Oil and gas corporation Ltd (ONGC) has been making headlines recently, with its shares surging nearly 5% following an upgrade from CLSA. The investment firm has upgraded its rating on ONGC to “High Conviction Outperform” from “Outperform” and raised the price target to ₹4360 per share, implying a significant 42% upside potential.
One of the key factors driving this bullish stance is the increased output from the eastern offshore fields, which is expected to drive a 10% and 20% increase in domestic oil and gas production for ONGC by the end of the year. Additionally, the potential removal of the windfall tax could unlock significant value for ONGC, allowing the company to capture higher realizations above the current $75 per barrel threshold if crude oil prices rebound.
Despite these positive catalysts, CLSA believes that ONGC shares are undervalued at present, trading at a discount compared to historical valuations and the performance of its peers. The company also offers a compelling dividend yield of 6%, further enhancing its investment appeal.
Jefferies also has a Buy call on ONGC with a higher potential upside of 58%. The recent production ramp-up in the KG basin is another factor supporting the positive price movement for ONGC.
In terms of stock performance, ONGC hit a 52-week high of ₹344.60 on August 1, 2024, and reached a low of ₹209.65 on January 10, 2024, on the BSE.
Overall, the outlook for ONGC appears to be positive, with both CLSA and Jefferies expressing confidence in the company’s growth prospects and valuation. Investors may want to keep an eye on ONGC as it continues to make strides in the oil and gas industry.
