Shares of Oil and Natural Gas Corporation of India (ONGC) touched its 52-week high in intraday trade on Thursday amid a report that the country’s largest top oil and gas producer plans to invest around ₹1 lakh crore for setting up two petrochemical plants. The stock has risen in the last four out of five sessions and gained as much as 5.5% during the same period.
Early today, ONGC shares opened higher for the second straight session at ₹202.75, up 1.65% against the previous closing price of ₹199.45 on the BSE. During the session, the PSU oil and gas stock rose 1.95% to hit a fresh 52-week high of ₹203.35. Finally, the shares of ONGC settled the day’s trade at ₹201.85, up 1.2%, with a market capitalisation of ₹2.53 lakh crore.
At the current level, ONGC shares have risen more than 50% against its 52-week low of ₹132.95 touched on November 22, 2022. The PSU stock has surged 41% in a year; 34% in the calendar year 2023; nearly 21% in six months; and over 8% in a month.
During an investor call on the company's second-quarter earnings, ONGC Director (Finance) Pomila Jaspal said on Wednesday that the company plans to establish two petrochemical plants to convert crude oil directly into high-value chemical products as it prepares for energy transition, according to PTI report.
"We have plans to invest ₹10,000 crore by 2028 or 2030 in two projects in two separate states," said D Adhikari, Executive Director and Chief of Joint Ventures & Business Development, ONGC, on the investor call, reported the news agency.
Last week, ONGC released its second-quarter earnings for the July-September period of 2023. The board of the state-run oil producer also approved an interim dividend of ₹5.75 per share of face value of ₹5 each for the financial year 2023-24, amounting to a dividend of 115%. The Maharatna company has fixed November 21 as the record date for the purpose of the payment of the interim dividend.
For Q2 FY24, ONGC reported a strong growth of 142% in its consolidated net profit at ₹16,553 crore, compared to ₹6830 crore in the corresponding period last year. The revenue from operations stood at ₹146,873.73 crore, down 13% from ₹168,656.12 crore in the year-ago period.
During the quarter under review, the total crude production declined 2.1% to 5.249 million metric tonnes (MMT) from 5.360 MMT in Q2 FY23. Natural gas production also dropped by 2.8% to 5.2 billion cubic meters (BCM) during the quarter, as against 5.35 BCM in the same period last year.
Post Q2 results, domestic brokerages JM Financial and Prabhudas Lilladher have maintained a ‘Buy’ call on ONGC shares with price targets of ₹225 and ₹237, respectively.
“We maintain our FY24/FY25 estimates; however, target price has gone up to ₹225 (from ₹220) due to an increase in the value of listed investments (which is valued at CMP less 20% holding discount),” says JM Financial. The brokerage also factored in strong dividend play.
Prabhudas Lilladher in its report says that the net oil realisation posts windfall tax is likely to be maintained at $70-75 per barrel while gas prices have been capped at $6.5 per mmBtu. “This provides comfort on the realisation front. On the production front, a decline in oil and gas production is likely to be compensated post-commissioning of production from the KG Basin in the coming quarters,” it adds.
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