Geojit Financial Services has assigned a 'Buy' rating to Oil and Natural Gas Corporation (ONGC) with a target price of ₹297. The brokerage cites a sharp rise in profits for the first quarter of fiscal year 2027, driven by higher crude oil prices. However, investors should be aware that while profits grew, actual production volumes of oil and gas saw a slight decline.
Geojit Financial Services has initiated coverage on Oil and Natural Gas Corporation (ONGC) with a 'Buy' rating, setting a target price of ₹297 per share. The assessment follows a strong financial showing by the energy major in the first quarter of the 2027 fiscal year, ending June 30, 2026.
Financial performance for the quarter was marked by a significant increase in earnings. The company reported a standalone profit after tax of ₹17,034 crore, which is a 112.3% increase compared to the same period in the previous year. This growth was largely supported by favorable market conditions, specifically higher crude oil and gas prices. Standalone revenue climbed by 45.2% to reach ₹46,460 crore, helped by realizations from nominated fields rising to $99.45 per barrel, a 50.4% improvement over the previous year.
While the financial numbers showed strong growth, operational data presented a different picture. Despite the jump in profit, ONGC saw a slight dip in physical output. Crude oil production fell by 4.9% to 4.45 million metric tonnes, while natural gas production dropped by 1.9% to 4.76 billion cubic meters. This indicates that the company’s profit growth was driven more by better pricing for its products rather than an increase in the volume of oil and gas extracted.
Geojit Financial Services used a 'Sum-of-the-Parts' valuation model to reach its target price. This method involves calculating the value of each business segment individually and adding them together to determine the total value of the company. While the brokerage maintains a positive outlook, it has highlighted specific risks that investors should monitor.
Operational challenges are a significant area of focus. The company has been managing complexities at the KG-98/2 reservoir, and any further technical or project commissioning delays in such deepwater fields could impact production targets. Furthermore, the company’s financial health remains sensitive to global crude oil prices; any correction in global commodity prices could affect profit margins. Investors should also track regulatory developments and potential fiscal implications related to past arbitration processes, which remain a point of interest for long-term holders.
Moving forward, the primary factor for investors to track will be the company’s ability to stabilize and increase production volumes. Success in ramping up output from new fields, while maintaining efficient cost management, will be critical for sustaining performance if crude oil prices stabilize or trend lower in the coming quarters.