ONGC, Oil India - Still Has More Steam Left; Reiterate 'Buy' Rating: Motilal Oswal

Motilal Oswal Report

The India upstream stocks have proven to be strong value plays in recent months, with both Oil and Natural Gas Corporation Ltd. and Oil India Ltd. trading higher led by robust production growth guidance.

We still see another 15-20% of ‘value’ upside’ left in both these stocks; beyond this, we believe growth prospects become paramount for a sustained re-rating.

As a result, investor attention for both stocks could soon shift away from valuation discount (versus previous cycle) to assessing volume growth scenarios, analyzing operating costs (onshore versus offshore acreage) and the strength and visibility of the exploration and development pipeline.

We remain positive on both the stocks and reiterate our 'Buy' rating on ONGC and Oil India with target prices of Rs 315 and Rs 650, respectively.

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