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Company Report | Q4FY11 Result Update


2 June 2011 Industry CMP (INR) Target (INR) Upside / Downside (%) 52 week High/Low (INR) Market Cap (INR Mn) 3M Avg. Volumes (000’s) P/E (FY12e) Shareholding Pattern (%)


Oil & Natural Gas Corp Ltd. (ONGC) Q4FY11 results are below our 282 360 28 368/261 47929 4747 9 estimates. This is due to the higher subsidy burden during the quarter. During the quarter Q4FY11, ONGC’s net sales has marginally increased (4.6% YoY) to INR 153,962 mn while on an annual basis the same has increased by 9.8% to INR 658,418 mn FY11. The increase in revenue was due to the higher crude price realisation. Moreover, volume growth was marginally lower by 3.3% QoQ on Q4FY11. EBITDA for the quarter Q4FY11 stood at INR 79723 mn decline of 15.4% YoY, while on annual basis the EBITDA has increased by 9.4% in FY11 to INR 410,189 mn. EBITDA margin for the quarter Q4FY11 has contracted by 936 bps while on an annual basis it has declined by 119 bps. Decline in the EBITDA for Q4FY11 was attributed to

Stock Performance

higher operating cost. Operating cost during the quarter has increased 23.6% led by higher operating & manufacturing cost (increased 30% YoY) and increased employee cost( increased 60% YoY). PAT for the quarter Q4FY11 has declined 26.1% YoY to INR 27,909 mn while for FY11 PAT has increased by 12.9% YoY to INR 189,240 mn. PAT margin for Q4FY11 has contracted 621 bps YoY to 16.7% while it has marginally increased (26 bps) in FY11 to 26.4%. Degrowth in PAT for the quarter was due to the higher subsidy burden with higher operating cost. 3 Months 4.7 1 1 Year -1.7 12.5
(INR Mn)

Performance (%) 1 Month ONGC -7.2 NIFTY -1.9

Outlook & Valuation ONGC expects to increase its production volume of oil & natural gas in both onshore and offshore going forward. We feel that Government of India’s indication towards 38.8% upstream sharing of the subsidy burden is an aberration to the historical trend and will be rolled back to the earlier 33%. This will help the company directly by higher crude price realisation. At CMP INR 282, the company is trading at PE of 9x & 8.8x its FY12e & FY13e earnings respectively. Considering the continuous demand for crude oil and business expansion through new discoveries domestically, as well as internationally, we remain bullish on the stock with a price target of INR 360.

Particulars Total Income EBIDTA Reported PAT
* Source: Bloomberg, Unicon Research

Actual 161,079 79,723 27,909

Estimates 188,656 130,350 67,950

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Standalone Financials DESCRIPTION Net Sales Other operating income Total Operating Income Total Expenditure EBITDA EBITDA (%) Depreciation EBIT Other Income Interest EBT Tax Profit After Tax Net Profit (%) EPS
Source: Company, Unicon Research

(INR Mn)

Q4FY11 153,962 7,117 161,079 81,357 79,723 49.5% 47,877 31,846 5,856 160 37,542 9,633 27,909 16.7% 3.3

Q4FY10 147,133 12,891 160,023 65,843 94,180 58.9% 44,480 49,700 4,691 561 53,831 16,066 37,764 22.9% 17.7

YoY 4.6% -44.8% 0.7% 23.6% -15.4% -936bps 7.6% -35.9% 24.8% -71.5% -30.3% -40.0% -26.1% -621bps -81.5%

FY11 658,418 33,355 691,773 281,584 410,189 59.3% 159,430 250,759 25,682 251 276,190 86,950 189,240 26.4% 22.1

FY10 599,876 19,949 619,825 244,912 374,914 60.5% 146,588 228,326 22,199 687 249,838 82,163 167,676 26.1% 78.4

YoY 9.8% 67.2% 11.6% 15.0% 9.4% -119bps 8.8% 9.8% 15.7% -63.4% 10.5% 5.8% 12.9% 26bps -71.8%

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Unicon Investment Ranking Methodology
Rating Return Range Buy >= 20% Accumulate 10% to 20% Hold -10% to 10% Reduce -10% to -20% Sell <= -20%

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