Analyst Research Report Snapshot

Title:

Oil and Natural Gas Corporation Ltd.|Q1FY15 Result Update | Below expectation |Maintain BUY rating on the stock with target price of Rs. 495

Price:

$23.00

Provider:

IndiaNivesh Securities Pvt Ltd

Date:

14 Aug 2014

Pages:

3

Type:

AcrobatPDF

Companies referenced:

ONGC.NS

Available for Immediate Download
Summary:

Oil and Natural Gas Corporation Ltd.|Q1FY15 Result Update Below expectation |Maintain BUY rating on the stock with target price of Rs. 495 | ONGC reported Q1FY15 numbers below our expectation due to higher than expected subsidy burden and lower volume. Net sales increased by 13.2% YoY and 4.1% QoQ to Rs 217.47 bn (slightly below our expectation of Rs 221 bn) as benefit of higher realization was offset by lower production. Gross realization stood at USD109/bbl v/s USD106.6 in Q4FY14 where as Net realization stood at USD 47.15/bbl v/s USD 32.78/bbl in Q4FY14. Net realization in Rupee terms increased 25.39% YoY to Rs. 2818 per barrel. ONGC shared higher than expected subsidy burden of Rs. 132 bn (against our expectation of Rs. 119 bn) vs Rs. 162 bn in Q4FY14. Reported net profit increased by 19.1% y-o-y (down 2.2% QoQ) to Rs. 47.81 bn, below our expectation of Rs 55.5 bn due to higher than expected subsidy burden coupled with higher DD&A expenses (up 9.9% YoY) and higher effective tax rate. Valuation: Though Q1FY15 number was slightly below expectation, we believe that the recent reforms undertaken by the Indian government in pricing of petroleum products (partial diesel regulation and increase in natural gas prices) are expected to be significantly value-accretive for ONGC and significant benefits accrue from FY15. At CMP Rs 402 ONGC is trading 11x FY15E EPS and 9.8x FY16E EPS, lower than of historical average PE of 11x. We maintain BUY rating on the stock with target price of Rs. 495 (based on 12xFY16e earnings).

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