X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
ONGC: Hammered down by subsidy - Views on News from Equitymaster
StockSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

ONGC: Hammered down by subsidy
Jan 21, 2008

Performance summary
  • Topline declines by 3% YoY during 3QFY08, hit by a subsidy payout of Rs 61 bn.

  • EBITDA margin contract to 53.1% during 3QFY08, down from 57.2% in 3QFY07. Higher raw material cost and other expenditure worsen matters.

  • Other income grows by 23% YoY.

  • Bottomline registers a decline of 7% YoY during 3QFY08 owing to operating margin erosion.

Financial snapshot
(Rs m) 3QFY07 3QFY08 Change 9mFY07 9mFY08 Change
Net sales 155,645 151,208 -2.9% 442,358 442,225 0.0%
Expenditure 66,553 70,891 6.5% 201,773 198,531 -1.6%
Operating profit (EBDITA) 89,093 80,318 -9.8% 240,585 243,694 1.3%
EBDITA margin (%) 57.2% 53.1%   54.4% 55.1%  
Other income 7,045 8,630 22.5% 20,642 29,118 41.1%
Interest 77 114 48.6% 151 466 209.9%
Depreciation 25,576 22,118 -13.5% 66,357 59,534 -10.3%
Profit before tax 70,485 66,716 -5.3% 194,719 212,810 9.3%
Tax 23,802 23,051 -3.2% 65,106 72,065 10.7%
Profit after tax/(loss) 46,683 43,665 -6.5% 129,613 140,746 8.6%
Net profit margin (%) 30.0% 28.9%   29.3% 31.8%  
No. of shares (m)         2,138.9  
Diluted earnings per share (Rs)*         78.3  
Price to earnings ratio (x)*         14.2  
(* on trailing twelve months earnings)

What has driven performance in 3QFY08?
  • Crude oil production remained steady for the quarter at 6.62 Million Metric Tonnes (MMT) (6.63 MMT for 3QFY07). Natural Gas production amounted to 5.78 Billion Cubic Meters (BCM) for 3QFY08 up from 5.73 BCM for the corresponding quarter last year.

  • Turnover declined due to a subsidy payout of Rs 61 bn to the PSU oil marketing companies- IOC, BPCL and HPCL. The subsidy burden for the corresponding quarter last year was Rs 22 bn. The impact of the subsidy at the PBT level is to the tune of Rs 55 bn, while it is Rs 37 bn at the bottomline level.

  • The pre-discount realisation for 3QFY08 is US$ 91.19 per barrel and post-discount realisation is US$ 54.52 per barrel.

    Cost break-up
    (Rs m) 3QFY07 3QFY08 Change 9mFY07 9mFY08 Change
    Raw materials 14,892 16,402 10.1% 49,880 46,072 -7.6%
    % sales 9.6% 10.8%   11.3% 10.4%  
    Staff cost 5,020 3,612 -28.0% 14,269 9,823 -31.2%
    % sales 3.2% 2.4%   3.2% 2.2%  
    Statutory levies 30,582 32,314 5.7% 91,538 93,278  
    % sales 19.6% 21.4%   20.7% 21.1%  
    Other expenditure 16,058 18,562 15.6% 46,085 49,358 7.1%
    % sales 10.3% 12.3%   10.4% 11.2%  
    Total cost 66,553 70,891 6.5% 201,773 198,531 -1.6%
    % sales 42.8% 46.9%   45.6% 44.9%  

  • Raw material costs for 3QFY08 have spiked by 10% while other expenditure surged 16% on a YoY basis.

  • The company has allocated certain staff and administrative expenses to their activity drivers resulting in lower allocation to Profit & Loss Account. As a result, profit before tax has increased by approximately Rs 2 bn for 9mFY08.

What to expect?
At the current market price of Rs 1,114, the stock is trading at a multiple of 14.2 times its trailing twelve months earnings. We believe despite the recent correction, the price has factored in the medium term positives and suggest a cautious approach at this juncture.

To Read the Full Story, Subscribe or Sign In


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

ONGC SHARE PRICE


Feb 23, 2018 (Close)

TRACK ONGC

ONGC - BP COMPARISON

COMPARE ONGC WITH

MARKET STATS