Stock to buy: Brokerage firm Elara Capital has recommended oil-producing stock Oil and Natural Gas Corporation Limited (ONGC) to buy, citing opportunities amid volatility in crude oil prices as the US-Iran conflict continues.
The brokerage firm has given a target price of ₹320 per share, seeing an upside potential of up to 38%.
“While current earnings are largely supported by elevated crude realisation, the more durable investment case rests on a higher-value gas portfolio, BP-led brownfield recovery initiatives, and government-backed deepwater exploration activity. At 5.2x FY28E earnings and 0.65x FY28E book value, alongside a ~7% dividend yield, risk-reward is attractive. Our TP of INR 320 implies 6.9x FY28E P/E and 0.8x FY28E P/B. We recommend BUY. Key risks include crude prices falling below USD 70/bbl, further reservoir-related challenges at KG-98/2, continued losses at HPCL/OPaL, and adverse arbitration outcomes,” the firm said in a note.
The brokerage firm further added that the biggest disappointment came from the production front during the second-quarter earnings, with crude oil output declining 5.3% YoY and natural gas production falling 2.3% YoY. The decline was primarily attributable to reservoir-related complexities at KG-98/2, monsoon-induced delays at PRP-8/9 and temporary disruptions in customer offtake. However, we believe these issues are execution-related rather than structural in nature.
Going forward, production growth is expected to be driven by a ramp-up in gas volumes from DUDP, completion of balance wells at KG-98/2, Tapti/Daman, production enhancement initiatives led by BP in the Western Offshore region and newly awarded offshore projects worth ₹11,800 crore, the brokerage firm said.