"FAIR VALUE" OF "OGDCL" RS. 160

"FAIR VALUE" OF "OGDCL" RS. 160

Current Price Rs.105.5

OGDC’s gas reserves life is 30.7 years while that of oil is 12.3 years. The company has always had the most aggressive plantowards exploration and going forward in FY09-10 these activities are going to remain aggressive with target of 52-65wells. The company’s success ratio remained at 1:0.21 in FY08, despite a significant number of jobs carried over fromFY07, when success ratio stood at 1:0.24. The stock is trading at a low forward PEx of 6.88 based on the current stock price.Going forward the company’s net income is expected to grow at 28% in FY’09 & at a 3 year CAGR of 16% on the back oftop-line growth based on rise in production volumes and improved oil & gas prices. The dividend yield of the companyhas remained above 8.0% since FY06 and is expected to be highest in FY09 at 9.5%. At the current price of Rs105.5, the stock is trading at TSR of43.6% (including 9.5% dividend yield) from our PT of Rs160/share. We recommend investors to take long termexposure in the stock based on high dividend yield and forecasted increase in earnings