Shares of India’s largest oil and gas explorer Oil and Natural Gas Corporation (ONGC) are witnessing strong buying interest, rising over 7 percent on August 7, after several brokerages highlighted that valuations are looking attractive after the June quarter earnings report.
ONGC's rise is in-line with a strong uptrend in the entire pack, with the BSE oil and gas index rising by over 3 percent, led by OIL, ONGC, GAIL and the OMC shares.
Sequentially, ONGC has reported a drop of 11 percent in consolidated net profit for the quarter ended June, from Rs 11,526.53 crore in the March quarter.
The drop in ONGC's June quarter profit is being attributed to the government's windfall tax on petroleum crude, even as international oil explorers have benefited during this period from a spike in crude prices.
An Investec report has taken note of ONGC's higher production CAGR forecast for oil and gas, and raised the target price for the share price to Rs 350. CLSA has said the fall in profit was in line with expectations, and given the plans to ramp up production over next two years, ONGC's valuations look attractive.
ONGC's chairman Arun Kumar Singh too had said in the recent past that the company is stepping up on exploration to boost domestic oil and gas output. A B&K Securities note finds the stock among the cheapest in the oil and gas pack, adding that production ramp up from KG field will be a crucial factor. ONGC has embarked on billion dollars bet on deepwater and ultra-deepwater exploration, to help India reduce its reliance on oil imports.
“To counter the decline in production from some of the matured and marginal fields, ONGC is taking proactive steps by implementing well interventions and advancing new well drilling activities,” ONGC has said earlier in February.
ONGC's peer Oil India, which too has been seeing strong buying interest in trade on August 7, is expected to report quarterly results on August 8.
The threat of the Middle East conflict escalating and impacting oil production has been supporting international crude prices of late. However, back home, India's growing power demand, robust economic growth and higher consumption of ATF has helped ONGC, Reuters quoted ICRA's Prashant Vasisht. India's fuel consumption too has grown on YoY basis, riding on strong industrial activity.
India is the world's third-largest importer and consumer of crude oil, and ONGC accounts for 67% of nation's oil output and 53% of the gas production.
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