Pick of The Week Ongc LTD
Pick of The Week Ongc LTD
Pick of The Week Ongc LTD
Recent adequate increase in FY2020 budget provision for LPG subsidies should allay investor concerns on subsidy
sharing for upstream PSUs, which we believe will be certain by 4QFY19 results.
Gas production has grown well in the recent months.
We expect ONGC’s net oil realization to remain steady over the next few years.
We raise EPS estimates, excluding HPCL, to Rs.24.3 (+7%) in FY2019E and Rs.25.6 (+3%) in FY2020E, factoring in (1)
modestly higher gas volumes, (2) higher other income and (3) other minor changes.
We assume stable crude realization, higher gas price and modest increase in production volumes.
Our fair value based on 9X FY2020E EPS plus value of investments increases to Rs.215 from Rs.210.
ONGC's earnings are highly sensitive to oil and gas prices and exchange rate assumptions.
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P/E (x) 9.8 7.0 6.7
This one pager on the company is extracted from last KIE update dated February 15, 2019 and it does not contain events beyond that date. We take no obligation to update the
KIE recommendations. While source of all other information is taken from Kotak Institutional Equities, the price performance and shareholding pattern chart is inputted by Kotak
PCG research team (with source as Bloomberg). It is advisable to read the full KIE report before taking any investment decision on the above company recommendation.
RATING SCALE
Definitions of ratings
BUY – We expect the stock to deliver more than 15% returns over the next 12 months
ADD – We expect the stock to deliver 5% - 15% returns over the next 12 months
REDUCE – We expect the stock to deliver -5% - +5% returns over the next 12 months
SELL – We expect the stock to deliver < -5% returns over the next 12 months
NR – Not Rated. Kotak Securities is not assigning any rating or price target to the stock.
The report has been prepared for information purposes only.
SUBSCRIBE – We advise investor to subscribe to the IPO.
RS – Rating Suspended. Kotak Securities has suspended the investment rating and price target
for this stock, either because there is not a sufficient fundamental basis for determining, or
there are legal, regulatory or policy constraints around publishing, an investment rating or
target. The previous investment rating and price target, if any, are no longer in effect for this
stock and should not be relied upon.
NA – Not Available or Not Applicable. The information is not available for display or is not
applicable
NM – Not Meaningful. The information is not meaningful and is therefore excluded.
NOTE – Our target prices are with a 12-month perspective. Returns stated in the rating scale are our
internal benchmark.
FUNDAMENTAL RESEARCH TEAM
Rusmik Oza Arun Agarwal Amit Agarwal Cyndrella Carvalho Ledo Padinjarathala, CFA
Head of Research Auto & Auto Ancillary Transportation, Paints, FMCG Pharmaceuticals Research Associate
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