Oil & Natural Gas Corporation - Q4FY20 Result Update - ICICI Securities

ONGC declared its Q4FY20 results, which were below our estimates on the profitability front mainly on account of high impairment loss and exploratory write-offs. Revenues fell 9.5% QoQ to Rs. 21456.2 crore (our estimate: Rs. 21065.9 crore) due to lower realisations at US$ 49/bbl. While oil production was in line with estimates, gas production was marginally lower. EBITDA during the quarter declined 30.2% QoQ and came in at Rs. 8587.9 crore (our estimate: Rs. 10678.3 crore) on account of higher other expenditure. Exploratory, DD&A expenses at Rs. 8037 crore and an exceptional loss of Rs. 4899.1 crore towards impairment of assets due to a fall in oil prices led to a net loss of Rs. 3098.3 crore.

Valuation & Outlook

Oil price movement is very important for ONGC's performance, going ahead. We model oil prices of US$39.5/bbl for FY21E and US$50/bbl for FY22E, given the current oil market scenario. Although oil prices saw some recovery in May, they are still lower, which will affect ONGC's profitability. Oil output growth is also lower on a sustainable basis. Considering these factors, we upgrade the stock from REDUCE to HOLD rating with a target price of Rs. 80. We value core business i.e. standalone & OVL at Rs. 63/share (6x FY22E core earnings) & investments at Rs. 17/share (50% discount to current MCap).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_ONGC_Q4FY20.pdf

Shares of OIL AND NATURAL GAS CORPORATION LTD. was last trading in BSE at Rs.81.9 as compared to the previous close of Rs. 80.5. The total number of shares traded during the day was 3163434 in over 12581 trades.

The stock hit an intraday high of Rs. 84.1 and intraday low of 81.1. The net turnover during the day was Rs. 262603214.

Source : Equity Bulls

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