Prabhudas Lilladher's research report on Oil and Natural Gas Corporation
We increase our FY23-25E earnings by 6-43% to factor in higher crude oil realisation to USD81/73/bbl (USD73/70/bbl earlier). ONGC’s Q2 standalone EBIDTA was lower than expected at Rs188.1bn (-27.5%Q/Q; PLe Rs201.7bn), while PAT of Rs128.3bn (-15.7%Q/Q PLe Rs107.5bn). EBIDTA was hit by lower than expected oil and gas volumes while PAT got a boost from higher other income and lower tax of 9% as company migrated to lower tax regime. Q2 consolidated EBIDTA/PAT stood at Rs165.7bn (-17%Q/Q) and Rs68.4bn (- 26%Q/Q) due to losses at HPCL. Recent government decision to impose windfall taxes will mean ONGC’s crude oil realization will be ~USD73/bbl, thereby not benefiting from high commodity prices but gas prices will remain healthy.
We maintain ‘BUY’ rating with PT of Rs180 based on 3.5x EV/E FY24E (3.5x EV/EFY23 earlier; Rs160 earlier) as we roll over.