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MOSL: ONGC (Buy)-Higher DDA, lower other income result in PAT miss

ONGC: Higher DDA, lower other income result in PAT miss

(ONGC IN, Mkt Cap USD18.2b, CMP INR103, TP INR150, 45% Upside, Buy)

 

• Oil sold was in line with estimate, while gas sold was 4% below our estimate, leading to in-line EBITDA.
• Higher depreciation, depletion, write-off and lower-than-expected other income resulted in a miss of 20% in PBT.
• Oil prices remain subdued in the absence of a recovery in oil demand amidst the US-China tariff war and the coronavirus-related demand destruction. However, OPEC+ appears to take further action to stabilize prices. We maintain our forecast of USD65/bbl for FY21/22. 

EBITDA in-line

• Standalone revenue of INR237b (-14% YoY, -3% QoQ) was in line with our estimate. The YoY decline primarily was due to lower oil price realization. Standalone EBITDA stood at INR123b (2% below our estimate; -26% YoY, -7% QoQ).
• DDA was at INR70.8b (7% beat; +15% YoY, +13% QoQ). Other income stood at INR14b (34% below estimate; -37% YoY, -48% QoQ).
• Higher DDA and lower other income resulted in PAT of INR41.5b (17% miss; -50% YoY, -34% QoQ).
• 9MFY20 standalone EBITDA stood at INR407b, down 14% YoY primarily due to lower oil prices. 9MFY20 standalone PAT was at INR163b (-28% YoY), further accentuated by a 22% rise in DDA cost.