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Elara Capital Issues Buy Rating for ONGC Amid Market Volatility

Brokerage firm Elara Capital has issued a buy recommendation for Oil and Natural Gas Corporation Limited (ONGC), setting a target price of ₹320 per share. This target represents an estimated upside potential of up to 38%. The firm suggests that despite current volatility in crude oil prices driven by the ongoing US-Iran conflict, the investment case for the state-owned oil producer remains supported by its gas portfolio, BP-led brownfield recovery initiatives, and government-backed deepwater exploration activities.

The recommendation comes as ONGC reported mixed financial results for the second quarter of FY27. The company posted a consolidated profit after tax (PAT) of ₹18,534.82 crore, a 46.9% increase year-on-year from ₹12,614.60 crore. Consolidated revenue from operations also rose by 25.6% to ₹1,98,263.33 crore. However, on a standalone basis, the company experienced a sequential decline, with PAT falling 9.1% quarter-on-quarter to ₹15,489 crore and revenue dropping 5.6% to ₹43,875 crore.

Elara Capital noted that production figures were a point of disappointment in the second quarter, with crude oil output declining 5.3% year-on-year and natural gas production falling 2.3%. These declines were attributed to reservoir-related complexities at the KG-98/2 field, monsoon-related delays at PRP-8/9, and temporary customer offtake disruptions. The brokerage firm characterized these issues as execution-related rather than structural, anticipating future growth from gas volume ramp-ups at DUDP, the completion of wells at KG-98/2, and new offshore projects valued at ₹11,800 crore.

Valuation metrics cited by the firm include a 5.2x FY28E price-to-earnings (P/E) ratio, a 0.65x FY28E book value, and a dividend yield of approximately 7%. The ONGC board has also announced an interim dividend of ₹8 per equity share, with a record date set for November 12, 2026. Risks to the outlook include crude prices falling below USD 70/bbl, continued reservoir challenges, potential losses at HPCL/OPaL, and adverse arbitration outcomes.

For investors, this analysis highlights the tension between ONGC's long-term production enhancement projects and immediate operational hurdles. While the stock has seen a 6.11% gain over the past month, it remains down 6.90% over the last year, suggesting that market participants may be weighing the attractive dividend yield and valuation multiples against the recent quarterly production declines and broader geopolitical volatility.

Why it matters

Investors should monitor whether ONGC's execution-related production challenges are resolved, as these factors directly impact the brokerage's growth thesis and the stock's potential to reach the projected target price.

FAQ

What is the target price set by Elara Capital for ONGC?
Elara Capital has set a target price of ₹320 per share for ONGC.

Why did ONGC's production decline in the second quarter of FY27?
The decline was primarily due to reservoir-related complexities at KG-98/2, monsoon-induced delays at PRP-8/9, and temporary disruptions in customer offtake.

What is the record date for ONGC's interim dividend?
The record date to determine shareholders eligible for the ₹8 per share interim dividend is November 12, 2026.

Source: Mint Markets. See the original source for full details.