ONGC Q2 Preview: Profit expected to jump over 30% despite pressure on realizations

Oil and Natural Gas Corporation (ONGC), India’s largest oil producer, is expected to deliver a solid set of earnings for the second quarter of FY25, supported by strong margins and better operational efficiency. However, softer crude realizations could weigh on the overall performance. Here’s what to watch for:

Key Expectations for Q2FY25 (Standalone)

- Revenue: ONGC's revenue is projected to increase 4.4 per cent quarter-on-quarter (QoQ) to Rs 36,806 crore, compared to Rs 35,266 crore in the previous quarter. Higher natural gas sales volumes are likely to support the topline.
- EBITDA: The reported EBITDA is expected to rise 11 per cent QoQ to Rs 18,857 crore, reflecting strong cost controls and operational efficiency. Adjusted EBITDA, accounting for exploration and survey costs, is estimated at Rs 18,461 crore, showing stable performance despite lower realizations.
- Profit: Net profit is forecasted to jump 34 per cent QoQ to Rs 11,933 crore, driven by improved margins and reduced cost pressures.

Margin Expansion Despite Lower Realizations

ONGC's EBITDA margin is expected to expand to 51.2 per cent, up from 48.1 per cent in Q1FY25. The adjusted margin could increase further to 54.2 per cent, aided by cost management and lower exploration expenses.

Realization Trends and Volume Outlook

The company’s gross crude realization is likely to decline by 5.5 per cent QoQ to around $80 per barrel, while net oil realization is expected to dip by 1 per cent to $51 per barrel. Despite this, ONGC's natural gas sales volumes are anticipated to see a modest growth of 2 per cent, while crude oil sales volumes may remain flat, indicating limited upside in production.

Focus on Exploration and Capex

Investors should keep an eye on ONGC’s ongoing exploration projects and capital expenditure (capex) plans, as they play a critical role in boosting future output. The outlook for oil prices and demand recovery will be crucial for sustaining profitability in the coming quarters.

Market Outlook

With crude oil prices softening and global demand trends showing mixed signals, ONGC’s earnings could face headwinds. However, the company’s focus on cost optimization and strategic capex investments is expected to provide some buffer against the volatile pricing environment.

Current Market Price (CMP): Rs 649.30