Buy ONGC; target of Rs 348: KRChoksey

KRChoksey is bullish on Oil and Natural Gas Corporation (ONGC) and has recommended buy rating on the stock with a target of Rs 348 in its August 13, 2012 research report.

"ONGC reported one of the lowest quarterly net crude realizations of $46.6/bbl due to higher subsidy sharing with OMC’s. fall in ONGC standalone crude price realisation by 4% on Y-o-Y basis on account of higher cess charged on crude production. Overall crude price realisation was $57/bbl (incl. JV).The company reported standalone 1QFY13 net profit growth of 48% to Rs 6077 Cr on Y-o-Y, higher than our estimates mainly due to better than expected crude sales volume and rupee depreciation. Net sales rose by 24% on Y-o-Y basis, on account 3.7% increase in total crude sales. Operating profit improved by 40% on Y-o-Y basis backed by lower exploration cost on dry wells,"

"Uncertainty over oil production of south Sudan block will continue for next 2/3 quarters. No positive on tax benefits from Siberian crude production by Imperial energy. Carabobo block in Venezuela can miss timeline for start of oil production (expected to start by Dec-12 @ 10,000bpd). Crude production from Syrian block would be lower (0.324MMTPA) till political turmoil settle down.Planning to drill 15 deepwater explorations well in KG basin, 4 well already completed in Q1FY13"

"ONGC plans to spend Rs 33065 cr in FY13. We expect $56/bbl net crude realisation for FY13. If new formula implemented, purely based on crude sales will provide 7% upside to net crude realisation. Oil find at D-1 field is positive trigger for the stock. We expect Govt to hike Prices of subsidized fuel post monsoon session, will help to lower the subsidy burden. At CMP of Rs 281, the stock is trading at 7.4X and 6.4x of its estimated PE for FY13E & FY14E. We recommend a Buy on the stock with a Price Objective (PO) of Rs 348 (intrinsic value) representing a potential upside ~ 24% over a period of 12 months," says KRChoksey research report.

FIIs holding more than 30% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

Read More