Analysts' corner

ONGC
Reco price: Rs 277
Target price: Rs 335
ONGC reported Q2 profits of Rs 8,640 crore (up 60 per cent y-o-y), ahead of Street estimates. While lower subsidy losses leading to a significant increase in crude realisations were expected, DD&A expenses were lower q-o-q, aiding the beat. The continuing 33 per cent share of subsidies is a positive sentiment, while royalty adjustment/taxation in Rajasthan, yet to flow through, provides an earnings cushion for ONGC. ONGC reported net crude realisations of $83.7/barrel, with subsidies falling 54 per cent sequentially to Rs 5,710 crore. Analysts believe the market is pricing in a significantly higher subsidy share for the upstream, leaving room for upside surprise. Maintain overweight.

— JP Morgan

MARICO
Reco price: Rs 149
Target price: Rs 141
Marico's consolidated revenues at Rs 970 crore increased 26 per cent y-o-y (14 per cent y-o-y volume growth), a tad lower than expectations. Ebitda margins declined 80 basis points y-o-y to 12 per cent, as gross margin decline was offset by lower advertising and promotion expenses (flat y-o-y). A higher tax rate led to nine per cent y-o-y net profit growth to Rs 78 crore. Strong 44 per cent y-o-y domestic growth was driven by higher pricing/mix. Margin pressures will likely continue, but are baked into consensus estimates to some extent. International business growth of 19 per cent y-o-y was relatively slower sequentially. However, margins improved q-o-q to 11-12 per cent (10 per cent in Q1) due to likely mix/scale benefits. Sell.

— Citigroup