Share price of Oil and Natural Gas Corp (ONGC) fell 4% today after the state-owned firm reported its first-ever quarterly loss after an impairment rising from the fall in oil and gas prices. ONGC share price slipped 3.93% to Rs 78.2 against previous close of Rs 81.40.
The stock opened with a loss of 3.19% at Rs 78.80 today. The stock has lost 4.69% in the last 3 days. The share trades higher than 50 day moving averages but lower than 5 day, 20 day, 100 day and 200 day moving averages.
The large cap share has lost 50.9% in one year and fallen 38% since the beginning of this year. Total 29.33 lakh shares were traded amounting to turnover of Rs 23.48 crore. Market cap of ONGC declined to Rs 1.01 lakh crore.
The oil and gas producer reported a Rs 3,098 crore loss in Q4 compared to a profit of Rs 4,240 crore in the same period a year ago.
Chairman and Managing Director Shashi Shanker said ONGC booked an impairment loss of Rs 4,899 crore in the fourth quarter of 2019-20, reflecting valuation of the firm's assets after fall in crude oil prices. But for the impairment, the company would have booked a profit.
An impairment loss is a recognised decline in the carrying amount of an asset that is triggered by a decline in its fair value. The same reason also led to the company seeing FY20 net profit halved to Rs 13,445 crore from Rs 26,765 crore a year back.
Revenue in the fourth quarter fell to Rs 21,456 crore from Rs 26,759 crore a year earlier. Crude oil production was marginally lower at 5.82 million tonnes in January-March as compared to 5.9 million tonnes in the previous fiscal.
Edelweiss gave a buy rating to the stock with a target price of Rs 100.
"Oil production (-1.4% YoY) continued to decline and underperform management's guidance. More worryingly, gas production has started declining (down 7.9% YoY,2.2% QoQ), reversing several quarters of steady production. We now expect oil production to remain flat over FY20-23 while gas production will rise due to KG-98/2, though it remained muted in 1HFY21 due to the COVID-19 impact. Besides, gas profitability would improve as KG gas is eligible for deepwater pricing, likely USD5-6/mmbtu.Operating performance is stable, but challenges in near term. ONGC incurred capex of Rs 300bn in FY20, and has given FY21 revenue guidance of Rs 320 bn. Its net debt/equity remains at 0.4x (FY20) with healthy FCF of INR171bn.
Outlook and valuation: Inexpensive; maintain 'BUY' Start of large KG-98/2production in FY21E, which is eligible for deep-water pricing, shall boost gas revenue. Valuations are compelling at 4.9x FY22E PER. Maintain 'BUY/SO'".