ONGC Forecasted to Reach Rs 297 by Prabhudas Lilladher: Buy Recommendation

ONGC Sees Improved Revenue, But Production Trends Remain a Concern

Prabhudas Lilladher's latest research report on ONGC highlights a mixed bag of results for the company. On the one hand, revenue improved by 13.9% quarter-on-quarter (QoQ) and 2.7% year-on-year (YoY) to INR359.3 billion. This growth was primarily driven by higher crude oil realizations, which increased to USD78.3 per barrel (+27.1% QoQ; +6.2% YoY). However, this uptick was partly offset by lower sales volumes, with total standalone sales volumes declining by 4.0% QoQ and 3.5% YoY.

In terms of profitability, adjusted earnings before interest, taxes, depreciation, and amortization (Adj. EBITDA) stood at INR186.1 billion, up 7.4% QoQ but down 2.1% YoY. Adjusted profit after tax (Adj. PAT) came in at INR73.0 billion, down 17.2% QoQ but up 6.0% YoY. Despite these mixed results, ONGC plans to drill approximately 500 wells, including 400 developmental wells, in the coming period. Management has also indicated that future production volumes will increasingly tilt towards gas, supported by a rising contribution from NWG volumes.

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Given the continued weakness in recent production trends, Prabhudas Lilladher has maintained conservative production assumptions. The research report builds in standalone production at 19.8 million metric tons (mmt) for oil and 20.1 billion cubic meters (bcm) for gas in FY27. For FY28, the report estimates oil production of 20.6 mmt and gas production of 21.2 bcm, reflecting modest improvement as key projects gradually ramp up and become operational.

Recommendation Prabhudas Lilladher maintains an "Accumulate" rating for ONGC with a revised target price of INR297, based on 9x FY28E EPS for the standalone business, along with the addition of investment value.