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Motilal Oswal Report
Lower upstream royalties and revised wellhead pricing norms are expected to lift Oil and Natural Gas Corporation Ltd.'s FY27 SA PAT by ~5%, while commissioning of key offshore projects such as Daman Upside and KG-98/2 strengthens medium-term production visibility.
Given high oil prices and the absence of windfall taxes so far, Motilal Oswal's confidence in the upstream sector rerating has risen.
The brokerage continues to look for further updates regarding medium- and long term volume growth in upcoming results.
Motilal Oswal value the company on an SoTP basis and derive a target price of Rs 275 (Neutral), factoring in oil/gas production compound annual growth rate of 1.7%/2.5% over FY25-28.
Valuation and view
In the past few quarters, ONGC has struggled to raise production,sales, with no meaningful production/sales growth YoY for 9M FY26.
Further, the brokerage likes the increased exploration intensity (which is key to building a robust development pipeline), though Motilal Oswal believes it will likely be accompanied by higher dry well write-offs, which will weigh on earnings.
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