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Dolat Capital Report
Oil and Natural Gas Corporation Ltd.'s Q4 FY24 headline numbers were below consensus. Ebitda/profit after tax came in at -7%/-8% mainly due to-
sales-to-production ratio being lower mostly in gas segment and
higher than expected depletion of reserves.
The company guided significant growth in oil/gas production of ~22 metric million tonne/ 25 billion cubic metre in FY27E. Most of the incremental oil production from KG-98/2 field, currently at 12 thousand barrels per day will touch 40/45 KBPD by the end of FY25E.
Incremental gas production, on the other hand, will touch ~5 bcm (3.6 bcm ramp up at 98/2 +1 bcm addition from new fields +0.3 bcm from the stranded gas field) over next three years.
By FY26 end, ~25% of gas production would be eligible for 20% higher gas price which is linked to ‘Indian Crude basket' and 12% slope.
We believe that recent reforms in crude and gas pricing have led to significant improvement in ONGC's profitability. Accordingly, we resume coverage with ‘Accumulate' rating and SoTP-based target price of Rs 318. The stock also offers 4-5% dividend yield. Any sharp rise/fall in crude price and adverse regulations will be key risks to our call.
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