ONGC share price gains 10% in March: Jefferies sees over 45% upside in this PSU stock. Here’s why

PSU stock Oil and Natural Gas Corporation (ONGC) has witnessed a sharp rally this month, surging 10%, amid a rebound in the Indian stock market after five months of back-to-back losses.

In today's trade itself, ONGC share price surged as much as 5% amid reports that Saudi Aramco is in talks to invest in two planned refineries in India.

According to a Reuters report, Aramco is in separate talks to invest in Bharat Petroleum Corp's planned refinery in the southern state of Andhra Pradesh and a proposed ONGC refinery in western Gujarat state, the sources said.

On a longer time frame of five years, ONGC has jumped 283%, turning into a multibagger stock. Global brokerage Jefferies sees further scope for growth in the oil PSU company's shares, projecting a 47% upside from today's (March 28) close of ₹254.80.

Why is Jefferies bullish on ONGC stock?

The brokerage highlighted several key reasons behind its bullish stance on the stock, such as strong production growth, a rise in the profitability of gas portfolio and expansion in the renewables business.

The PSU oil company is targeting 5-6% annual production growth over FY26-28 on the back of ramp-up in crude and gas production from the KG basin by mid-CY25, new development at Daman and DSF2.

ONGC has contracted BP as a technical service provider. Over the 10-year period of the contract, BP expects to increase crude oil/gas recovery by 44%/90% over ONGC's assumed recovery estimates. "This should result in ~5% annual increase in crude and ~8% annual increase in gas production from the field FY27 onwards if BP succeeds. This could take ONGC's production growth CAGR to 10%+ over FY27-30," said Jefferies.

The company expects ~20% of gas production to be eligible for new well gas price (US$ 8.5/mmbtu) in FY26 rising to ~100% by 2030.

Furthermore, Jefferies highlighted that ONGC's Ayana acquisition is in line with its strategy of mature asset acquisition with land, grid access and PPAs in place. The current focus is on acquiring solar assets, with the company targeting 14% Equity IRR in these projects.

"We build in 2%/9% CAGR in crude/gas production but Mumbai High production growth poses upside risk to our est. We project 14% EPS CAGR over FY25-27 on production growth and better pricing in gas. The stock is discounting US$ 55 crude, making R-R favorable. Maintain Buy with PT of ₹375," Jefferies said.

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