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ONGC: Energised performance - Views on News from Equitymaster
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  • Jun 14, 2001

    ONGC: Energised performance

    The domestic oil & gas exploration & production major, Oil & Natural Gas Corporation Ltd. (ONGC), has recorded an impressive growth in sales. However, in FY00, the company declared revenue growth of 34.3%.

    (Rs m) 4QFY00 4QFY01 Change FY00 FY01 Change
    Sales 56,925 60,216 5.8% 200,906 236,473 17.7%
    Other Income 3,307 7,420 124.4% 9,932 14,404 45.0%
    Expenditure 30,625 29,196 -4.7% 103,007 110,792 7.6%
    Operating Profit (EBDIT) 26,300 31,019 17.9% 97,899 125,681 28.4%
    Operating Profit Margin (%) 46.2% 51.5%   48.7% 53.1%  
    Interest 1,749 951 -45.6% 6,003 3,984 -33.6%
    Depreciation 8,994 14,145 57.3% 42,523 44,533 4.7%
    Profit before Tax 18,864 23,343 23.7% 59,304 91,569 54.4%
    Tax 10,260 10,428 1.6% 23,010 39,281 70.7%
    Profit after Tax/(Loss) 8,605 12,915 50.1% 36,295 52,288 44.1%
    Net profit margin (%) 15.1% 21.4%   18.1% 22.1%  
    No. of Shares (eoy) 1,426 1,426   1,426 1,426  
    Diluted Earnings per share* 24.1 36.2   25.5 36.7  
    P/E Ratio   4.5     4.4  

    Over the last two years sales have grown considerably, as international oil prices have skyrocketed. In FY99 the company reported a drop in sales as oil prices had declined to $10 / barrel.

    The rise in sales followed with a control on costs has ensured an impressive growth in OPM. Consequently, operating profits have also grown significantly. The OPM has increased by 530 basis points and 440 basis points during 4QFY01 and FY01 respectively.

    During FY01, the company revised the policy for accounting for wells-in-progress. Earlier, wells-in-progress for a period of more than 5 years were charged to the income statement. Under the revised policy the time period has been reduced to more than three years. This has led to a reduction in profits by Rs 4.5 bn.

    The post tax profits have received a boost from other income, which shot up over FY01. The rise was contributed by reimbursement from the Government amounting to Rs 4.4 bn. ONGC seems to be among the few companies that pay full tax rate. The effective tax rate has increased by 4.1 percentage points to 42.9% in FY01.

    At Rs 163 the company trades on a multiple of 4.4x FY01 earnings. The stock price has moved up considerably since March '01. ONGC has proposed a dividend of Rs 11.



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