ONGC extends gain post Q2 earnings

The stock was up nearly 3% at Rs 277 on the National Stock Exchange.

Oil and Natural Gas Corporation (ONGC) is trading higher by 2.5% at Rs 277, extending its previous day’s around 1% gain, after reporting a better-than-expected 2.8% year-on-year (yoy) jump in net profit at Rs 6,064 crore for the quarter ended September 30, 2013 (Q2FY14) even after paying record fuel subsidy. The state-owned oil and exploration firm had profit of Rs 5,897 crore in a year ago quarter. The company’s net sales increased 12.8% yoy to Rs 22,312 crore.

The board of directors of the state-owned oil exploration firm is schedule to meet on December 06, 2013, to consider payment of interim dividend for the financial year 2013-14.

Meanwhile, analyst at Motilal Oswal Securities has recommended ‘Buy’ on the stock with target price of Rs 387 per share.

The stock currently trades at around 40% discount to its global peers on EV/BOE (1P basis) and timely execution of diesel reforms and passing on of benefits of gas price hike could lead to stock's re-rating. The stock implied dividend yield of FY14 dividend stands at around 4%, says analyst in a report dated November 13.

Kirit Parikh recommendations, if implemented, will be significantly positive for Indian oil and gas sector helping in lowering of under recoveries and increasing profitability of oil PSU’s. Even if the implementation is delayed, the sector outlook still remains positive with continued monthly diesel price hikes, limit on subsidized LPG cylinders and gradual shift to direct cash transfer, added report.