Last Update 20 Dec 25

Fair value Decreased 0.86%

ONGC: Future Cash Flows Will Support Long-Term Shareholder Upside

Analysts have modestly reduced their price target on Oil and Natural Gas to approximately $277 from about $279, reflecting slightly softer long term revenue growth and profit margin assumptions. They also note that the company remains well positioned in key end markets and benefits from ongoing secular demand trends.

Analyst Commentary

Recent Street research on peers in capital intensive, demand sensitive industries highlights a mixed but instructive backdrop for Oil and Natural Gas. Analysts observing similar companies see a balance between structural growth drivers and near term cyclical headwinds, and those dynamics are informing how they calibrate valuations and risk premiums for the group.

Bullish Takeaways

Bullish analysts are willing to raise or maintain price targets when they see evidence that secular demand, such as long duration infrastructure or energy transition spending, can support steady cash flow generation even as growth normalizes.
Positive commentary emphasizes that companies with strong positions in auto, industrial and data centric end markets can still justify premium multiples, provided they execute on high return projects and maintain disciplined capital allocation.
Several notes point to ongoing adoption of new technologies and capacity build outs as supportive of long term earnings power, which in turn underpins confidence that current valuations can be sustained or gradually expanded.
Where management teams demonstrate clear visibility into order books and backlog, bullish analysts are more inclined to look through short term noise and focus on multi year free cash flow compounding.

Bearish Takeaways

Bearish analysts are trimming price targets when they see slower than expected growth or margin compression, arguing that current valuations need to better reflect more moderate long term return profiles.
There is caution around the timing of any cyclical recovery, with some commentary highlighting that shifts from inventory correction to normalized demand do not yet translate into a clear restocking upcycle.
Concerns remain that key end markets, particularly autos and certain industrial segments, have not shown a sustained inflection, keeping execution risk and earnings revisions squarely in focus.
In several cases, analysts acknowledge upside risks from new customer wins or product ramps but still prefer to wait for more tangible evidence of reaccelerating growth before re rating the shares.

What's in the News

The Board will meet on December 05, 2025 to consider the re-employment of Chairman Arun Kumar Singh on a contract basis, along with other corporate matters (Board Meeting).
ONGC has signed a long-term ethane handling term sheet with Petronet LNG at Dahej, securing around 600 KTPA capacity from fiscal 2028–2029 for OPaL feedstock and supporting PLL's first-of-its-kind multi-fuel jetty project (Strategic Alliances).
The Company has approved an investment of up to 4,215 million in wholly owned subsidiary ONGC Green Limited via a rights issue to fund renewable energy expansion (Business Expansions).
The Board has granted in-principle approval for two 50:50 joint ventures with Mitsui O.S.K. Lines to enter ethane transportation via Very Large Ethane Carriers, with a cumulative investment of up to USD 49.20 million, aligning with the Maritime Amrit Kaal Vision 2047 (Strategic Alliances).
The Comptroller and Auditor General of India has appointed M/s Rama K Gupta & Co. as Joint Statutory Auditor for FY 2025–26 after earlier nominee MSKA & Associates declined the role (Auditor Changes).

Valuation Changes

Fair Value: reduced slightly to approximately ₹276.9 from about ₹279.3, reflecting modestly softer long term assumptions.
Discount Rate: edged down marginally to about 13.00% from roughly 13.02%, implying a near unchanged risk profile.
Revenue Growth: lowered modestly to around 1.15% from about 1.30%, incorporating a slightly more conservative outlook on top line expansion.
Net Profit Margin: trimmed slightly to roughly 7.74% from about 7.92%, reflecting expectations of marginally lower profitability.
Future P/E: increased modestly to approximately 9.52x from about 9.35x, indicating a slightly higher multiple applied to forward earnings.

Expansion in production and increased premium-priced gas output will enhance revenue, margins, and earnings while meeting sustained energy demand in emerging markets.
Diversification into petrochemicals and global LNG, alongside efficiency improvements, will stabilize earnings and boost long-term growth, reducing vulnerability to oil price swings.
Falling oil prices, rising costs, capital-intensive assets, project delays, and struggling subsidiaries threaten ONGC's profit stability and future earnings growth.

Catalysts

About Oil and Natural Gas

Engages in the exploration, development, production, and distribution of crude oil and natural gas in India and internationally.What are the underlying business or industry changes driving this perspective?

ONGC's ramp-up in oil and gas production from the KG Basin and upcoming projects (Daman, MH fields, new discoveries) is expected to reverse prior declines and drive volume growth, positioning the company to capitalize on persistent energy demand in Asia and Africa, which should support top-line (revenue) improvement.
ONGC is increasing natural gas output from new wells that receive a premium price over legacy production, and expects new well gas to rise from 13–14% to 24–25% of total gas volumes by next year, directly boosting margins and overall earnings as premium pricing expands.
The company's shift toward higher-value downstream activity via the Opal petrochemicals complex-now EBITDA positive, running at >90% utilization, and expected to improve as the petrochemical cycle recovers and lower-cost ethane feedstock is secured-will diversify revenues and stabilize earnings, reducing sensitivity to crude market volatility.
Ongoing operational efficiency initiatives, cost reductions (manpower, logistics, insurance, transportation), and port/crewboat optimizations are anticipated to lower unit operating costs over the next 6–12 months, strengthening net margins and free cash flow.
ONGC's exposure to LNG and global gas projects (including the potential restart of the Mozambique LNG project as force majeure is lifted) positions the company to benefit from growth in global LNG trade and emerging gas export opportunities, which could provide additional long-term revenue upside.

Oil and Natural Gas Earnings and Revenue Growth

Oil and Natural Gas Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Oil and Natural Gas's revenue will grow by 1.2% annually over the next 3 years.
Analysts assume that profit margins will increase from 5.5% today to 7.7% in 3 years time.
Analysts expect earnings to reach ₹525.5 billion (and earnings per share of ₹37.75) by about September 2028, up from ₹360.6 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting ₹626.0 billion in earnings, and the most bearish expecting ₹387.2 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.8x on those 2028 earnings, up from 8.3x today. This future PE is lower than the current PE for the IN Oil and Gas industry at 17.7x.
Analysts expect the number of shares outstanding to grow by 0.1% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 14.12%, as per the Simply Wall St company report.

Oil and Natural Gas Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Sustained decline in realized crude oil prices-evident from a drop from $83.05 to $66.13 per barrel YoY-directly reduces ONGC's sales revenue and erodes net profits, and reflects the broader trend of potential long-term pricing headwinds amid increased global decarbonization efforts and the risk of peak oil demand.
Operating expenses are rising, with increased contractual payments, LNG purchase costs, and higher depletion/depreciation due to asset additions, which may structurally pressurize net margins if efficiency gains or production increases fail to fully offset these cost escalations.
ONGC's asset portfolio faces higher capital intensity and impairment risk, as seen with increased depreciation and the need to continually invest large CapEx (~₹30,000 crore annually) to combat natural declines in mature fields and ramp up new projects-a dynamic that could be exacerbated by stricter climate regulations or lower-for-longer oil price environments, threatening future earnings stability.
Key production ramp-ups (notably in the KG Basin and new well gas projects) are exposed to project execution delays (e.g., weather-related or logistical issues), which could postpone revenue realization; repeated delays or under-delivery risk casting doubts on long-term output growth and cash flows.
Investments in petrochemical subsidiaries such as Opal remain at risk due to the subsidiary's heavy debt load (~₹24,800 crore), cyclicality in petrochemical pricing, and the need for sustained high utilization; if the upcycle is weak or Opal underperforms, ONGC may be required to inject further capital or face earnings drag, negatively impacting consolidated profitability and returns.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of ₹273.414 for Oil and Natural Gas based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹340.0, and the most bearish reporting a price target of just ₹205.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹6817.4 billion, earnings will come to ₹525.5 billion, and it would be trading on a PE ratio of 9.8x, assuming you use a discount rate of 14.1%.
Given the current share price of ₹239.07, the analyst price target of ₹273.41 is 12.6% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Analysts Adjust Price Target for Oil and Natural Gas as Growth Outlook Remains Cautious