Accumulate Oil & Natural Gas Corporation Ltd For Target Rs.273 by Prabhudas Liladhar Capital Ltd
Volume outlook trimmed amid muted Q1 production
Oil and gas production volumes (inc. JV) were in line with our estimates at 5.0mmt and 4.9bcm (PLe: 5.0mmt and 4.9bcm), respectively. Crude realization came in above expectations at USD99.5/bbl (PLe: USD95.9/bbl). As a result, revenue beat estimates at INR464.6bn (PLe: INR438.6bn; BBGe: INR449.0bn), up 29.3% QoQ and 45.2% YoY. EBITDA also exceeded estimates at INR294.5bn (PLe: INR265.4bn; BBGe: INR272.6bn), rising 65.7% QoQ and 57.9% YoY, driven by higher realizations and lower other expenses. PAT came in above estimates at INR170.3bn (PLe: INR149.2bn; BBGe: INR142.1bn), supported by lower interest, survey and exploratory well costs. We revise our FY27E standalone production estimates to 18.9mmt for oil and 19.4bcm for gas (earlier: 19.8mmt and 20.1bcm). For FY28E, we now estimate oil and gas production at 19.7mmt and 20.4bcm, respectively (earlier: 20.6mmt and 21.2bcm), broadly in line with the company's production guidance. We maintain 'Accumulate' rating with a revised TP of INR273 (earlier: INR266), based on 8x FY28E EPS for the standalone business, along with the value of investments
Standalone production volume declines; OVL remains steady QoQ:
Oil production inc. condensate from own fields declined 5.0% YoY but remained flat QoQ at 4.7mmt. Share of oil JVs stood at 0.3mmt, down 3.0%/14.4% QoQ/YoY. Gas production from own fields stood at 4.8bcm,flat QoQ and down 1.9% YoY. Gas production from JVs stood at 0.1bcm, down 2.1%/18.8% QoQ/YoY. Total oil and gas production (incl JVs) remained flat QoQ at 5.0mmt and 4.9bcm but declined 5.5% and 2.3% YoY respectively. For OVL, oil production volumes improved 3.6%/2.6% to 1.8mmt, but gas production declined 11.5%/2.4% QoQ/YoY to 0.7bcm
Volume sales as a % of production declined YoY:
ONGC’s volume sales declined 4.8% YoY and remained flat QoQ at 4.2mmt. Volume sales from JV declined 12.0% YoY and 28.6% QoQ to 0.2mmt. Oil Volume sale as a % of production remained steady at 90% vs 91.2% QoQ, while for JV it stood at 84% vs 114.1% in Q4FY26 and 81.7% in Q1FY26. For Gas, sales as a % of production stood at 76.4% vs 77.4/78.3% in Q4FY26/Q1FY26. Gas sales volume declined 1.8% QoQ and 4.2% YoY.
Oil price realization improved:
Crude oil realization from own fields improved to USD99.5/bbl vs USD78.3/bbl in Q4FY26 and USD66.1/bbl Q1FY26. Gas price realization for own fields stood at USD7.0/mmbtu vs USD6.4/6.8mmBtu in Q4FY26/Q1FY26
EBITDA/PAT above estimates
Driven by higher crude oil price realization, revenue increased 29.3%/45.2% QoQ/YoY to INR464.6bn (PLe: INR438.6bn; BBGe: INR449.0bn). Due to this, EBITDA improved 65.7%/59.7% QoQ/YoY to INR294.5bn (PLe: Rs265.4bn; BBGe: Rs272.6bn), lower other expenses further aided EBITDA growth. Lower interest, survey and exploratory costs benefited PAT which beat est at INR170.3bn (PLe: INR149.2bn; BBGe: INR142.1bn), up 156.1% QoQ and 112.3% YoY
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