ONGC Surges 7% As Brokerage Cheers Increased Production Guidance

ONGC shares surged 7% on Wednesday after brokerages shared positive calls on the company on increasing production guidance.

What Happened: In its Q1 results, ONGC saw its standalone net profit fall 15% year on year to ₹8,938 crore. While its revenue jumped 4% from the previous year to ₹35,266 crore. 

Crude oil realisation increased to $83.05 (around ₹6,889) per barrel from  $76.36 (around ₹6,300) in the previous year. Total crude oil production fell slightly to 5.23 million metric tons while total gas production declined by 4% to 4.86 billion cubic meters.

ONGC management expects total crude oil production to rise by 12% to 23.1 million metric tonnes while gas production is expected to increase by 27% to 25.9 million metric tonnes by FY27. This will be driven by KG-98/2 and Daman upside development. The company said it will start gas production from KG-98/2 asset in the fourth quarter of FY25. 

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Brokerage Views: Investec maintained a "buy" call and hiked the target price to ₹350. The brokerage said the production guidance is optimistic and execution will be the key. The research firm kept its conservative base case on the company due to its poor execution track record. 

Jefferies maintained a "buy" call while hiking the target price of ₹410. The brokerage pointed out management reiterated its guidance of increasing production from KG Basin in Q3. The company is waiting for final notification of premium pricing of gas from new wells in nomination fields. The company's valuation remains favourable, the brokerage said. 

CLSA also maintained an "outperform" call with a target price of ₹330. The company's EBITDA was a slight beat while net profit was in line, the brokerage said. The company is at an attractive valuation with a near-term trigger and healthy dividend yield, the research firm added. 

Price Action: Shares of ONGC rose 7.66% to ₹329.55 on Wednesday afternoon. 

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