1:2 Split, 3 Bonuses; BUY/SELL This Maharatna PSU Oil & Gas Stock Below Rs 320 After Ex-Dividend For Rs 2.5/Sh

Maharatna PSU oil and gas giant, ONGC has turned ex-dividend on August 23 for dividend payout of 50% worth Rs 2.5 per share. Brokerages JM Financial and Prabhudas Lilladher has shown mixed reaction to the stock. Apart from holding a strong track record of divided payout, ONGC has also rewarded investors with three bonuses, and one stock split in the ratio of 1:2 in its history so far.

In FY24, ONGC's total oil production from nomination blocks stood at 19.2mmt (down 1.5% YoY), while gas production stood at 19.3bcm (down 3.3% YoY). Similar trend can be seen in Q1FY25 too wherein oil production came in at 4.7mmt, down 1.9/2.9% QoQ/YoY. On the gas front too, production was fell 2/3.7% QoQ/YoY to 4.7bcm. Decline has been primarily due to continuous delay in ramp up from KG-DWN-98/2, as per Prabhudas Lilladher.

Thereby, Prabhudas added, "we downgrade the rating on ONGC to 'Reduce' with a TP of Rs320 based on 9x FY26 standalone adj EPS and adding the value of investments."

On the other hand, JM Financial has recommended buy for a target price of Rs 340, which is raised from its earlier target of Rs 325.

JM's note said, "Brent crude price had corrected to ~USD 75/bbl in the 1st week of Aug'24 due to demand growth concerns on the back of macro-economic concerns in the US and China and risk-off sentiment across financial markets. However, in the last few days, Brent has recovered to ~USD 80/bbl driven by continued geopolitical tension in the Middle East and some easing of macro-economic concerns. On the demand front, IEA has largely maintained global oil demand growth estimate at ~1mmbpd for both CY24 and CY25, though it has highlighted the contraction in China's oil consumption for 4th month in a row in Jul'24."

However, JM's note added, "IEA expects global oil supply growth for CY24 to be limited at only 0.7mmbpd due to OPEC+ output cuts, implying a deficit of ~0.3mmbpd. Though IEA expects surplus to emerge in CY25, we believe OPEC+ is likely to pause/reverse easing of voluntary output cuts to ensure market remains in deficit. Hence, we still believe the strong pricing power of OPEC+ will continue to support Brent at ~USD 80/bbl, which is the fiscal break-even crude price for Saudi Arabia. This is a sweet spot for Oil India/ONGC."