ONGC gains 2% as Q3 numbers beat estimates; brokerages maintain 'buy'

NEW DELHI: State-run Oil and Natural Gas Corp surged over 2 per cent in early trade on Tuesday after its October-December net profit beat market expectations.

ONGC posted lowest profits in last five quarters for the December 2012 quarter, as the subsidy burden remained high. The profit at Rs 5563 crore was 17% lower y-o-y, but in line with the street expectations.

"The market is unlikely to treat the results as a negative surprise as ONGC's profits last year were bloated by extra-ordinary income," ET reported.

"ONGC had booked Rs 3142 crore income in December 2011 quarter as Cairn India accepted the royalty payment as cost recoverable for Rajasthan field," said the report.

At 09:40 am, ONGC was trading 2.3 per cent higher at Rs 315.65. It has hit a low of Rs 313 and a high of Rs 316.90 in trade today.

Jefferies maintained a 'buy' rating on ONGC and has also upped its price target from Rs 302 earlier to Rs 360. The brokerage believes that the risk reward is still very favourable for ONGC.

Jefferies said the worst case for ONGC has now shifted to flat absolute subsidy burden in FY14/15 versus earlier expectation of further rise. The best case as per Jefferies is significant reduction subsidies and gas price hike.

Other brokerage firms which maintain a 'buy' rating on the counter include UBS, BofA-ML, Goldman Sachs and Citigroup.

UBS maintains a 'buy' rating on ONGC with a target price of Rs 400, while BofA-ML has a target price of Rs 381.

Goldman Sachs also maintained a 'buy' call on the counter with a target price of Rs 350 and Citigroup has a target price of Rs 377.