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Oil and Natural Gas Corporation Ltd.| Q3FY13 Result Update




IndiaNivesh Securities Pvt Ltd


11 Feb 2013





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Oil and Natural Gas Corporation Ltd.| Q3FY13 Result Update | Ahead of estimates ONGC reported Q3FY13 numbers better than street estimates. Net sales increased by 15.8% y-o-y and 6.1% q-o-q to Rs 209.87 bn (higher than street expectation of Rs 198.65 bn) led by higher crude oil sales volume and net realization. Net realization stood at USD47.97/bbl (up 6.69% y-o-y) v/s USD44.96 in Q3FY12 and USD46.8 in Q2FY13. In Rupee term net realization increased by 13.26% y-o-y to Rs 2597/bbl in Q3FY13 due to Rupee depreciation against USD. During the quarter, oil subsidy burden of upstream companies stood at Rs. 150.82 bn (38.40% of total subsidy). ONGC shared subsidy burden was Rs. 124.33 bn in Q3 FY13 (82% of total up stream's share burden). EBITDA margin decreased 591 bps y-o-y (up 163 bps q-o-q) to 53.8% due to higher statutory levies. Net profit stood at Rs 55.62 bn (above street expectation of Rs 53.28 bn) on account of higher than estimated top line. Though, Net profit decreased by 17.5% y-o-y and 5.7% q-o-q to Rs 55.62 bn, after adjusting the exceptional gain from the royalty payment by Cairn in Q3FY12 of Rs 31.42 bn company's net profit increased by 54.5% y-o-y. Crude oil sales grew by 7% y-o-y (up 3% q-o-q) to 5.64 MMT while natural gas sales remained flat y-o-y to 5.02 BCM. Valuation: We are positive on ONGC from the long-term perspective due to likely rationalization of subsidy sharing and potential reserve accretion from its large E&P acreage. The recent reforms undertaken by the Indian government in pricing of petroleum products is also expected to be significantly value-accretive for ONGC. ONGC trades at a ~40% discount to its global peers on EV/BOE (7.2x EV/BOE of 1P reserves vs. global average of above 12x). At CMP of Rs 308 ONGC is trading 10.58x FY13E and 9.57x FY14E EPS and 4.66x FY13E and 4.18x FY14E EV/EBITDA. We maintain our BUY rating on the stock with target price of Rs. 358.

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