MOSL: ONGC (Upgrade to BUY)-Projects finally showing results-Cost efficiency, production growth and dividend yield call for re-rating
​ONGC: Projects finally showing results; Cost efficiency, production growth and dividend yield call for re-rating
(ONGC IN, Mkt Cap USD34.4b, CMP INR180, TP INR233, 30% Upside, Upgrade to Buy)
- ​After almost a decade of negative-to-flat growth, we believe gas production would grow at 10-15% annually for the next five years. Our recent meeting with the management reinforced our belief.
- Continued improved oil recovery (IOR) and contribution of new projects to production would also help reverse the decadal trend of negative-to-flat growth.
- We expect oil prices to remain in the band of USD50-60/bbl, which would provide stability to its earnings.
- After two years of negative EPS growth, we expect EPS growth of 31% in FY18 and 14% in FY19. Positive policy developments, cost efficiency and dividend yield of 4-6% would further aid re-rating of the stock. Upgrade to Buy.
Oil and Natural Gas is engaged in exploration, development and production of crude oil and natural gas. Co.'s business also includes niche areas like -processing of crude oil & natural gas; oil field services, transportation of the oil and natural gas, production of value added products like - LPG, Naphtha, Superior Kerosine Oil, ATF, C2-C3, etc., Refinery, Petrochemicals, Power, unconventional and alternate sources of energy. Co.'s five international locations as per oil & gas production are in Vietnam, Russia, Venezuela, Sudan, South Sudan, and Colombia. Co.'s five international locations as per oil & gas reserves are in Russia, Venezuela, Sudan, South Sudan, Myanmar and Vietnam.
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