[T.S.R:10853] OIL INDIA vs ONGC

OIL India Ltd Vs ONGC Ltd

We believe ONGC is the best comparison for OIL considering the scope of the business and limitations faced by both the companies. Both OIL and ONGC being owned by the Government of India have to provide discount on sale of crude oil to OMC's.

 

OIL currently has 2P reserves of 974.2 mn boe as compared to ONGC which has 2P reserves of 9851.5 mn boe. In terms of revenues, OIL registered growth of 17.7% y-o-y to Rs. 7200.7 crs for FY 2009 as compared to 8.0% y-o-y growth registered by ONGC for FY 2009. Even on the margins front OIL has EBITDA margins of 44.8% for FY 2009 as compared to 40.4% EBITDA margins for ONGC. On the net level OIL has net margins of 30.0% as compared to 18.8% registered by ONGC in FY 2009.

On the valuation front both OIL and ONGC are trading at a multiple of 11.7x based on their respective FY 2009 diluted earnings based on the upper band. OIL has a P/BV of 2.69x as compared to 2.24x for ONGC. On the EV/BOE basis OIL is trading at 3.96x as compared to 5.04x for ONGC.

We believe the company has grown reasonably well historically and will continue to maintain the growth trajectory and margins going forward. Based on the above factors I recommend subscribing to the issue with long term investment objective.

 

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