ICICI Direct recommended hold rating on Oil and Natural Gas Corporation with a target price of Rs 80 in its research report dated July 02, 2020.
ICICI Direct's research report on Oil and Natural Gas Corporation
ONGC declared its Q4FY20 results, which were below our estimates on the profitability front mainly on account of high impairment loss and exploratory write-offs. Revenues fell 9.5% QoQ to Rs 21456.2 crore (our estimate: Rs 21065.9 crore) due to lower realisations at US$ 49/bbl. While oil production was in line with estimates, gas production was marginally lower. EBITDA during the quarter declined 30.2% QoQ and came in at Rs 8587.9 crore (our estimate: Rs 10678.3 crore) on account of higher other expenditure. Exploratory, DD&A expenses at Rs 8037 crore and an exceptional loss of Rs 4899.1 crore towards impairment of assets due to a fall in oil prices led to a net loss of Rs 3098.3 crore.
Considering these factors, we upgrade the stock from REDUCE to HOLD rating with a target price of Rs 80. We value core business i.e. standalone & OVL at Rs 63/share (6x FY22E core earnings) & investments at Rs 17/share (50% discount to current MCap).
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