Jefferies has a positive outlook on Oil and Natural Gas Corp., reiterating a 'buy' call and setting a price target of Rs 360, despite a small earnings miss in the fourth quarter of the previous fiscal.
The brokerage flagged a weaker crude price environment and trimmed its fiscal 2026 and 2027 consolidated earnings per share estimates by 13% and 14% respectively, on lower production and pricing assumptions.
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The fourth quarter marked the second consecutive rise in crude and gas production, though Jefferies noted that management tempered growth guidance in the Krishna Godavari Basin. Standalone crude production held steady at 5.26 MMT, while average daily production climbed 2.7% on a quarterly basis. Natural gas output also rose to 5.01 BCM.
Jefferies pointed to a robust production growth outlook, driven by new deepwater developments and ramp-up from the KG Basin by mid-fiscal 2025. However, ONGC's standalone Ebitda at Rs 19,000 crore was 3% below estimates, while PAT at Rs 6,450 crore was a 31% miss due to a one-time exploration cost write-off.
The report also highlights potential upside from BP's Mumbai High contract, with Jefferies noting the asset's long-term technical support since 2017.
Despite the earnings miss, Jefferies argues that ONGC remains the cheapest among global peers and is already discounting weak crude prices.
ONGC Q4 FY25 Results Highlights (Standalone, QoQ)
Revenue up 3.8% to Rs 34,982 crore versus Rs 33,717 crore (Bloomberg estimate: Rs 33,709 crore).
Ebitda down 0.3% to Rs 19,007.5 crore versus Rs 19,057 crore (Bloomberg estimate: Rs 17,974 crore).
Margin at 54.3% versus 56.5% (Bloomberg estimate: 53.3%).
Net profit down 21.7% to Rs 6,448 crore versus Rs 8,240 crore (Bloomberg estimate: Rs 8,810 crore).
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