ONGC, India's largest public sector company announced its 1QFY04 results recently. The company reported a 12% growth in its topline whereas bottomline was up by about 8%. Let's take a detailed look at the results.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares
Diluted Earnings per share*
Though ONGC reported a 2% dip in its crude oil production, it succeeded in exceeding its target by about 3% during the quarter. In case of natural gas, its production was up by about 2% YoY. Higher realisations led to a growth in its topline by about 12% during the same period.
During the June quarter, ONGC witnessed a 540 basis points growth in its operating profit margins. This is on account of the fact that though the topline increased by about 12%, total expenses declined during the same period. As a percentage of sales also, expenses declined from 48% in 1QFY03 to 43% during the current quarter. As a result, operating profits increased by a higher rate and led to an increase in operating margins.
If one were to look at segmental break-up, ONGC witnessed higher increase in PBIT margins in case of on shore exploration. PBIT margins of on shore exploration increased by about 390 basis points, while that from off shore exploration increased by about 240 basis points during the same period. On an overall basis, PBIT margin improved by about 240 basis points.
Overall PBIT margin
The company managed to reduce its interest outgo significantly during June quarter thus aiding bottomline growth. However, higher rate of growth in depreciation and taxes limited bottomline growth. Consequently, net profit was up only 8% during the quarter.
At Rs 469, the stock is trading at a P/E multiple of 7.8x its annualised 1QFY04 earnings. ONGC has aggressive capex plans during current financial year. It plans to invest about Rs 100 bn for domestic exploration while another Rs 60 bn is planned for acquiring equity investments abroad. It has recently appointed two firms for deep-sea exploration and plans to start the same by the month of September. Its various foreign investments have actually started bearing fruit. Though deep-sea exploration poses risk, any success in this front will significantly add to its revenues. This apart, expected deregulation in natural gas is also a positive for the company.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407