The elevated crude prices continue to keep the spotlight on oil and gas stocks. Motilal Oswal Financial Services has recommended a ‘Neutral’ rating on Oil And Natural Gas Corporation (ONGC) with a target price of Rs 275, representing a 7% downside from the current market price. This came on the back of stagnant production, sales growth, a decline in estimated profits, and many other factors.
Stagnant production and sales growth
In recent quarters, ONGC has struggled to increase its output. Specifically, the company saw no meaningful year-over-year production or sales growth for the first nine months of the 2026 fiscal year.
“In the past few quarters, ONGC has struggled to raise production and sales, with no meaningful production and sales growth YoY for 9MFY26,” said Motilal Oswal.
Impact of dry well write-offs
While ONGC is increasing its exploration intensity to build a development pipeline, Motilal Oswal expects this will be accompanied by higher dry well write-offs, which are expected to weigh heavily on the company’s earnings.
“We like the increased exploration intensity (which is key to building a robust development pipeline), though we believe it will likely be accompanied by higher dry well write-offs, which will weigh on earnings,” said the brokerage firm.
Projected decline in FY27 profits
Although royalty reforms are expected to provide a one-time boost, the financial snapshots indicate an estimated 2.5% decline in Adjusted EPS for FY27 compared to FY26. Consolidated Adjusted PAT is also expected to drop to Rs 42,200 crore in FY27 from Rs 43,300 crore in FY26.
Also, given high oil prices and the absence of windfall taxes so far, the brokerage’s confidence in the upstream sector rerating has risen. “We continue to look for further updates regarding medium- and long-term volume growth in upcoming results,” said Motilal Oswal.
ONGC: Revenue contraction
The company’s total income from operations is projected to decrease steadily over the coming years, with estimated declines of 3.87% in FY26 and 2.92% in FY27.
ONGC share price performance
The share price of ONGC has surged 5.3% in the last five trading sessions. The stock has risen 3% in the past one month and 18% in the last six months. ONGC’s stock price has given a return of 23% in the past one year.
