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EBITDA below estimates; no subsidy burden
* ONGC reported net operating income of INR280b (est. 301b, +48% YoY, +17% QoQ), lower than our estimate due to higher-than-expected discount of 2.4% to Brent for oil price realization and lower oil sales. EBITDA came in at INR158b (est. 168b, +51% YoY, +39% QoQ). Depreciation including writeoffs stood at INR48.5b (est. 63.6b, flat YoY, -23% QoQ), lower than our estimate due to lower write-offs. Other income stood at INR23.9b (est. 8b, +24% YoY, -36% QoQ). Despite lower-than-expected EBITDA, PAT stood at INR82.6b (est. 70.2b, +61% YoY, +40% QoQ), higher than our estimate due to much lower depreciation and higher other income. Oil realization: Crude oil realization stood at USD73.1/bbl v/s USD51.2/bbl in 2QFY18 and at USD74.2/bbl in 1QFY19. There was no subsidy burden in the quarter.
* Sales volumes :
Oil sold stood at 5.4mmt (-8% YoY, -9% QoQ). Gas sold stood at 5.0bcm (+2% YoY, +5% QoQ). Total VAP sold stood at 914tmt (flat YoY, +11% QoQ).
* Lower DDA at USD7.6/boe :
Write-offs in the quarter stood at INR13.2b v/s INR13.3b in 2QFY18 and INR11.4b in 1QFY19. DDA stood at USD7.6/boe v/s USD8.1/boe in 2QFY18 and USD8.2/boe in 1QFY19.
* Valuation and view
* 1H standalone EPS stands at INR11.2. We estimate full-year standalone EPS at INR25.4.
* The stock is trading at 4.7x FY20E consolidated EPS of INR34.1. We value the standalone segment at 8.0x FY20 adj. EPS of INR22.5 and add value of investments to arrive at target of INR208. Reiterate Buy.
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