ICICI Direct has maintained a BUY recommendation on Tata Steel with a revised target price of Rs 270, implying an upside potential of nearly 28% from the current market price of Rs 210. The brokerage believes Tata Steel is entering a structurally favorable growth cycle supported by robust domestic steel demand, aggressive capacity expansion, improving realizations, and a strategic restructuring of its European operations. The company’s Q4FY26 performance reinforced this thesis, with EBITDA margins expanding sharply and Indian operations delivering a meaningful improvement in profitability. ICICI Direct expects Tata Steel’s consolidated EBITDA to grow at a strong 25% CAGR between FY25 and FY28, driven by pricing strength, cost optimization, and rising steel volumes across India.

ICICI Direct Reaffirms BUY Call on Tata Steel Amid Rising Domestic Steel Demand

Tata Steel continues to strengthen its position as one of the world’s most geographically diversified steel manufacturers, with significant operations spread across India, the Netherlands, the UK, and Thailand. The brokerage highlighted that Tata Steel’s current crude steel production capacity stands at approximately 27.4 million tonnes in India, alongside 7 million tonnes in the Netherlands, 3.2 million tonnes in the UK under transition, and 1.7 million tonnes in Thailand.

ICICI Direct believes the company’s aggressive long-term expansion strategy positions it favorably to capitalize on India’s accelerating infrastructure and manufacturing growth cycle. Tata Steel is targeting nearly 40 million tonnes per annum capacity by 2030, supported by multiple brownfield and greenfield projects currently under execution.

Q4FY26 Earnings Showcase Strong Recovery in Profitability

Tata Steel reported a healthy operational performance during the March quarter, with consolidated revenue rising 13% year-on-year to Rs 63,270 crore. Steel sales volumes climbed 5% YoY to 8.7 million tonnes, driven largely by robust demand from India operations.

The company’s EBITDA stood at Rs 9,829 crore, while EBITDA margins improved to 15.5%, reflecting a sequential expansion of nearly 115 basis points. More importantly, EBITDA per tonne for Indian operations surged to nearly Rs 15,952 compared to Rs 13,381 in the previous quarter.

Profit after tax attributable to shareholders came in at Rs 2,926 crore, registering sequential growth of around 9%. The performance was aided by improved steel realizations and stronger domestic pricing trends following safeguard duty implementation.

India Operations Emerging as the Core Growth Engine

ICICI Direct remains particularly optimistic about Tata Steel’s India business, which is expected to remain the company’s primary earnings driver over the next several years. According to the brokerage, Tata Steel expects domestic steel volumes to increase by more than 2 million tonnes in FY27, largely due to the ramp-up of the Kalinganagar expansion project.

Key expansion initiatives include:

• 4.8 MTPA expansion at Neelachal, targeted by 2029
• 2.5 MTPA finished steel expansion at Meramandali
• Strategic partnership with Lloyds Metals & Energy for iron ore integration and a proposed 6 MTPA greenfield steel plant in Maharashtra
• Expansion of downstream and value-added businesses including tubes, wires, galvanizing, and color-coated steel

The brokerage expects Tata Steel’s Indian steel sales volumes to grow at a 7% CAGR between FY26 and FY28, eventually reaching nearly 26 million tonnes.

Steel Price Momentum Expected to Lift Margins Further

The near-term earnings outlook appears increasingly favorable due to stronger steel realizations. Tata Steel management indicated that Indian steel realizations could improve by nearly Rs 6,000 per tonne sequentially in Q1FY27 — among the highest increases anticipated within the domestic steel industry.

Although coking coal prices are expected to rise by roughly US$15 per tonne, alongside elevated logistics and energy costs stemming from geopolitical tensions in West Asia, ICICI Direct believes pricing gains and internal cost optimization initiatives should more than offset these pressures.

The company has also announced a region-wide cost savings target of approximately Rs 7,140 crore for FY27 after already achieving savings of over Rs 10,800 crore in FY26 through supply chain optimization, improved raw material efficiency, and operational restructuring.

European Business Restructuring Could Unlock Long-Term Value

Tata Steel’s European transformation strategy remains a critical pillar of the long-term investment case. In the UK, the company is transitioning toward greener steel production through a 3.2 MTPA Electric Arc Furnace project backed by a £500 million government grant.

Meanwhile, in the Netherlands, Tata Steel plans to replace one blast furnace with a Direct Reduced Iron and Electric Arc Furnace configuration by 2030, potentially supported by nearly €2 billion in government funding.

Despite ongoing environmental and regulatory challenges in Europe, ICICI Direct expects profitability to improve gradually due to:

• European import restrictions
• Carbon Border Adjustment Mechanism implementation
• Higher steel realizations
• Operational restructuring
• Reduced losses in UK operations

The brokerage also noted that Tata Steel expects UK operations to progressively move toward EBITDA breakeven over the coming years.

Financial Outlook Indicates Sharp Earnings Expansion

ICICI Direct has significantly upgraded its earnings estimates for Tata Steel. The brokerage now projects consolidated EBITDA to rise from Rs 34,352 crore in FY26 to nearly Rs 53,598 crore by FY28. Net profit is expected to surge from Rs 10,794 crore in FY26 to Rs 24,567 crore in FY28.

The brokerage expects EBITDA margins to improve steadily toward 18.3% by FY28, while leverage ratios are projected to decline meaningfully as cash generation strengthens. Debt-to-EBITDA is estimated to reduce from 2.5x in FY26 to nearly 1.4x by FY28.

Valuation Suggests Meaningful Upside Potential

ICICI Direct values Tata Steel using a Sum-of-the-Parts methodology, assigning a 7.5x EV/EBITDA multiple to the India business and 4x EV/EBITDA to European operations. Based on FY28 estimates, the brokerage arrived at a consolidated enterprise valuation of nearly Rs 3.94 lakh crore.

After adjusting for debt and cash balances, the brokerage derived an implied equity value supporting a target price of Rs 270 per share.

Key Risks Investors Should Monitor

Despite the constructive outlook, investors should remain aware of certain risks that could affect future performance:

• Sharp correction in domestic steel prices
• Higher-than-expected coking coal costs
• Regulatory challenges in European operations
• Execution risks related to large-scale capex projects
• Global economic slowdown impacting steel demand

Investment View

Tata Steel appears strategically positioned to benefit from India’s long-term industrial expansion cycle. Strong domestic demand visibility, rising value-added steel capacity, aggressive cost optimization, and a gradual turnaround in European operations collectively strengthen the company’s medium-term earnings trajectory.

With earnings momentum improving materially and valuations remaining reasonable relative to projected cash flows, ICICI Direct believes the stock offers an attractive risk-reward profile for long-term investors targeting exposure to India’s infrastructure and manufacturing growth story.