MOSL: ONGC (Buy)-Stable oil prices-Gas production to get a fillip; Attractive valuation with no threat of subsidy burden
ONGC: Stable oil prices; Gas production to get a fillip; Attractive valuation with no threat of subsidy burden
(ONGC IN, Mkt Cap USD29.1b, CMP INR163, TP INR196, 21% Upside, Buy)
- Despite threats of production pressure from Venezuela and Iran, global economic slowdown and rising production from the US and OPEC+, oil price outlook appears stable.
- Stable oil prices and INR depreciation does not pose any subsidy burden threat to upstream companies.
- Trading at 40% discount to 10-year P/E, we reiterate Buy with target of INR196.
Stable oil prices
- Except for the slight spurt to ~USD75/bbl, Brent has weakened to ~USD70/bbl in the past few days, amid rising US production and weakening global economic growth.
- Due to decreasing oil supply in global markets on Iranian sanctions and issues in Nigeria and Venezuela, the supply gap is being fulfilled by increased production in the US and Saudi Arabia.
- Despite OPEC production cuts; call on OPEC crude is expected to be at 30.1mnbopd, ~3% lower than current production and ~6% lower than CY17/18 production.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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