Emkay Global Financial is bullish on ONGC has recommended buy rating on the stock with a target price of Rs 100 in its research report dated September 02, 2020.
Emkay Global Financial's report on ONGC
ONGC reported standalone revenue/EBITDA/APAT of Rs130.1bn/47.8bn/4.96bn in Q1FY21. EBITDA was 16% higher than our estimate on lower production cost (down 21% yoy/49% qoq) and dry wells write-off (down 61%/79%). Interest cost fell 24% yoy/43% qoq. Nominated block (NB) crude realization discount to Brent re-expanded to USD2.7/bbl at USD28.7/bbl, while total production (incl. VAP) fell 10% yoy/6% qoq. Hence, revenue was a 4% miss. JV crude revenue fell 62% yoy/40% qoq with lower sales/production run-rate. NB crude production was down 1% yoy/3% qoq to 5.1mmt, while gas fell 13%/8% to 5.4bcm due to Covid-19 off-take issues. VAP output fell 21%/18% to 0.7mmt with a decline in naphtha volumes. NB/JV gas realization fell 25%/41% qoq to USD2.7/3.2/mmbtu NCV. We raise FY21/22E PAT by 7%/13% on lower opex but offset by output cut and 33% tax for FY21.
Outlook
We however reduce EV/EBITDA multiple to 3.5x from 4x due to higher oil prices now and 4-6% ROE. We cut TP by 5% to Rs100. Maintain Buy with an EW stance in EAP.
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