Angel Broking is bullish on Oil and Natural Gas Corporation (ONGC) and has recommended buy rating on the stock with a target of Rs 328 in its June 1, 2011 research report.
“Oil and Natural Gas Corporation (ONGC)’s bottom line dipped by 26.1% yoy to Rs 2,791cr (Rs 3,776cr) for 4QFY2011, lower than our expectation, on account of higher subsidy burden and higher-than-expected operating expenditure. ONGC’s top-line performance during the quarter was marred by higher subsidy burden as the government increased upstream subsidy-sharing burden. The company’s top line during the quarter was flat yoy at Rs 16,108cr despite registering higher gross realisations. Gross realisations during the quarter stood at US$108.9/bbl (US$79.2/bbl), up 38% yoy. The company shared a subsidy burden of Rs 12,135cr vs. Rs 4,999cr of subsidy shared in 4QFY2010. Thus, a substantial increase of 143% in subsidy burden resulted in around 25% dip in net realisations for the company. Thus, net realisations during the quarter stood at US$38.7/bbl (US$51.4/bbl). ONGC’s OPM during the quarter contracted by 936bp yoy to 49.5% (58.9%), resulting in operating profit registering a 15.4% yoy decline to Rs 7,972cr (Rs 9,418cr). DD&A cost was higher by 7.6% yoy to Rs 4,788cr (Rs 4,448cr), higher than our estimates, on account of higher dry wells written off during the quarter. Other income during the quarter also came in above our estimates, increasing by 24.8% yoy to Rs 586cr as against Rs 469cr registered in 4QFY2010.”
“We believe the risk-reward ratio is now favourable with limited downside from current levels. Although, there is an FPO overhang on the stock in the near term, we believe increased volumes and net realisation should offset these concerns. We maintain Buy on the stock with a target price of Rs 328, translating into an upside of 16.5% from current levels,” says Angel Broking research report.
“Oil and Natural Gas Corporation (ONGC)’s bottom line dipped by 26.1% yoy to Rs 2,791cr (Rs 3,776cr) for 4QFY2011, lower than our expectation, on account of higher subsidy burden and higher-than-expected operating expenditure. ONGC’s top-line performance during the quarter was marred by higher subsidy burden as the government increased upstream subsidy-sharing burden. The company’s top line during the quarter was flat yoy at Rs 16,108cr despite registering higher gross realisations. Gross realisations during the quarter stood at US$108.9/bbl (US$79.2/bbl), up 38% yoy. The company shared a subsidy burden of Rs 12,135cr vs. Rs 4,999cr of subsidy shared in 4QFY2010. Thus, a substantial increase of 143% in subsidy burden resulted in around 25% dip in net realisations for the company. Thus, net realisations during the quarter stood at US$38.7/bbl (US$51.4/bbl). ONGC’s OPM during the quarter contracted by 936bp yoy to 49.5% (58.9%), resulting in operating profit registering a 15.4% yoy decline to Rs 7,972cr (Rs 9,418cr). DD&A cost was higher by 7.6% yoy to Rs 4,788cr (Rs 4,448cr), higher than our estimates, on account of higher dry wells written off during the quarter. Other income during the quarter also came in above our estimates, increasing by 24.8% yoy to Rs 586cr as against Rs 469cr registered in 4QFY2010.”
“We believe the risk-reward ratio is now favourable with limited downside from current levels. Although, there is an FPO overhang on the stock in the near term, we believe increased volumes and net realisation should offset these concerns. We maintain Buy on the stock with a target price of Rs 328, translating into an upside of 16.5% from current levels,” says Angel Broking research report.
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