On Wednesday, ICICI Securities updated its financial outlook for Oil & Natural Gas Corp Ltd (ONGC:IN) shares, increasing the price target to INR375 from INR340 while retaining a Buy rating on the stock.
The firm noted that ONGC's adjusted EBITDA and profit after tax (PAT) for the standalone entity in the first quarter of the fiscal year 2025 were INR 178.6 billion and INR 89.4 billion, respectively. These figures showed a year-over-year decrease but a quarter-over-quarter increase for EBITDA and a decrease for PAT.
According to the analyst's assessment, the quarter-over-quarter growth in EBITDA was attributed to reduced operational expenses, while the decline in earnings compared to the previous quarter was due to higher depreciation, increased tax rates, and lower other income. This performance resulted in a slight deviation from ICICI Securities' projections.
The report highlighted that ONGC's EBITDA and PAT experienced a significant year-over-year decline on a consolidated basis, falling 26% and 30% to INR 226 billion and INR 99.3 billion, respectively.
This downturn was primarily due to underperformance by its subsidiaries, Hindustan Petroleum Corporation Limited (HPCL) and Mangalore Refinery and Petrochemicals Limited (MRPL), although OVL's earnings made some positive contributions in the same quarter.
Looking ahead, ICICI Securities underscored the ramp-up of the KG basin asset as a critical factor in ONGC's performance and earnings growth over the fiscal years 2025 to 2026.
The firm also anticipates a rebound in the earnings prospects for HPCL and MRPL and a reduction in leverage on ONGC's consolidated balance sheet. The reiterated Buy rating reflects the firm's positive outlook on ONGC's future performance.
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