As the Indian stock market experiences a dip, investment opportunities arise, particularly in Public Sector Undertakings (PSUs). ICICI Securities has identified a promising PSU stock, Oil and Natural Gas Corporation (ONGC), which it believes could see an impressive upside of up to 55% from current levels.
Market Context
The Nifty index has recently fallen by 10.44%, while the Sensex has seen a decline of 9.76% from their all-time highs. This correction marks the steepest fall since the COVID-19 crash, creating a conducive environment for investors looking for undervalued stocks. Amidst this backdrop, ICICI Securities advocates for strategic buying in ONGC, highlighting its strong fundamentals and recent performance.
ONGC’s Recent Performance
As of November 15, 2024, ONGC shares closed at ₹250.80, reflecting a slight decrease of 0.69%. The stock has seen considerable trading activity, with approximately 1.24 crore shares traded on the NSE. Despite this recent dip, ONGC remains a significant player in the oil and gas sector with a market capitalization of ₹3,15,639.21 crore.
Financial Highlights
In its Q2 FY25 results, ONGC reported an adjusted EBITDA of ₹179.8 billion and a net profit after tax (PAT) of ₹119.8 billion, marking year-on-year increases of 1% and 17%, respectively. While oil and gas production saw a slight decline of 2% to 10.2 million tonnes of oil equivalent (mtoe), the company’s overall financial health remains robust.
Future Outlook for ONGC
ICICI Securities maintains a “BUY” rating on ONGC with a target price set at ₹390 per share. The brokerage notes that the ramp-up of assets in the KG basin is crucial for production growth and earnings strength over FY25-26E. Additionally, recovery in subsidiary earnings and reduced leverage are expected to bolster ONGC’s performance.
Key Drivers for Growth
- Production Recovery: The company has focused on increasing domestic production to reverse declining trends in crude oil output.
- Strong Financials: Despite challenges in revenue generation due to lower oil prices, ONGC’s operational efficiency is reflected in its EBITDA margins.
- Dividend Announcement: ONGC’s board has declared an interim dividend of ₹6 per equity share, further enhancing its attractiveness to investors.
Conclusion
With ICICI Securities projecting significant upside potential for ONGC amidst current market conditions, investors may find this PSU stock an appealing addition to their portfolios. As always, it’s essential for investors to conduct their due diligence and consider market trends before making investment decisions.
Disclaimer
This article is intended for informational purposes only and does not constitute financial advice. Investors should conduct their own research and consult with financial professionals before making any investment decisions regarding securities mentioned herein
