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ONGC share price slips 4% on first ever quarterly loss of Rs 3,098 crore

ONGC share price slipped 3.93% to Rs 78.2 against previous close of Rs 81.40.

twitter-logoBusinessToday.In | July 1, 2020 | Updated 15:53 IST
ONGC share price slips 4% on first ever quarterly loss of Rs 3,098 crore
The share trades higher than 50 day moving averages but lower than 5 day, 20 day, 100 day and 200 day moving averages

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.

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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.

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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'".

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