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Business News/ Markets / Mark To Market/  The outlook for ONGC stock in 2020
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The outlook for ONGC stock in 2020

For one, production performance has been nothing to write home about
  • For the six months ended September, standalone gas production rose by a mere 1% year-on-year, while crude oil production declined by 4.7%
  • For one, production performance has been nothing to write home about. (Reuters )Premium
    For one, production performance has been nothing to write home about. (Reuters )

    Shares of Oil and Natural Gas Corp. Ltd (ONGC) lacked the energy in 2019. The stock has declined by nearly 15% so far this year, while the Nifty 100 index has increased by 11%. What gives?

    For one, production performance has been nothing to write home about. For the six months ended September, standalone gas production rose by a mere 1% year-on-year, while crude oil production declined by 4.7%. Second, outlook on crude oil prices isn’t spectacular, as global oil demand is not expected to be robust from a near to medium term perspective. Brent crude oil prices are currently hovering around $68 a barrel and analysts don’t expect meaningful upsides from these levels.

    The good news is that valuations are not demanding, what with the stock trading at 5.4 times estimated earnings for FY20, based on Bloomberg data.

    What should investors watch out for in the coming year? “Any divestment in government’s stake in ONGC via offer for sales or ETF would hit its stock performance," said analysts from ICICI Securities Ltd in a 12 December report. Further, muted outlook on crude prices is another risk for ONGC. Investors will watch production trajectory closely, too. Meanwhile, news reports indicated that the government was contemplating gas price deregulation. News flow on that remains crucial.

    ICICI Securities expects ONGC to benefit if gas prices are deregulated. “ONGC would be a hedge against investment in city gas distribution (CGD) firms as it would gain the most from gas price deregulation, while CGD firms would be hit by it," the broking firm said.

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    ABOUT THE AUTHOR
    Pallavi Pengonda
    Pallavi is a deputy editor at Mint and heads the Mark to Market team. This column covers wide-ranging topics related to the stock markets, offering an in-depth analysis of financial reports of companies. She writes and edits across verticals, covering the breadth of the Indian stock market. Pallavi has done her master of management studies, specializing in finance.
    Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
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    Published: 31 Dec 2019, 07:00 AM IST
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