JPM-Oil and Natural Gas Corporation Limited upside as volumes realizations likely rangebound-20251111

ONGC’s 2QFY26 standalone PAT of Rs98.5bn was 14% below our estimate but in line with Street expectations. The miss vs. our numbers was due to higher than expected ‘Other Expenses’ and lower than expected other income. OVL and OPaL reported losses of Rs3.5bn and Rs4.6bn each, marking another weak quarter for both the subsidiaries. Given that oil prices remain low and rangebound, and production volumes are unlikely to improve meaningfully, we maintain our Neutral rating on the stock.

•2Q missed JPMe; in line with Street: 2Q revenue was in line with JPMe but higher other expenses (up 24%/22% QoQ / YoY) hurt EBITDA (down 5% QoQ), missing JPMe by 8%. Raw material costs were also up 7/43% QoQ/YoY which the company mentioned was due to increase in LNG consumption cost at C2-C3 plant at Dahej. The higher costs came as a surprise to us since the company had previously mentioned an increased focus on cost control (targeted~15% or c.Rs50bn decrease in opex). Lower other income (dividends from subs lower than expected in 2Q) hurt the bottom line, while a reduced tax rate helped it. On a standalone basis, 1H EBITDA made up c.53% of FY26 consensus forecasts. While the consensus estimates appear reasonable, there may be some room for upgrades should 2H follow 2Q’s run-rate.