Shares of Oil and Pure Gasoline Corp. fell over 1% on Tuesday after HSBC slashed its goal worth on the inventory amid issues in regards to the firm’s weak oil income and declining manufacturing charges.
The brokerage lower the goal worth to Rs 215 from Rs 230. It maintained its ‘scale back’ ranking on ONGC, citing the restricted influence of the federal government’s latest gasoline worth reform.
The brand new gasoline pricing method, which gives reduction to ONGC and permits it to earn the next realisation for gasoline from growing older fields, is seen as helpful however not ample to drive vital profitability or earnings development, the brokerage stated. Whereas the gasoline pricing adjustments would enhance profitability marginally, the continued decline in oil manufacturing is a extra urgent concern, it stated.
The removing of the windfall tax on crude oil exports, efficient from Dec. 2, had earlier capped ONGC’s web worth realisation at round $75 per barrel. Nonetheless, with oil costs at the moment averaging $70 per barrel, HSBC considers the tax removing as immaterial to ONGC’s earnings. Though the transfer might enhance market sentiment, the weakening oil costs and lower-than-expected manufacturing volumes are anticipated to weigh closely on the corporate’s monetary efficiency.