Oil & Natural Gas Corporation - Q1FY21 Result Update - ICICI Securities

ONGC reported a mixed set of Q1FY21 numbers. Although operational volumes were below estimates, profitability was higher due to reduced operating and DD&A costs. Revenues fell 39.4% QoQ to Rs. 13011.3 crore (our estimate:Rs. 13954.1 crore) due to lower realisations at US$28.7/bbl. Oil production was down 2.6% QoQ to 5.7 MMT (our estimate: 5.8 MMT). Gas production fell 8.2% QoQ to 5.5 MMT (our estimate: 5.7 MMT) due to reduced gas offtake during lockdown. EBITDA fell 31.2% QoQ to Rs. 5907.7 crore (our estimate: Rs. 5723.7 crore) as other expenses reduced from Rs. 11200.8 crore to Rs. 6319.9 crore. DD&A expenses were at Rs. 4949.2 crore against estimate of Rs. 6454.5 crore. Consequently, PAT was at Rs. 496 crore against net loss of Rs. 3098.3 crore in Q4FY20 (estimated loss: Rs. 184.3 crore).

Valuation & Outlook

The movement in oil prices is very important for ONGC's performance, going ahead. We model oil prices of US$41/bbl for FY21E, US$50/bbl for FY22E, given the current oil market scenario. Although oil prices have recovered, they are still at lower level, which will affect ONGC's profitability. Due to lower production growth on a sustainable basis, despite cheaper valuations, we maintain HOLD rating on the stock with a target price of Rs. 80/share. We value core business i.e. standalone & OVL at Rs. 64/share (6.5x FY22E core earnings) & investments at Rs. 16/share (50% discount to current MCap).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_ONGC_Q1FY21.pdf

Shares of OIL AND NATURAL GAS CORPORATION LTD. was last trading in BSE at Rs.77.95 as compared to the previous close of Rs. 79.05. The total number of shares traded during the day was 1176130 in over 8767 trades.

The stock hit an intraday high of Rs. 79.1 and intraday low of 77.35. The net turnover during the day was Rs. 92063389.

Source : Equity Bulls

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