LISTING |
|
|
Rs 987 |
|
Rs 1220/Rs 580 |
|
Rs 10 |
PE Ratio |
13.8 |
P/BV |
3.52 |
Div% |
140% |
Div Yield |
1.4% |
COMPANY OVERVIEW:
In April 1956, the government of India adopted the Industrial Policy Resolution, which placed mineral oil industry among schedule ‘A’ industries, the future development of which was to be the sole and exclusive responsibility of the state.
Soon, after the formation of the Oil and Natural Gas Directorate, it became apparent that it would not be possible for the Directorate with its limited financial and administrative powers as subordinate office of the Government, to function efficiently. So in August, 1956, the Directorate was raised to the status of a commission with enhanced powers, although it continued to be under the government. In October 1959, the Commission was converted into a statutory body by an act of the Indian Parliament, which enhanced powers of the commission further.
The main functions of the Oil and Natural Gas Commission subject to the provisions of the Act, were "to plan, promote, organize and implement programs for development of Petroleum Resources and the production and sale of petroleum and petroleum products produced by it, and to perform such other functions as the Central Government may, from time to time, assign to it ". The act further outlined the activities and steps to be taken by ONGC in fulfilling its mandate.
The liberalized economic policy, adopted by the Government of India in July 1991, sought to deregulate and de-license the core sectors (including petroleum sector) with partial disinvestments of government equity in Public Sector Undertakings and other measures. As a consequence thereof, ONGC was re-organized as a limited Company under the Company's Act, 1956 in February 1994.
After the conversion of business of the erstwhile Oil & Natural Gas Commission to that of Oil & Natural Gas Corporation Limited in 1993, the Government disinvested 2 per cent of its shares through competitive bidding. Subsequently, ONGC expanded its equity by another 2 per cent by offering shares to its employees.
PRODUCT MIX:
PRODUCT NAME |
SALES VALUE |
% OF TOTAL SALES VALUE |
OIL CRUDE |
Rs38680 crore |
64.32% |
GAS NATURAL |
Rs7178 crore |
11.94% |
HSD |
Rs4860 crore |
8.08% |
AROMATIC RICH NAPHTHA |
Rs4384 crore |
7.3% |
LIQUEFIED PETROLEUM GAS |
Rs2016 crore |
3.35% |
C2/C3(ETHANE/PROPANE) |
Rs929 crore |
1.54% |
MOTOR SPIRIT |
Rs915 crore |
1.52% |
SUPERIOR KEROSENE OIL |
Rs740 crore |
1.23% |
SUPERIOR KEROSENE OIL |
Rs337 crore |
0.56% |
LSFS |
Rs41 crore |
0.06% |
KEROSENE/ATF |
Rs39 crore |
0.06% |
OTHERS |
Rs11 crore |
0.01% |
HSD |
Rs1.5 crore |
0% |
REASON TO AVOID STOCK AT THIS LEVEL:
Rising cost in aging domestic fields.
Lower price and limited upside from oil price rebound.
Overseas investment is also a concern.
Subsidy burden is expected to increase in FY2010.
Government hands on the oil sector limits the growth of the company.
KEY RISK TO OUR AVOID STOCK AT THIS LEVEL:
New finding of Oil & natural gas.
Government de regulating the oil sector.
ONGC has made substantial investment in overseas blocks, through its subsidiary ONGC Videsh, in Sudan, Vietnam and Russia. ONGC remains aggressive in search for oil equity overseas. Value accretive overseas acquisition poses upside risk to our estimate.
Rupee depreciation benefits ONGC through higher domestic realization.
SHAREHOLDING PATTERN:
|
|
NO. OF SHARES |
% OF TOTAL |
PROMOTER |
1585740673 |
|
74.14% |
|
INSTITUTION |
257808683 |
|
12.05% |
|
GENERAL PUBLIC |
295323174 |
|
13.81% |
|
GRAND TOTAL |
2138872530 |
|
100.00% |
|
FINANCIAL:
|
|
31/03/06 |
31/03/07 |
31/03/08 |
31/03/09 |
TOTAL INCOME |
50555.86 |
61146.8 |
65147.92 |
69118.7 |
EXPENDITURE |
-20855 |
-28430.7 |
-30056.4 |
-32999.86 |
OPERATING PROFIT |
29700.84 |
32716.08 |
35091.49 |
36118.84 |
DEPRECIATION |
-8457.28 |
-9499.44 |
-9797.92 |
-12084.92 |
PBIT |
|
21243.56 |
23216.64 |
25293.57 |
24033.92 |
INTEREST |
|
-46.97 |
-21.5 |
-58.98 |
-118.96 |
PBT |
|
21196.59 |
23195.14 |
25234.59 |
23914.96 |
TAX |
|
-7313.74 |
-8027.29 |
-8920.05 |
-8386.08 |
EXTRA ORD INCOME |
640.52 |
475.06 |
0 |
43.41 |
PAT |
|
14523.37 |
15642.91 |
16314.54 |
15572.29 |
CHANGE IN TOTAL INCOME: CAGR IN TOTAL INCOME IS 10.9%.
CHANGE IN OPERATING INCOME: CAGR IN OPERATING INCOME IS 6.73%.
CHANGE IN NET PROFIT: CAGR IN NET PROFIT IS 2.35%.
RATIO:
|
|
31/03/06 |
31/03/07 |
31/03/08 |
31/03/09 |
EPS |
|
67.90429 |
73.13872 |
76.27894 |
72.80854 |
OPM |
|
58.74856 |
53.50416 |
53.86433 |
52.25625 |
NPM |
|
28.72737 |
25.58255 |
25.0423 |
22.52978 |
INTEREST COVER |
451.9906 |
1079.844 |
428.7046 |
201.9657 |
KEY HIGHLIGHTS:
EPS increased merely at CAGR rate of 6.73%.
OPM declined over 3 year period from 58.7% to 52.25%.
NPM declined over 3 year period from 28.72% to 22.5%.
Interest cover remained very high at 201.96. This shows company remains debt free.
COMPARISION OF Q4FY2009 WITH Q4FY2008:
|
|
Q4FY2008 |
% CHANGE |
Q4FY2009 |
TOTAL INCOME |
17762.05 |
-14.30% |
|
15223.85 |
EXPENDITURE |
-9951.68 |
|
|
-8034.75 |
OPERATING PROFIT |
7810.37 |
-8% |
|
7189.1 |
DEPRECIATION |
-3844.48 |
|
|
-4244.44 |
PBIT |
|
3965.89 |
|
|
2944.66 |
INTEREST |
|
-12.34 |
|
|
-13.6 |
PBT |
|
3953.55 |
|
|
2931.06 |
TAX |
|
-1326.96 |
|
|
-993.5 |
EXTRA ORD INCOME |
0 |
|
|
0 |
PAT |
|
2626.59 |
-26.20% |
|
1937.56 |
KEY HIGHLIGHTS:
Total Income decline by 14.3% due to the decline in the crude oil price.
Operating profit came down by 8% due pressure on operating profit margin.
PAT came down by 26.2% due to decline crude oil and subsidy burden.
VALUATION:
We value the company at 10X to the FY2010E EPS. We feel the FY2010E EPS to almost remain same there won’t `be any significant improvement due to subdued crude oil price and government intervention in regulating the oil industry. The EPS for FY2010E will be at Rs72 this translate the fair value of Rs720 per share. We maintain avoid or sell on the counter.
CONCLUSION:
We remain negative on the counter. Investors should avoid the counter for now. They can enter below Rs800. The stock looks expensive at this stage.
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