Stock Analysis – ONGC

Some notes based on an equity research report from one of the leading stock broker about ONGC and stock price target for one year time period.

ONGC has reported 3QFY12 PAT of Rs.6740 crore, which includes a onetime gain of Rs.3140 crore from Cairn India as royalty disbursement.

Net realization for ONGC on domestic oil production has been at USD 45/barrel.

Upstream share of subsidy for 9 months stands at 38%.

Depreciation and amortization value stands at Rs.4530 crores. It is much higher due to dry well expenses on five deepwater wells.

Production in Syria has come to a halt due to political tension and production in Sudan also declined sharply. This is good enough to cast a doubt on FY13 production growth, which may offset gains from higher crude oil prices for OVL. Decline/stoppage of production at ONGC Videsh Ltd (OVL) is a dampener in results and future numbers.

Gas production in domestic business remains stable and subsidy should be a non- event, provided it continues at 38%. However, if the average subsidy for FY12 rises to 44% or higher, this could be a concern on stock price. Other risks could be higher than expected under- recoveries and lower than expected production from certain OVL assets.

One may Buy Stocks of ONGC for target stock price of Rs.322 over one year.

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