Buy ONGC; target of Rs 177: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on ONGC

ONGC reported an in line EBITDA of INR259.3b (up 113% YoY and 39% QoQ), with an in line oil realization at USD108.5/bbl (up 65% YoY and 14% QoQ) and crude oil sales at 5mmt (flat YoY and QoQ). Although we expect crude oil prices to hover at USD60-70/bbl in the long run, the prevailing strength made us raise our FY23/FY24 realization estimate to USD79/USD90 per bbl after factoring in the impact of the windfall tax. In our base case, we have assumed a continuation of the windfall tax till Dec’22. Any continuation beyond that may result in EPS cuts. We build in domestic gas price realization of USD7.7/USD5.7 per mmBtu in FY23/FY24.

Outlook

We expect a gas/oil production of 3% CAGR each over FY21-24. Factoring all this, we have largely left unchanged our standalone EBITDA estimate, but have reduced our consolidated EBITDA estimate by 17%/4% for FY23/FY24 due to a sharp cut in HPCL’s projections. We value the company at 3.5x FY24E adjusted EPS of INR41.1 and add value of investments to arrive at our TP of INR177. We maintain our Buy rating.

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ONGC - 140822 -moti