In Monday’s trading session, shares of one of the leading PSU stocks, specialized in the exploration, production, and development of oil and natural gas resources, both onshore and offshore, jumped by up to 5 percent after global brokerage company Jefferies initiated a Buy Target on it with a 45 percent Upside Potential.
Price action
With a market capitalization of Rs. 3,09,474 crores on Friday, the shares of Oil & Natural Gas Corporation Limited were trading at Rs.256 down by 1.3 percent making a low of Rs. 255.60 per share compared to its previous closing price of Rs. 258.90 per share.
What Happened
ONGC, a state-owned company operating under the Ministry of Petroleum and Natural Gas, saw its shares in focus after Jefferies revised and initiated a “Buy” target price of Rs. 375 with a 45 percent upside potential from its earlier target price of Rs. 410.
Jefferies noted that the recent 30 percent drop in ONGC’s stock price over the past three months appeared unwarranted, attributing the decline to a 10 percent fall in crude oil prices. This situation presents a potential buying opportunity for the stock.
Furthermore, the brokerage emphasized that a likely ramp-up of production in KG Basin production in Q4 FY25. The KG basin production will contribute around 10 percent to ONGC’s consolidated EBITDA in FY26, marking a critical driver for the stock’s future performance.
About the Company
Oil and Natural Gas Corporation Limited (ONGC) is a global leader in the oil and gas industry, known for its significant contribution to India’s energy sector. Founded in 1956, ONGC is a fully integrated energy major, engaged in the exploration, production, refining, and marketing of oil and natural gas.
ONGC’s core operations include exploration and production activities in both offshore and onshore regions, covering vast reserves of both conventional and unconventional resources. The company plays a key role in India’s energy security by meeting a substantial portion of the country’s oil and gas demand.
Key insights
ONGC’s P/E ratio of 7.3 is well below the industry average of 26.78, indicating potential undervaluation. The company also offers a strong dividend yield of 4.98 percent and is trading at 0.92 times its book value, making it an attractive option for value and income-focused investors.
Shareholding Pattern
The ownership structure of Oil and Natural Gas Corporation Limited is as follows: the promoters hold 58.89 percent, Foreign Institutional Investors (FIIs) own 8.12 percent, Domestic Institutional Investors (DIIs) control 19.04 percent and the public holds 13.94 percent.
Financials
The company’s revenue rose by 8.7 percent from Rs 1,49,388 crore to Rs 1,62,492 crore in Q2FY24-25. Meanwhile, Net profit fell from Rs 13,734 crores to Rs 10,272 crore during the same period.
Key Financial ratios
Oil and Natural Gas Corporation Limited has an Return on Equity (RoE) of 11.67 percent and a Return on Capital Employed (RoCE) of 12.59 percent. Furthermore, the company’s debt-to-equity ratio is 0.54.
Written by Sridhar J
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