Brokerage firms were bullish on Oil and Natural Gas Corporation (ONGC) counter after the state-owned company reported the highest quarterly net profit in the quarter ended June 30, 2022. On Friday's closing price of Rs 139 per share, they see an upside of up to 47 per cent for the stock.   

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The state-owned company’s share price dipped nearly 2.5 per cent to Rs 136.1 per share on the BSE and NSE intraday during Tuesday’s session ahead of the dividend record date.  The government-owned refinery has fixed August 19 as the record date for the dividend payment to its shareholders. 

The company's net profit stood at Rs 15,205.85 crore or Rs 12.09 per share in the April-June period is against Rs 4,334.75 crore, or Rs 3.45 a share reported in the same period a year ago according to a stock exchange filing.   

Revenue from operations increased to Rs 42,320.72 crore in the first quarter of the current financial year from Rs 23,021.64 crore in the year-ago period.   

Citing the reasons for the lag in the stock performance of ONGC, ICICI Securities said, “Concerns on medium-term production growth, weak earnings from subsidiaries HPCL & OVL and recent imposition of ‘windfall tax’ on oil realisations, effectively putting a natural cap.”   

However, the brokerage noted even at realisations of US $75/bbl for oil and Rs 20-21/scm for gas price, standalone and consol EPS of Rs 40/sh and Rs 48/sh, respectively, are well above historical averages.    

It reinitiated a 'Buy' coverage with a target price of Rs 185 per share, implying over 33 per cent upside in the stock price as compared to Friday’s closing of Rs 139 apiece levels. 

Brokerage house JM Financial maintained a buy for target price of Rs 205.  

It said ONGC’s 1QFY23 standalone EBITDA was in line , while PAT was slightly lower due to higher interest cost and lower other income but this was partly offset by lower dry well write off.  

"Domestic crude and gas sales volume was slightly lower while crude and gas realisation was largely in line. However, OVL’s earning was impacted in 1QFY23 due to sanctions on Russia, resulting in its crude/gas output declining by 18%/4.5% QoQ," it said  

Saying ONGC is a major beneficiary of the sharp jump in domestic gas price in FY23 given the spike in global gas prices, it reiterated a buy rating. "We reiterate a buy (TP of INR 205) as CMP is discounting only ~USD 50/bbl of net crude realisation while our TP is based on FY24 net crude realisation of USD65/bbl. At CMP, ONGC trades at 4.3x FY24E EPS and 0.5x FY24E BV (3-year avg. of ~0.6x)," it added.  

Global brokerage firm Morgan Stanley maintained an 'Overweight' rating with target price of Rs 177, while CITI suggested a Sell for target price of Rs 125.