Choosing between hundreds of schemes is a difficult task for most mutual fund investors. For newbie investors , another dilemma is whether to go for the growth or the dividend option. While you don't stand to gain or lose significantly with either alternative, there are some aspects that need to be considered to make the correct decision. Let us first examine how one differs from the other.
Sunday 12 June 2011
Buy ONGC; target of Rs 328: Angel Broking
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.
ONGC an underperformer, target of Rs 303: LKP Shares
LKP Shares has recommended an underperformer rating on ONGC with a target of Rs 303 in its June 3, 2011 research report.
“ONGC, Q4 FY11 results bore the brunt of the increased subsidy burden with ONGC having to suffer a whopping subsidy discount of $ 70.1/bbl during the quarter.
• Total sales for the quarter increased 5.2% yoy but fell 16.6% qoq to Rs 155,510 mn:
- Q4 FY11 subsidy burden at Rs 121,353.4 mn ($ 70.1/bbl) was almost triple the subsidy/bbl of $ 24.3/bbl in Q3 FY11. This resulted in the net realization plunging by 40% from $ 64.8/bbl in Q3 FY11 to $ 38.7/bbl in Q4 FY11.
- Q4 FY11 domestic crude production at 6.8 MMT was down 3.3% sequentially. Production from nomination fields dropped by 0.2 MMT during the quarter whereas a 5-day repair in MPT resulted in marginal drop of 0.03 MMT in output from JVs.
• Powered by the hike in APM gas price to $ 4.2/mmBtu, natural gas sales from nomination fields jumped by 110% y-o-y to Rs 29,970 mn in Q4 FY11.
- Production from nomination fields at 5.73 bcm was up 1.6% y-o-y, but dropped 1.4% q-o-q.
- Production & sales from JVs fell 11% & 16% y-o-y to 0.58 bcm & 0.52 bcm respectively during the quarter. Gas sales from JVs fell by 14% y-o-y to Rs 4,530 mn.
Operating expenses leaped by 33.1% q-o-q & 39.9% y-o-y to Rs 42,890 mn. Also, other expenses at Rs 5,300 mn were up 223.2% q-o-q driven by a four-fold jump in provisions & write-offs. This led to OPM falling by 1390 bps q-o-q & 1060 bps y-o-y to 46.8% for Q4 FY11. As a result, net profit for Q4 FY11 plunged 60.6% q-o-q & 26.1% y-o-y at Rs 27,908.6 mn. EPS for the quarter was Rs 3.3, as against Q3 FY11 EPS of Rs 8.3.
The upstream sector’s share of the gross under recoveries, which was fixed at ~33% during FY08-10, has been increased suddenly to ~39% in FY11. Since our FY12 & FY13 estimates of gross under-recovery at Rs 911.5 bn & Rs 860.6 bn are higher than gross under recovery of ~Rs 782 bn in FY11, we don’t foresee a return to the 33% sharing mechanism in the near term. Accordingly, we assume 39% of the subsidy burden to be borne by the upstream sector in perpetuity. We estimate post-subsidy realization for ONGC India to be $ 51.9/bbl and $ 54.9/bbl respectively in FY12 & FY13. As per our estimates, ONGC’s crude realizations are capped at ~ $ 58/bbl going forward. We estimate consolidated topline growth of 7.3% and 6.4% in FY12 & FY13 respectively. We estimate net sales of Rs 1,261.8 bn & Rs 1,342.7 bn in FY12 & FY13. We estimate EPS of Rs 26.5 and Rs 29.7 in FY12 & FY13 respectively. Our SOTP valuation for ONGC yields a target price of Rs 303. Our price target translates into EV/boe of $ 5.3/boe and FY12E & FY13E P/E of 11.4x and 10.2x respectively.
We note that the adhoc increase in the subsidy burden for the upstream sector has resulted in heightened uncertainty for investors. By virtue of its size, ONGC bears the lion’s share of the subsidy burden which is leading to depressed realizations & earnings. The upcoming FPO is also expected to result in downward pressure on the stock price as there have been precedents of PSU FPOs being issued at a discount to the CMP to achieve maximum subscription. At our target price of Rs 303, the potential upside is 8.2% only. Hence, in light of the near term external pressures on the company, we revise our rating to UNDERPERFORMER,” says LKP Shares research report.
“ONGC, Q4 FY11 results bore the brunt of the increased subsidy burden with ONGC having to suffer a whopping subsidy discount of $ 70.1/bbl during the quarter.
• Total sales for the quarter increased 5.2% yoy but fell 16.6% qoq to Rs 155,510 mn:
- Q4 FY11 subsidy burden at Rs 121,353.4 mn ($ 70.1/bbl) was almost triple the subsidy/bbl of $ 24.3/bbl in Q3 FY11. This resulted in the net realization plunging by 40% from $ 64.8/bbl in Q3 FY11 to $ 38.7/bbl in Q4 FY11.
- Q4 FY11 domestic crude production at 6.8 MMT was down 3.3% sequentially. Production from nomination fields dropped by 0.2 MMT during the quarter whereas a 5-day repair in MPT resulted in marginal drop of 0.03 MMT in output from JVs.
• Powered by the hike in APM gas price to $ 4.2/mmBtu, natural gas sales from nomination fields jumped by 110% y-o-y to Rs 29,970 mn in Q4 FY11.
- Production from nomination fields at 5.73 bcm was up 1.6% y-o-y, but dropped 1.4% q-o-q.
- Production & sales from JVs fell 11% & 16% y-o-y to 0.58 bcm & 0.52 bcm respectively during the quarter. Gas sales from JVs fell by 14% y-o-y to Rs 4,530 mn.
Operating expenses leaped by 33.1% q-o-q & 39.9% y-o-y to Rs 42,890 mn. Also, other expenses at Rs 5,300 mn were up 223.2% q-o-q driven by a four-fold jump in provisions & write-offs. This led to OPM falling by 1390 bps q-o-q & 1060 bps y-o-y to 46.8% for Q4 FY11. As a result, net profit for Q4 FY11 plunged 60.6% q-o-q & 26.1% y-o-y at Rs 27,908.6 mn. EPS for the quarter was Rs 3.3, as against Q3 FY11 EPS of Rs 8.3.
The upstream sector’s share of the gross under recoveries, which was fixed at ~33% during FY08-10, has been increased suddenly to ~39% in FY11. Since our FY12 & FY13 estimates of gross under-recovery at Rs 911.5 bn & Rs 860.6 bn are higher than gross under recovery of ~Rs 782 bn in FY11, we don’t foresee a return to the 33% sharing mechanism in the near term. Accordingly, we assume 39% of the subsidy burden to be borne by the upstream sector in perpetuity. We estimate post-subsidy realization for ONGC India to be $ 51.9/bbl and $ 54.9/bbl respectively in FY12 & FY13. As per our estimates, ONGC’s crude realizations are capped at ~ $ 58/bbl going forward. We estimate consolidated topline growth of 7.3% and 6.4% in FY12 & FY13 respectively. We estimate net sales of Rs 1,261.8 bn & Rs 1,342.7 bn in FY12 & FY13. We estimate EPS of Rs 26.5 and Rs 29.7 in FY12 & FY13 respectively. Our SOTP valuation for ONGC yields a target price of Rs 303. Our price target translates into EV/boe of $ 5.3/boe and FY12E & FY13E P/E of 11.4x and 10.2x respectively.
We note that the adhoc increase in the subsidy burden for the upstream sector has resulted in heightened uncertainty for investors. By virtue of its size, ONGC bears the lion’s share of the subsidy burden which is leading to depressed realizations & earnings. The upcoming FPO is also expected to result in downward pressure on the stock price as there have been precedents of PSU FPOs being issued at a discount to the CMP to achieve maximum subscription. At our target price of Rs 303, the potential upside is 8.2% only. Hence, in light of the near term external pressures on the company, we revise our rating to UNDERPERFORMER,” says LKP Shares research report.
Market Voices
The markets lost significantly after the release of disappointing IIP data but recovered in the last one hour of trade to close with moderate losses. Interest rate sensitive sectors like banking and realty were the worst performers in today's trade, consumer durables being the only sector to close in the green. The Sensex closed at 18268, down 116 points from its previous close, and Nifty shut shop at 5486, down 35 points. The CNX Midcap index was down 0.3% while the BSE Smallcap index lost 0.5% in today's trade. The market breadth was negative with advances at 439 against declines of 840 on the NSE. The top Nifty gainers were Hindalco, Cairn, ONGC and Ranbaxy and the biggest losers included Grasim, DLF, Reliance Capital and L & T.
Source : Rediff
Source : Rediff
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