Does ONGC merit a big upgrade in the market? Probal Sen explains
Probal Sen, V-P-Equity Research, ICICI Securities, says there is a reasonable dividend yield in NGC and Oil Insia and the return ratio should start to show an improvement, specifically for ONGC and to a lesser extent with Oil India, despite all the strength, I think there is still some steam left in these two stories.
When did you last look at ONGC so closely after decades of tracking the energy space? Does it merit the big upgrade coming in? Three of your peers in the industry have done it.
Probal Sen: We have had a positive stance on ONGC over the last year. I am surprised by the extent of the reaction. To be honest, I do not think that the production guidance that the company gave was anything new compared to what they have been anyways saying for the last three quarters.
What seems to have changed, as you rightly mentioned, is that perhaps the Street has started to probably believe in or create more confidence in the guidance that is now coming through and essentially what it means is this: If their guidance were to be met for production growth in both oil and gas, they would essentially reverse the last seven- to eight-year trajectory as far as their overall operational performance goes. That is the structural change one is seeing in the company from the next two- to three-year perspective.
When you add to that the fact that net realisations are holding steady at between $73 to $75, gas realisations should continue to go up from even here with nomination gas fields also likely to see an increase of around 50
