Brokerage Motilal Oswal has maintained a 'Buy' rating on ONGC, setting a price target of Rs 290. This suggests a potential 21% rise from the current price of Rs 240, driven by healthy dividend yields and improved operational performance at the company’s overseas subsidiary.
Motilal Oswal has reiterated a ‘Buy’ recommendation for Oil and Natural Gas Corporation (ONGC), projecting a potential upside of 21% from the stock's recent market price of approximately Rs 240. The brokerage firm has set a target price of Rs 290 based on its assessment of the company’s business segments and future earnings outlook.
Three main factors drive this positive outlook. First, the brokerage highlighted the company’s forward dividend yield, which currently stands at 6.9%. This is the highest level seen in three years. Second, global energy agencies are providing more optimistic forecasts for crude oil. The U.S. Energy Information Administration has raised its price expectations for Brent crude for 2026 and 2027 by 6%, citing low global inventory levels as a supporting factor. Similarly, the International Energy Agency expects a supply deficit in 2026, which may help keep oil prices firm.
The third factor involves the company’s overseas arm, ONGC Videsh. This subsidiary has reported a significant turnaround in its performance over the last two quarters. The brokerage suggests that if this momentum continues, the development of new assets in this business could add approximately Rs 15 per share to ONGC’s overall valuation. To arrive at the Rs 290 target, the valuation model assigns a value of 6.5 times the company’s estimated standalone earnings for December 2027.
While the outlook is positive, investors should consider the inherent challenges within the sector. The brokerage’s model assumes only a modest 1% overall growth in volume, with a projected 0.3% decline in oil production being offset by a 2.1% increase in gas output. This highlights that production growth remains a challenge for the company. Furthermore, the company’s performance is highly sensitive to external factors, including potential volatility in global crude oil prices and changes in government regulations, such as windfall taxes, which have impacted the sector in the past. The sustainability of the recent operational recovery at ONGC Videsh is also a variable that will require time to verify.
Investors may monitor upcoming disclosures regarding production volumes and the stability of the company’s overseas operational performance to gauge if these projections align with the actual business results in the coming quarters.