"Considering ONGC reserves and strong perspective plan 2030, we remain bullish on the long term potential of the stock and we expect both the domestic and international production to improve.
Further, we expect the temporary issues with OVL to be resolved over a period of time further enhancing OVL's production. Currently, the stock is trading below the mean band of its historical valuations at 8.3x and 7.9x its FY13 and FY14 consensus earnings estimates, we recommend a BUY on the stock," Ventura has stated.
"Declining production in the domestic fields and restricted production at OVL has led to negative volume growth for ONGC. However, the management seems confident of achieving high growth in the next years backed by EOR activities in the domestic assets.
In addition to restricted growth in production, lack of policy action by the government on the rising under recoveries remains an overhang on the stock. Increase in upstream companies share in under recoveries from 33% a year back to 40% now, further adds to the blow.
With lack of political support to the government, any hike in diesel prices or partial de regulation can be ruled out. Led by these concerns, we expect the stock to remain under pressure in the near term," the Ventura research report states.