Q1 Results: Analysts Cut Target Price For ONGC On Lower Sales

Most analysts cut their target prices for Oil and Natural Gas Corporation Ltd. as sale of crude and gas fell in the quarter ended June 30.

While crude sales were down 10 percent to 5.286 million metric tonnes, gas sales fell 4.2 percent to 4.996 billion cubic metres. Besides lower sales volume, higher finance cost, increasing tax rate and lower other income offset the benefits of higher product prices and lower costs.

Still, analysts maintained their bullish investment recommendation on ONGC on cheaper valuation and higher operating profit.

A look at how analysts saw ONGC Q1 Results 2019-20

CLSA

• Maintains ‘Buy’, cuts target price to Rs 240 from Rs 285 apiece.
• Miss on net profit due to one-offs, but core Ebitda in line with estimates.
• Cuts target price to factor in lower oil and gas prices.
• Stock trading at compelling valuation and offers 8 percent dividend yield.

JPMorgan

• Maintains ‘Overweight’ with a target price of Rs 210 a share.
• Earnings beat as higher crude prices help offset lower output.
• Sceptics on stock continue to highlight potential subsidy risk.
• Decline in crude production offset by increase in gas production.

Emkay Global

• Maintains ‘Buy’ but cuts target price to Rs 185 from Rs 190 apiece.
• Earnings miss estimate on lower oil revenues.
• Maintains ‘Buy’ on cheap valuations but remains ‘Underweight’ due to lack of triggers and significant divestment risks.

UBS

• Maintains ‘Buy’ but cuts target price to Rs 220 from Rs 240 apiece.
• Q1 realisations beat expectations, but production growth yet to catch up.
• Expects investors to react positively to the results as Ebitda was higher.
• Concern of subsidy burden on upstream companies has subsided.

Edelweiss

• Maintains ‘Buy’ but cuts target price to Rs 197 from Rs 209 apiece.
• Lower exploration costs led to earnings surge.
• Gas production remains robust; oil continues to trend lower.
• Cuts target price to factor in lower gas prices.

Nomura

• Maintains ‘Neutral’ with a target price of Rs 155 a share.
• Weak first quarter on lower oil/gas sales.
• Ebitda miss was driven by lower sales volume and higher royalty payment.
• ONGC Videsh profits sharply improved in first quarter, consolidated earnings dragged by HPCL/MRPL.