The ONGC share price has captured investor attention, climbing steadily amidst market fluctuations. With Jefferies reaffirming a bullish stance on ONGC, forecasting a 47% upside from current levels, the spotlight is firmly on this state-owned energy giant. But what’s fueling this optimism? Let’s dive into the factors that make ONGC a compelling buy in today’s market.
Why Did ONGC Shares Rise Recently?
Shares of Oil and Natural Gas Corporation (ONGC) surged by 3.7% to ₹255.20 on the BSE last Friday. This increase came after global brokerage firm Jefferies reiterated its “buy” recommendation with a target price of ₹375, signaling a significant 47% upside.
Jefferies identified a 30% stock price correction over the past three months as unjustified, primarily due to a mere 10% decline in crude oil prices. The brokerage emphasized that this correction had a negligible 2% impact on ONGC’s earnings, underscoring its robust fundamentals.
What’s Driving ONGC’s Growth Potential?
1. Improved Earnings Outlook for Subsidiaries
Jefferies highlighted the role of ONGC’s subsidiary, Hindustan Petroleum Corporation Limited (HPCL), in enhancing consolidated earnings per share (EPS). Favorable regulatory measures are expected to bolster HPCL’s profitability, creating a ripple effect on ONGC’s financial health.
“The improved earnings outlook for HPCL is a critical driver for ONGC’s overall performance,” Jefferies stated.
2. Krishna Godavari (KG) Basin Production Ramp-Up
The anticipated ramp-up in the Krishna Godavari (KG) basin’s production during Q4 FY25 and Q1 FY26 is a game-changer. Jefferies predicts that the KG basin will contribute about 10% to ONGC’s consolidated EBITDA in FY26, marking a pivotal milestone for the company’s growth trajectory.
| Period | Production Impact | EBITDA Contribution |
|---|---|---|
| Q4 FY25 – Q1 FY26 | Significant Increase | ~10% of Consolidated EBITDA |
3. Resilience Amid Crude Oil Price Corrections
Despite a dip in crude oil prices, ONGC’s earnings remain resilient. This stability highlights the company’s ability to navigate market volatility, making it a safer bet for long-term investors.
ONGC Share Performance vs. Market Trends
Over the past year, ONGC shares have outperformed the Nifty index, delivering an 18.16% gain compared to Nifty’s 11.64%.
| Metric | ONGC | Nifty Index |
|---|---|---|
| 1-Year Performance | +18.16% | +11.64% |
This robust performance underscores investor confidence in ONGC’s strategic initiatives and growth potential.
ONGC’s Green Energy Ventures: A Glimpse into the Future
1. ONGC NTPC Green Private Limited (ONGPL)
In collaboration with NTPC Green, ONGC has established ONGC NTPC Green Private Limited (ONGPL). This joint venture focuses on renewable energy projects, including Greenfield developments and acquisitions.
2. Offshore Wind Energy Projects
ONGPL is also exploring offshore wind projects, a move aligned with India’s commitment to sustainable energy. These initiatives position ONGC as a front-runner in the green energy space, diversifying its revenue streams and reducing its carbon footprint.
What Does Jefferies’ Revised Target Price Mean?
Jefferies recently revised its target price for ONGC from ₹410 to ₹375, reflecting broader corrections in oil prices. However, this adjustment doesn’t dilute the firm’s confidence in ONGC’s long-term growth prospects.
“The current correction presents a compelling buying opportunity for investors looking to capitalize on ONGC’s future growth,” Jefferies noted.
FAQs on ONGC Share Price
1. What is ONGC’s current share price target?
Jefferies has set a target price of ₹375, indicating a 47% upside from the current levels.
2. Why is ONGC focusing on renewable energy?
ONGC aims to diversify its portfolio and align with global sustainability goals by investing in renewable energy projects, including offshore wind farms.
3. Is now a good time to invest in ONGC?
Yes, analysts view the recent correction in ONGC’s share price as an excellent entry point for long-term investors.
Conclusion: ONGC’s Path to Growth
The ONGC share price story is one of resilience and forward-thinking strategies. From leveraging production ramp-ups in the KG basin to spearheading green energy initiatives, ONGC is well-poised to deliver value to its shareholders. With Jefferies’ bullish stance and favorable market conditions, the road ahead for ONGC looks promising.
Investors seeking a mix of stability and growth should keep a close eye on ONGC, as it continues to redefine its role in India’s energy landscape.
