ONGC Q2 show misses estimates on higher costs; brokerages remain cautious

ONGC Q2 results review: Oil and Natural Gas Corporation (ONGC) reported mixed September quarter (Q2FY26) earnings, as higher operating expenses offset the benefit of improved realisations and volumes. 

 

On the bourses, however, ONGC share price rose up to 2.42 per cent to hit an intraday high of ₹255.50 per share. At 12:35 PM, ONGC shares were trading 1.66 per cent higher at ₹253.60 per share. By comparison, BSE Sensex was trading 0.82 per cent higher at 84,559.73 levels.

 

Most brokerages maintained a cautious stance on the stock amid muted production growth and a bearish outlook for crude oil prices.

 

Nomura

 

Japan-based brokerage Nomura said ONGC’s Q2 performance was ‘decent despite a sharp drop in crude oil realisations,’ though results missed estimates due to elevated operating expenses. The brokerage noted that standalone net revenue rose 3 per cent sequentially (-3 per cent Y-o-Y) to ₹33,000 crore, supported by higher sales volume and realisations. Ebitda declined 3 per cent quarter-on-quarter (Q-o-Q) to ₹16,600 crore as operating costs, including ₹1,050 crore in foreign exchange (FX) losses, weighed on margins. Net income, however, rose 23 per cent Q-o-Q to ₹9,840 crore on higher other income.

 

Crude oil sales volume, including joint ventures, increased 3 per cent Q-o-Q (+5 per cent Y-o-Y) to 4.8 million tonnes, while gas sales rose 1 per cent Q-o-Q (+1 per cent Y-o-Y) to 3.9 bcm. Net crude realisation improved 2 per cent Q-o-Q to $67.3 per barrel. ONGC Videsh (OVL) reported a net loss of ₹350 crore compared with a ₹110 crore loss in Q1FY26, while ONGC Petro additions Ltd (OPaL) narrowed its loss to ₹460 crore.  ALSO READ | Nifty Midcap 150 index hits new high; Apar Industries, BSE rally 7% 

Nomura highlighted key takeaways from management’s post-results commentary, including: oil production guidance of 19.8/21 million tonnes for FY26/27, gas production at 20/21.5 bcm, and annual capex of ₹30,000–35,000 crore. ONGC also aims to cut operating expenses by ₹5,000 crore through cost optimisation, target 10GW of renewable capacity by 2030, and ramp up production under the BP TSP contract at Mumbai High by 60 per cent over the next decade.

 

Thus, Nomura cut its FY26F/27F consolidated earnings per share (EPS) by 14 per cent/7 per cent to factor in lower volumes and realisations, partly offset by higher earnings from HPCL. The brokerage maintained a ‘Neutral’ rating with a lower target price (TP) of ₹270 (from ₹275), valuing ONGC at 6.6x FY27F EPS and 0.8x P/B.

Motilal Oswal

 

Analysts at Motilal Oswal said ONGC’s Q2FY26 results were largely in line with estimates, with revenue at ₹33,000 crore and Ebitda at ₹17,700 crore. Crude oil and gas sales were steady at 4.8 mmt and 3.9 bcm, respectively, while value-added product (VAP) sales were slightly below expectations. Reported oil realisation of $67.3/bbl implied a $3.2/bbl discount to Brent.

 

The brokerage reiterated its ‘Neutral’ rating with a TP of ₹250, citing continued challenges in ramping up production. 

 

“Upstream remains our least preferred sector despite cheap valuations,” Motilal Oswal said, adding that it expects ONGC’s oil and gas production to grow at a modest compound annual growth rate (CAGR) of 2 per cent and 3 per cent, respectively, over FY25-27.  ALSO READ | RIL stock jumps 10% in 1 month, nears record high. Should you buy or hold?

Nuvama

 

Nuvama analysts noted that ONGC trimmed its FY26 production guidance by about 1 per cent due to delays in the KG-98/2 field ramp-up. While earnings before interest, tax, depreciation, amortisation and exploration expense (EbitdaX) was in line with estimates, profit missed forecasts by 8 per cent due to lower other income. The brokerage expects subsidiary performance, including MRPL’s improved GRM, to provide some cushion but remains cautious on crude prices and production growth.

 

Given this, analysts at Nuvama retained their ‘Reduce’ rating with a TP of ₹233, stating, “We raise FY26E/27E EbitdaX by 4 per cent/3 per cent on improved showing by subsidiaries, but maintain a bearish view on oil.”

 

That said, brokerages remain wary of ONGC’s near-term prospects amid cost pressures and sluggish production gains, despite steady operational performance and resilient realisations.