28 March 2019
Update
| Sector:
Oil & Gas
ONGC
Buy
BSE SENSEX
38,133
S&P CNX
11,445
CMP: INR160
TP: INR196(+22%)
Takeaways from OPaL’s Dahej Plant Visit
About OPaL
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
ONGC IN
12,833
2016 / 29.3
192 / 128
2/-14/-26
1453
34.4
Financials Snapshot (INR b)
Y/E March
2019E 2020E
Sales
4,603.5 4,983.7
EBITDA
848.9 910.9
Adj. PAT
350.0 377.0
Adj. EPS
27.3
29.4
EPS Gr.
35.1
7.7
BV/Sh.
175.5 193.3
RoE (%)
16.3
15.9
RoCE (%)
11.9
12.7
Payout (%)
39.4
39.5
Valuation
P/E (x)
5.7
5.3
P/BV (x)
0.9
0.8
EV/EBITDA
3.2
2.9
D. Yield (%)
5.9
6.4
2021E
5,094.6
921.3
379.5
29.6
0.7
211.1
14.6
12.1
39.9
5.3
0.7
2.7
6.5
Incorporated in 2006, ONGC Petro additions Limited (OPaL) is a joint venture
(JV) between ONGC (promoter – 49.36%), GAIL (co-promoter – 49.21%) and
GSPC (co-promoter – 1.43%).
The company has set up a 1.9mmtpa (1.1mmtpa ethylene, 0.4mmtpa
propylene and rest is chemicals) petrochemical complex in Dahej, Gujarat.
The complex was commissioned in Mar’17 and built with a total capex of
INR308b (including interest cost of ~INR90b).
The plants are running at ~90% utilization rates in an integrated fashion.
EBITDA margin for the company stands at ~18-20%, with higher domestic
realization.
OPaL expects to achieve EBITDA of ~INR15b in FY19, ~INR25b in FY20 (with full
utilization), and ~INR35b after (a) the completion of the Hazira-Dahej Naphtha
pipeline, (b) the exit from SEZ and (c) the completion of other debottlenecking
by FY21.
OPaL’s kickoff
Shareholding pattern (%)
As On
Dec-18 Sep-18 Dec-17
Promoter
65.6
67.5
67.7
DII
14.8
13.3
13.3
FII
5.9
5.8
5.2
Others
13.7
13.4
13.8
FII Includes depository receipts
Stock Performance (1-year)
ONGC
220
180
140
100
Sensex - Rebased
OPaL was created with an intention of producing value products using ONGC’s
naphtha from Hazira, and ethane, propane and butane from ONGC’s extraction
plant at Dahej.
Dahej complex has a total of eight furnaces, with flexibility of changing
feedstock inputs, base design for 60% naphtha and 40% gases. This gives the
company an advantage of switching between gas and naphtha during periods
of high gas prices (in winter), and vice versa.
Total gas consumption stands at ~5.3mmscmd, with 1.3mmscmd of LNG used
purely for power generation.
Naphtha is majorly sourced from ONGC, while a small amount is also sourced
from BPCL/others. Ethane is majorly sourced from ONGC’s extraction plant, and
a small quantity (less than 10%) from RIL.
The company can boost its utilization up to ~120%, with certain
debottlenecking and process improvement.
OPaL’s positioning
OPaL commands ~13% of the domestic market share, with ~32 domestic
channel partners.
The products are exported to 20+ countries. Around two thirds of exports are
to China with the help of ~13 global partners.
Chemicals form the majority of exports, with py-gas (via Hazira) and benzene
(Pipavav) exports at 100% each and butadiene (Kandla) exports at 60%.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Swarnendu Bhushan – Research Analyst
(Swarnendu.Bhushan@MotilalOswal.com); +91 22 6129 1529
Sarfraz Bhimani – Research Analyst
(Sarfraz.Bhimani@motilaloswal.com); +91 22 6129 1566