ONGC shares rise 2% despite 18% drop in Q2 profit. Check target price by Nomura, Goldman Sachs
ONGC reported an 18% year-on-year (YoY) decline in quarterly profit to Rs 9,848 crore due to lower oil prices. Revenues from operations fell 2.5% to Rs 33,031 crore in the July-September quarter. The company declared an interim dividend of Rs 6 per equity share for the current fiscal year, with a total payout of Rs 7,548 crore.
ONGC realised a crude oil price of $67.34 per barrel from its nominated fields during the quarter, down 14% from a year earlier, while realisation from joint venture fields fell 12.3%. Natural gas price realisation from nominated fields was 3.8% higher at $6.75 per mmbtu. However, average prices from new well gas, which is linked to crude oil rates, dropped 11.3% to $8.36 per mmbtu.
Goldman Sachs maintained its ‘Sell’ rating on ONGC with a target price of Rs 220, a 12% upside from current market levels. ONGC has guided for a 5% CAGR in oil and gas production over FY25-27, though Goldman Sachs models a more conservative 2% growth. The brokerage highlighted that the stock has underperformed the Sensex, and it has cut its FY26-28 EBITDA estimates by 13%, citing valuations that remain unattractive.
Nomura has maintained its Neutral rating on ONGC but trimmed the target price to Rs 270 from Rs 275, citing lower volume growth and weaker crude realizations. The brokerage cut its consolidated EPS estimates by 14% and 7% for FY26 and FY27, respectively, while noting that the stock currently trades at reasonable valuations of about 6.6 times FY27 earnings and 0.8 times book value.
In its post-results interaction, ONGC’s management outlined production and investment plans focused on steady growth and cost efficiency. The company is targeting moderate increases in oil and gas output over the next two years, backed by annual capital expenditure of around Rs 30,000-35,000 crore. It also plans to trim operating expenses by about Rs 5,000 crore through efficiency measures and expand its renewable energy capacity to 10 GW by 2030.ONGC is primarily an upstream company, focused on the exploration and production of crude oil and natural gas. The upstream sector of the oil and gas industry involves activities like searching for and extracting raw materials from the ground, which is the core business of ONGC. Shares of the company were trading at Rs 253, higher by 1.6% from the last close on the NSE. ONGC is trading 9% below its 52-week high of Rs 273.
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