Oil & Gas PSU Stock To Buy, Likely To Give 36% Return, Board Recommends Dividend: Motilal Oswal

Motilal Oswal has come up with a Buy call on Oil And Natural Gas Corporation Ltd. (ONGC) with a target price of Rs. 215 apiece. With the given target price, the stock can give up to 36% return if the stock is purchased at the current market price.

ONGC in a Board meeting held on Friday, May 26 2023, recommended a dividend of Rs. 0.50/share of face value of Rs. 5 each i.e. 10%.

ONGC is a Maharatna-status PSU stock operating in the Oil & Gas sector. It is a large-cap stock with a market capitalisation of Rs. 2,00,026 crore.

Dividend

According to the regulatory filing by the Board of Directors of ONGC Ltd., "Recommendation of Final Dividend for the Financial Year 2022-23 at the rate of Rs. 0.50 per equity share of face value of Rs. 5/- each i.e.@10%, subject to approval by the Members of the Company at the ensuing Annual General Meeting."

Valuation and view

According to Motilal Oswal, The company intends to add more than 100,000 sq. km of exploratory area each year while also spending INR100b each year on exploration. The capex guidance stands at INR301b for FY24. The company had recently approved three new projects for a capex of INR58.8b. It is also looking at INR70- 80b of petchem expenditure at MRPL and might also consider construction of a new petchem facility for a budget of INR300-400b.

"ONGC is trading at 2.6x FY24E EV/EBITDA and 3.8x FY24E P/E. We value the company at 6x FY25E adj. EPS of INR30.4 and add the value of investments to arrive at our TP of INR215. Reiterate BUY with a 35% potential upside," the brokerage has said.

Stock Outlook

On Tuesday, the share price of ONGC last traded at Rs. 158.85 apiece. It is traded 6.01% down its 52 week high i.e. Rs. 169 apiece recorded on 12 May 2023. It traded the 52 week low on 6 July 2022 at Rs. 119.85 apiece.

The stock declined 3.72% in the past 1 week. It gave 10.27% positive return in 1 year and 90.93% in 3 years, respectively. It has given 8.71% negative return in the past 5 years.

Disclaimer - The stock has been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.