Analysts Remain Bullish On ONGC Despite Consistent Guidance Misses—Here's Why

70% of the analysts tracking Oil & Natural Gas Corporation Ltd. have a 'Buy' call on the stock and the average 12-month target price pegs an 18% return potential on the stock from the current levels.

This comes despite ONGC consistently missing its production guidance in the last 6 years. The company also cut its FY26 and FY27 production guidance in its concall for the third quarter of the financial year 2025.

Factors Leading To Overall Positive View On ONGC:

Q3FY25 saw ONGC reversing the declining production trend, with both oil and gas production seeing an uptick. The management stated that the company's production profile will not be like the last 7-8 years and would be steady for the next 10 years with no declines.

ONGC's oil production at its KG 98/2 asset also saw an uptick from 25,000 barrels per day in Q2 to 35,000 barrels per day as of Q3. The management also noted that the basin will hit its guided 45,000 barrels per day peak level by March 2025. The company also stated that gas production at the basin will start ramp-up in 3 months.

Back in August 2024, the government of India allowed ONGC to charge a 20% premium over the administrative price mechanism for domestic production from new wells.

Currently ONGC volumes of new wells gas stand at 5.5 million metric standard cubic meter per day or 5% of the total gas production. The company expects these volumes to increase 5% every year. This gives the company some higher earnings relief.

As per Nuvama, who, for context, has a bearish view on the stock, the premium pricing of the new well gas may add Rs 1,500 crore to ONGC's profit before tax.

And lastly, one of the key aspects is valuations. Given the recent correction, Emkay Research notes that ONGC's current valuations remain very attractive. The stock's price to earnings ratio based on FY27 earnings stands at 7.4x, as per the brokerage.