Accumulate Oil and Natural Gas Corporation; target of Rs 276: Prabhudas Lilladher

Prabhudas Lilladher's research report on Oil and Natural Gas Corporation

Mixed production profile of standalone oil (+0.4% QoQ) and gas (-1.9% QoQ) combined with marginally higher oil price realization of USD73.7/bbl in Q4 vs USD72.6/bbl in Q3FY25 resulted in revenues of Rs349.8bn, +3.8% QoQ. EBITDA of Rs190bn (+0.2% QoQ) was 3.8% higher than our est of 183.2bn & consensus of Rs179.7bn. Much higher DDA led by write-offs resulted in PBT declining by 20% QoQ to Rs88bn (PLe Rs107bn) despite growth in rev. PAT stood at Rs64.5bn, -19.6% QoQ (PLe Rs80bn, consensus Rs88bn). Standalone FY25 EBITDA stood at Rs748bn, +3% YoY while PAT stood at Rs356bn, -12% YoY. Going ahead, we build in 7% and 5% volume growth in oil and gas production in FY26E. The stock is currently trading at 8x FY27 conso EPS, with USD71.3/75/bbl of Brent in FY26/27.

Outlook

We remain positive on the stock but downgrade from Buy to Accumulate due to ~10% run-up in the stock post preview. We value the company at Rs276, valuing the standalone business at 8x FY27 adj EPS and adding the value of investments. Key risk to our recommendation is sustained.