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    Hold ONGC, target price, target price Rs 80: ICICI Direct

    Synopsis

    he brokerage has modelled oil prices of $39.5/bbl for FY21E and $50/bbl for FY22E, given the current oil market scenario.

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    ICICI Direct has given a hold rating to Oil And Natural Gas Corporation with a 12-month target price of Rs 80. The share price moved up by 0.73 per cent from its previous close of Rs 81.85. The stock’s last traded price is Rs 82.45.

    According to the brokerage, ONGC’s Q4FY20 results were below its estimates on the profitability front mainly on account of high impairment loss and exploratory write-offs. Revenues fell 9.5 per cent quarter on quarter to Rs 21456.2 crore against brokerage estimate of Rs 21065.9 crore due to lower realisations at $49/bbl.

    While oil production was in line with estimates, gas production was marginally lower. EBITDA during the quarter declined 30.2 per cent quarter on quarter and came in at Rs 8587.9 crore against brokerage estimate of Rs 10678.3 crore on account of higher other expenditure.

    Exploratory, DD&A expenses at Rs 8,037 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.

    Investment Rationale

    Oil price movement is very important for ONGC's performance, going ahead. The brokerage has modelled oil prices of $39.5/bbl for FY21E and $50/bbl for FY22E, given the current oil market scenario. Although oil prices saw some recovery in May, they are still lower, which will affect ONGC’s profitability. Oil output growth is also lower on a sustainable basis.

    Considering these factors, the brokerage has upgraded the stock from reduce to hold rating with a target price of Rs 80. The brokerage values core business i.e. standalone & OVL at Rs 63/share (6 times FY22E core earnings) and investments at Rs 17/share (50 per cent discount to current market cap).

    ONGC-ICICIDirectJuly32020


    Financials

    For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 104488.95 crore, down -4.53 per cent from last quarter sales of Rs 109443.39 crore and down -6.97 per cent from last year's same quarter sales of Rs 112316.40 crore. The company has reported net profit after tax of Rs -6875.29 crore in the latest quarter.

    Promoter/FII Holdings

    Promoters held 47.75 per cent stake in the company as of March 31, 2020, while FIIs held 8.28 per cent, DIIs 16.57 per cent and public and other 27.41 per cent.
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    1 Comment on this Story

    Mohan P39 days ago
    why i need to hold when target is 80 and cmp is 82???
    The Economic Times