State-owned Oil and Natural Gas Corporation (ONGC) reported a decline of 7.9% in its consolidated net profit to Rs 10,748.5 crore in Q3FY24 compared with Rs 11,665 crore in the corresponding quarter last fiscal, as revenue fell. The profit fell by a sharper 35% on a sequential basis from Rs 16,553.32 crore in Q2FY24.
The decline was also due to lower price realisation in the last quarter. Realisations fell 6.4% to $81.59 per barrel. Gas prices, too, were lower by 24.2% at $6.5 per mmBtu.
Here is what top brokerages view on ONGC
Motilal Oswal on ONGC
In a recent report, Motilal Oswal has given a ‘Buy’ recommendation on ONGC, providing insights into the company’s financial performance for the third quarter of fiscal year 2024.
During 3QFY24, ONGC reported that crude oil sales reached 4.7 million metric tonnes, and gas sold amounted to 4 billion cubic meters, both aligning with expectations. However, the sales volume for value-added products fell short of estimates, standing at 573 thousand metric tonnes compared to Motilal Oswal’s projection of 655 tmt.
ONGC’s reported oil realization remained in line with expectations at USD 81.6/bbl, representing a 6% year-on-year decrease. Net of windfall tax, the realization stood at USD 72.4/bbl. The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) aligned with estimates at INR 171.6 billion, reflecting a 16% YoY decline, while Profit After Tax was reported at Rs 95.4 billion, slightly exceeding Motilal Oswal’s estimate of Rs 91.5 billion, with a 14% YoY decline.
ONGC has declared a second interim dividend of Rs 4 per share, supplementing the Rs 5.75 per share declared in November 2023.
OVL’s (ONGC Videsh Limited) oil production witnessed a substantial 31% YoY increase, reaching 1.816 mmt, while gas production rose by 10% YoY to 0.859 bcm in 3QFY24. Crude oil sales for OVL stood at 1.224 mmt (-3% YoY), and gas sales came in at 0.481 bcm (-15% YoY). OVL reported revenue of Rs 24.4 billion down by 3% YoY, PBDT (Profit Before Depreciation and Taxes) at Rs 9.14 billion decline of 43% YoY, and PAT at Rs 1.71 billion down 69% YoY during the quarter.
For the nine months ending FY24, ONGC’s revenue amounted to Rs 1,038 billion down by 13% YoY, with EBITDA at Rs 550 billion down by 16% YoY. The reported PAT declined by 24% to Rs 298 billion.
JM Financials on ONGC
In a recent report, JM Financials has upheld a BUY recommendation on ONGC, setting a revised target price of INR 300. Despite the recent market rally, JM Financials considers the risk-reward ratio to be reasonable.
The Current Market Price (CMP) is perceived to be discounting approximately USD 65/bbl of net crude realization, while JM Financials’ TP is anchored on a net crude realization of USD 70/bbl.
It is highlighted in the report that the government permits ONGC/Oil India to achieve a net crude realization of around USD 72-73/bbl. Additionally, ONGC is positioned as a robust dividend play, offering a yield in the range of 4-6%.
At the current CMP, ONGC is trading at 6.2x FY26E EPS (Earnings Per Share) and 0.9x FY26E BV (Book Value). JM Financials suggests that these factors contribute to the appeal of ONGC as an investment opportunity.