Oil and Natural Gas Corporation (ONGC) is an oil and gas exploration and production company with its headquarters in New Delhi. The Indian government established ONGC on August 14, 1956. The Ministry of Petroleum and Natural Gas is in charge of overseeing the activities of this public sector undertaking as it generates over 84% of India’s natural gas production and about 70% of the country’s crude oil (or about 57% of total consumption). The Maharatna status of ONGC was awarded by the Indian government in November 2010.
ONGC announced its Q1FY23 results on 12th August 2022, unveiling a staggering 124% YoY increase in EBITDA and a 251% YoY increase in net profits. This quarter’s EBITDA, according to analysts, was among the finest ever. However, a number of worries lurking over the subsidiaries and the sector as a whole had an influence on performance. In fact, the ONGC share price increased by 5% over the previous two days before the release of the Q1FY23 results, reflecting the optimism of investors. So, let’s now dig deeper into the results and analyse company fundamentally and technically.
Key Highlights of ONGC Results
- ONGC’s revenue from operations for the Q1FY23 grew by 84% YoY, up 7% QoQ
- ONGC registered a 91% YoY growth in offshore business and onshore business increased by 72% YoY during the Q1FY23 against
- EBITDA came in at Rs 24,731 crore for the Q1FY23, rising 125% YoY, and margin jumped by 1,065 bps YoY to 43% in Q1FY23.
- ONGC reported a profit of Rs 15,205.8 crores for the Q1FY23, up 251% YoY, up 72% QoQ
- After reaching a short-term high of US$133.9 per barrel on March 3rd, Brent oil prices have since dropped to US$110 per barrel due to worries about an impending recession brought on by inflation and the effects of the Russia-Ukraine war on the world
ONGC Results Q1FY23: Revenue grew 84% YoY while EBITDA grew 125% YoY
ONGC’s revenue from operations for the Q1FY23 grew by 84% YoY to Rs 42,321 crore compared to the Rs 23,022 crores in Q1FY22. While on a sequential basis revenue grew 22.7% QoQ from Rs 34,497 crores in Q4FY22 to Rs 42,321 in Q1FY23.
Further ONGC registered a 91% YoY growth in offshore business at Rs 27,990.4 crore and onshore business increased by 72% YoY to Rs 14,330.3 crore during the Q1FY23 against Q1FY22.
The EBIT of offshore business during Q1FY23 jumped 133% to Rs 16,036 crore and that of onshore surged 682.5% to Rs 4,890.3 crore compared to the Q1FY22.
The strong operating performance was driven by increased crude realisation following a surge in oil prices and an increase in domestic gas prices. EBITDA came in at Rs 24,731 crore for the Q1FY23, rising 125% YoY, and margin jumped by 1,065 bps YoY to 58.43% in Q1FY23. While revenue classifications stood as follows: Crude Oil has the largest share in total revenue of ONGC, followed by Gas and LPG.
ONGC Results Q1FY23: PAT Margin almost doubled in Q1FY23 with PAT increasing 251% YoY
ONGC reported a profit of Rs 15,205.8 crores for Q1FY23, up 251% YoY compared to Rs 4,335 in Q1FY22 driven by strong operating performance and top-line growth. While on sequential basis, profits grew 72% QoQ in Q1FY23 to Rs 15,206 crore from Rs 8,860 crores in Q4FY22.
Brent remains strong despite recent reverses
After reaching a short-term high of US$133.9 per barrel on March 3rd, Brent oil prices have since dropped to US$110 per barrel due to worries about an impending recession brought on by inflation and the effects of the Russia-Ukraine war on the world economy.
However, despite relatively modest supply additions for CY21–22, the already tight demand–supply environment for global gas prices is expected to prevail. The rising demand for gas in Asia, the very low gas stockpiles across Asia and Europe, and the growing fears about Russian supply interruptions to Europe might all have an impact on gas prices in the future.
Technical Analysis of ONGC share price
ONGC Stock has been down by 13% in last two months. It reached a high of t Rs 194 in March when the crude oil prices were the highest. Subsequently it has started falling from this high and has fallen 27% YTD. This can be attached to several reasons like imposition of tax by government, global supply-demand issues due to wars and probable recession & inflationary trends looming in the world economy as well as the cool off in crude oil prices.
Moreover, ONGC stock is taking a strong support at 130 and have also made an up move of 5% with the announcement of Q1FY23 results. Further, Analysts see a possible upside of more than 20% owing to its performance in Q1 and future prospects while keeping in mind key risks & concerns.
On the charts, the stock is still weak as the current price is below the 50 EMA. Strength can only be confirmed once the 50 EMA is able to cross the 100 and 200 EMA levels.
Motilal Oswal said, “We reiterate our Buy rating with a potential upside of 27%. The key risk to our rating will be a sharp decline in oil prices or the continuation of windfall taxes beyond Dec’22.” While ICICI Securities re-initiated coverage with a ‘BUY’ rating on ONGC Stock, with a price target of Rs185/share, a 33% upside and HDFC Securities by factoring in higher costs, set target price of INR 178/share for ONGC Stock.
Our view
While the prospects for Brent crude prices remain volatile, the recent decision by the government to impose higher cess on upstream players has created an additional hurdle. The decision to impose an additional windfall tax of US$40/bbl on upstream oil price (later reduced to US$20/bbl levels) July 2022 onwards has effectively capped net realisations for ONGC at US$70-75/bbl levels. Therefore it would be interesting to watch how these dynamics play in future.
Further, key risks to check out include sharp reversal in oil and gas price trends, with even more delays in KG basin starting up and any more regulatory setbacks. There are many uncertainties around the stock and the technical charts are weak at the moment. Till a time factors dont play out favourably, and there is an entry point indicated on the technical charts, investors can avoid this stock.
About the Author
Ketan Sonalkar (SEBI Rgn No INA000011255)
Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.
Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice
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