Maintain 'hold' on ONGC – TP Rs.298 - Geojit BNP Paribas

- Low 1HFY13 subsidy and higher other income results in PAT beat. Despite the lower subsidy, operating EBITDA was weak at Rs.103 billion, as crude production (ex-Cairn JV) fell 7% yoy and 1% qoq. Net realization was USD47/barrel.

- 1HFY13 production of gas grew 2% y-y, vs guidance of 4%.

- Other Income at Rs.3b was above market estimate.

- The decline in crude production was due to delays in the development of the G1 field and lower production from new development wells at Mumbai High. Management hinted that its ~26m ton (ex JV) production target for FY14 could be delayed on slower ramp up of marginal field projects.

- On OVL, Sudan/Syria production has not yet normalized.

- Near-term weakness is expected to continue in crude production. However, lower subsidies are considered as positive. Production woes at ONGC and at OVL are expected to keep the shares under pressure. Maintain TP at Rs.298.

- Risks to the target price are volatility in crude prices and the subsidy burden.

Source : Equity Bulls

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