Share price of India’s largest crude oil and natural gas company surged nearly 2.02 percent on NSE to Rs. 279.1 in the morning trading session of Wednesday, after the global brokerage firm Jefferies retained its ‘buy’ call on the stock with a potential upside of nearly 41 percent.
At 09:33 a.m., the shares of Oil and Natural Gas Corporation (ONGC) Limited, with a market cap of Rs. 3.48 lakh crore, were trading in the green at Rs. 277.15, up by 1.3 percent, as against its previous closing price of Rs. 273.55.
Jefferies kept its “buy” recommendation on the PSU stock after observing that the profitability of oil PSU should remain high due to the central government’s policy continuity.
On June 4, after the election results were announced and the BJP failed to secure a simple majority by crossing the 272-mark, investors sold their ONGC holdings, causing the company’s shares to decline by around 17 percent. As per the brokerage, this correction provides an entry opportunity for investors.
Jefferies has a target price of Rs. 390 per share on ONGC, indicating a potential upside of nearly 41 percent from the current trading price of Rs. 277.15.
The company’s ramp-up in KG basin production in Q3 FY24-25 and accretion to profitability are significant triggers to monitor in the coming future.
All things considered, Jefferies is still optimistic that ONGC’s profitability will continue to be higher than its historical averages.
Jefferies stated earlier on April 15 that it anticipates ONGC to produce significant free cash flows and lower consolidated net debt, resulting in profitable growth from FY23-24 to FY25-26.
In terms of financials, the company’s consolidated revenue from operations stood at Rs. 1,66,770 crore in Q4 FY23-24 from Rs. 1,64,066 crore Q4 FY22-23, indicating a rise of 1.6 percent YoY, while the net profit grew by 102 percent from Rs. 5,701.5 crore to Rs. 11,526 crore, during the same period.
The return on equity (ROE) stood at 14.6 percent in FY23-24, up from 12.62 percent in FY22-23, as well as a rise in the Return on Capital Employed (ROCE) from 12.24 percent in FY22-23 to 15.43 percent in FY23-24.
As per the shareholding pattern of March 2024, the Promoters hold a 58.89 percent stake in the company, FIIs hold an 8.88 percent stake, while Retail Investors and DIIs hold a 13.35 percent and 18.88 percent stake in ONGC, respectively.
The stock has delivered positive returns of around 78.6 percent in one year, and nearly 34.8 percent returns year-to-date.
Oil and Natural Gas Corporation Limited is engaged in exploration, development and production of crude oil, natural gas and value-added products. It is the largest crude oil and natural gas company in India, contributing around 71 percent to Indian domestic production.
Written by Shivani Singh
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