Broker’s call: ONGC (Buy)

Target: ₹325 CMP: ₹256.

20 ONGC’s Q2-FY25 standalone EBITDA, at ₹18,200 crore, was slightly lower than JM Financial’s expectation of ₹18,800 crore (but in line with consensus of ₹18,200 crore) due to crude sales volume being 3 per cent below JMFe, but that was partly offset by net crude realisation being $1/bbl above JMFe at $ 74.

3/bbl.

Gas sales volume and realisation were largely in line.

However, ONGC’s standalone PAT, at ₹12,000 crore, was significantly above JMFe/consensus of ₹9,200 crore due to higher other income, lower dry well write-off and lower tax-rate.

OVL’s crude and gas production continued to be weak; PAT was also lower QoQ due to higher opex.

We maintain Buy (revised TP of ₹325 from ₹340) given our expectation that OPEC+ will continue to support crude $75-80/bbl, and the government allowing ONGC/Oil India to make net crude realisation of $75/bbl.

Further, ONGC is likely to see 10-15 per cent output growth with ramp-up of output from KG DW 98/2 block.

Every $5/bbl rise/fall in net crude realisation results in increase/decrease in our EPS and valuation by 6-8 per cent.

ONGC is also a robust dividend play (4-6 per cent).

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