty 50 index.
Since the election verdict was announced on June 4, with the BJP unable to cross the 272-mark to form a simple majority, investors have offloaded their holdings in ONGC. The oil major's shares have tanked around 9 percent.
According to Jefferies, this correction appears overdone and can prove to be an attractive entry point for investors. The brokerage has a target price of Rs 390 per share on ONGC, offering a 50 percent upside from current levels.
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ONGC's ramp-up in KG basin production in the third quarter of the current fiscal year and accretion to profitability are key triggers to monitor.
Overall, Jefferies remains confident that ONGC's profitability will remain elevated compared to its past averages.
In its note on April 15, Jefferies said it expects the state-owned company ONGC to generate strong free cash flows and reduce consolidated net debt, which would lead to a profitable growth over FY24-26.
"In the past, reforms in crude and gas pricing impacted the company's profitability above past decade averages. Going ahead, we believe that a sharp rise or fall in crude prices could be potential risks for ONGC," they added.
ONGC shares have jumped 67 percent in the past year, as compared to a 25 percent rise in the frontline Nifty 50 index.
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