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Analysts’ picks: ONGC

This article was posted on May 9, 2009 and is filed under Stock Views

CMP: Rs 882.90
Target price: Rs 630
Goldman Sachs has reiterated its ‘sell’ rating on ONGC with a 12-month target price of Rs 630, citing regulatory uncertainty and muted volume growth as the main concerns.

“We continue to believe that key positive catalysts for the stock, such as a gas price hike and fuel pricing reforms, are in government hands, and hence unpredictable,” a Goldman Sachs note to clients said.

“We also think that ONGC will eventually have to pay a subsidy in 4QFY09, given the government’s reluctance to issue more oil bonds despite oil marketing companies’ (OMCs) suffering from additional high interest costs, inventory loss and mark-to-market losses (Rs 5,000 crore) on oil bonds in FY09 Moreover, OMCs are again incurring losses on gasoline sales, which could sequentially increase ONGC’s 1QFY10E subsidy,” the note added.

The brokerage has forecast an earning per share of Rs 80.27 for the current financial year, which is below consensus estimates.

source: Business-Standard

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