ONGC, Oil India among cheapest upstream stocks globally: What are prices factoring in?

Antique Stock Broking on Wednesday said shares of upstream PSUs ONGC and Oil India continued to trade at valuations that reflected an unrealistically bearish long-term crude oil assumption, despite a visibly improving production outlook and supportive currency trends.

The domestic brokerage said the recent rupee depreciation over the past six months has offset nearly 75 per cent of the roughly $3.1 per barrel decline in crude prices, yet ONGC and Oil India shares have fallen about 7 per cent and 14 per cent, respectively, over the same period. Antique said this correction has pushed their valuations to levels that implied long-term crude prices well below realistic assumptions.

According to Antique’s discounted cash flow analysis, ONGC’s current market price implied crude realisations of about $47 per barrel, while Oil India’s implied crude stood at around $45 per barrel. This was materially below the brokerage’s long-term crude assumption of $65 per barrel. Antique said the disconnect was stark, noting that when crude traded above $70 per barrel, market valuations had typically assumed long-term crude of $60–65, whereas current prices implied sub-$50 crude even though spot prices were already near that band.

The brokerage added that Indian upstream stocks were among the cheapest globally. On FY28 estimated EV/Ebitda, adjusted for investments, ONGC and Oil India traded at 2.6 times and 2.9 times, respectively, compared with a global average of 4.2 times.

"Importantly, legacy concerns around regulated pricing and weak growth are not applicable any more," Antique said.

On reserves, Antique said the valuation gap was even wider, with EV per barrel of 1P reserves at about $6, nearly half the global average of $11.9.

Antique also flagged that legacy concerns around regulated pricing and weak growth were no longer applicable. It said both ONGC and Oil India were entering a visible production upcycle over FY25–28, with expected CAGRs of 1.8 per cent and 8.4 per cent, respectively. For ONGC, growth was expected to be driven by the KG Basin ramp-up, Daman, DSF-II and potential upside from BP-TSP. For Oil India, the brokerage highlighted an expanded drilling programme, resolution of gas transportation bottlenecks through DNPL capacity doubling, and the upcoming NRL refinery expansion as key growth drivers.

On crude prices, Antique expected near-term softness, with crude likely to remain below $65 per barrel amid surplus supply from the US and OPEC+. However, it said downside risks were limited as current stock prices already discounted sub-$50 crude. The brokerage expected crude to firm to $65–70 per barrel into the next positive demand cycle, typically seen in the June–September period, as demand strengthened and supply growth moderated.

Antique said it revised FY26 Ebitda estimates by 4.2 per cent for ONGC and cut Oil India’s by 7.1 per cent to reflect second-half assumptions, while raising FY27–28 estimates by 2–5 per cent on foreign exchange benefits. Rolling forward valuations to FY28 EV/Ebitda, the brokerage reiterated its BUY ratings, with revised target prices of Rs 330 for ONGC, implying about 40 per cent upside, and Rs 540 for Oil India, implying about 32 per cent upside.