ONGC Shares Decline for Second Consecutive Day Amid Q4 Earnings Miss, CLSA Sees Potential for Up to 73% Upside

ONGC Shares Extend Decline Despite CLSA's Bullish Stance

Shares of Oil and Natural Gas Corporation Ltd (ONGC) continued their downward trend for a second consecutive session on Friday, despite brokerage CLSA retaining its high-conviction bullish stance on the stock.

In early trade, ONGC shares were trading 2 percent lower at Rs 268.6. The stock had fallen 4.7 percent on Wednesday following the company's fourth-quarter results, which were announced late on Tuesday. Indian markets were closed on Thursday for a holiday.

CLSA maintained its High Conviction Outperform rating on ONGC, with a target price of Rs 405 per share. This implies a potential upside of over 50 percent from current levels. The brokerage said ONGC's reported net profit missed estimates due to one-off charges, but underlying operating performance remained intact. Adjusted core EBIT and profit before tax were broadly in line with expectations, indicating that the company's core operations remained stable.

Read also: Expert Portfolio Manager Raja Venkatraman Names Top Investment Picks for June 4

ONGC reported a net profit of Rs 6,650 crore for the January-March quarter, down 20.6 percent sequentially from Rs 8,372 crore in the previous quarter. Revenue rose 13.9 percent quarter-on-quarter to Rs 35,928 crore, while EBITDA declined 17.1 percent to Rs 12,666 crore. The EBITDA margin narrowed to 35.3 percent from 48.4 percent in the December quarter.

CLSA highlighted management's confidence in delivering more than 30 percent gas production growth over the next two years, with the production ramp-up expected to begin from the next quarter. The partnership with BP is also expected to help arrest production declines from the ageing Mumbai High fields, a key concern for investors tracking the company's long-term output profile.

CLSA estimates that ONGC could offer upside ranging from 44 percent to 73 percent under different Brent crude price scenarios. The company said new-well gas contributed 17 percent of production and more than 21 percent of revenue from its nomination gas portfolio during FY26. Revenue from new-well gas stood at Rs 6,678 crore during the year. ONGC also mentioned that projects worth Rs 33,075 crore are currently under execution in its Western Offshore assets, which are expected to support production growth in the coming years.

Read also: MarketSmith India's 4 June Stock Recommendations