ONGC - Q3FY13 Result Update :: LKP Research

ONGC - Q3FY13 Result Update

Q3FY13 results ahead of estimates

ONGC’s Q3FY13 net profit of Rs55.6bn was ahead of our estimate. Net revenues for the quarter stood at Rs210bn (yoy +15.8% qoq +6.1%). ONGC’s subsidy burden for the quarter was Rs124.3bn resulting in fall in its net realization to $47.97/bbl (yoy +6.7% qoq +2.5%). Crude oil sales volume grew sequentially by 4.3% while on an annual basis the growth was muted at 0.4%. Gas sales witnessed annual growth of 2.3% as against a decline of 0.5% on a sequential basis. Operating profit for the quarter of Rs112.4bn was significantly higher than our estimate of Rs100.8bn while operating profit margin was 53.5%. DDA cost increased sequentially by 18.3% to Rs44.1bn (yoy -2.7%) on account of higher depletion charge during the quarter. Other income declined by 30.6% qoq (+2.6% yoy) due to higher dividend income and forex gain of Rs2.5bn during the quarter in the preceding quarter.

The government announced a slew of measures to contain under recoveries – no subsidy on bulk diesel sales, monthly increase in diesel price by Rs0.4-0.5/litre, restricting LPG cylinders to 9 per family. However, we remain apprehensive about the actual implementation given that general elections are due in 2014. To our mind, the government would find it difficult to periodically increase diesel prices. We note that the net realizations of the upstream oil PSUs would still be affected by subsidy sharing mechanism which continues to remain ad hoc. Further, given the weak situation of its finances, the government could keep bulk of benefit due to lower under recoveries, for itself. We maintain our price target of Rs335 however revise our rating from BUY to NEUTRAL. At the CMP, the stock is trading at 9.7x and 4.0x FY14e EPS and EBITDA respectively.

Actual v/s Estimates

Y/E, Mar (Rs. m)	Q3FY13	Q2FY13	qoq (%)	Q3FY12	yoy (%)	LKP Estimates	Deviation (%/bps)
Revenue	209,872	197,882	6.1%	181,238	15.8%	197,570	6.2%
EBITDA	112,358	102,718	9.4%	106,576	5.4%	100,830	11.4%
EBITDA (%)	53.5%	51.9%	163 bps	58.8%	-527 bps	51.0%	250 bps
PAT	55,627	58,966	-5.7%	35,993	54.5%	52,821	5.3%

LKP Research

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