Religare Research has recommended 'Buy' on Oil & Natural Gas Corporation (ONGC) with target price of Rs 470 as against current market price of Rs 327.90 in its report.

Commenting on the investment rationale, the stock broker said, "ONGC's Q4 PAT at Rs 39.4 billion came in below our/street estimates on higher statutory levies and other expenses. Highlights are (a) Lower crude & NGL production at 5.54mmt (Q3: 5.66mmt). (b) Lower NG production at 63mmscmd (Q3: 67mmscmd). (c) Better net crude realisations at USD 55.6/bbl (Q3: USD 35.6/bbl).

At ~7x FY17E earnings (discount to historical trading range of 9-10x), current valuations do not factor in net crude realisations beyond USD 45/bbl. However, we see a re-rating ahead as ONGC’s net realisations likely improve to  ~USD 60-65/bbl with (a) GoI proposing that ONGC would not bear any subsidy burden if crude averages below USD 60/bbl and only 85% of the difference if it averages higher and (b) crude currently hovering at ~USD 60-65/bbl. Buy the stock with a Mar'16 TP of Rs 470."

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