Tata Steel Share Price Target at Rs 240: Motilal Oswal Research
Motilal Oswal Financial Services has reiterated its BUY recommendation on Tata Steel with a target price of Rs240, implying a potential upside of approximately 15% from the current market price of Rs209. Motilal Oswal believes the company is entering a structurally stronger earnings cycle driven by domestic capacity expansion, safeguard duty-led price protection, and an improving European outlook. India’s steel demand is projected to grow at a healthy pace over FY26–FY30, while regulatory interventions are stabilizing pricing dynamics. Simultaneously, Europe is progressing toward breakeven, aided by cost transformation and carbon border mechanisms. With consolidated EBITDA expected to rise meaningfully and leverage ratios improving, valuation metrics remain compelling at current levels, justifying the BUY call and Rs240 target.
Investment Thesis: Domestic Strength Anchors the Story
Tata Steel’s long-term strategy is firmly anchored in India’s structural steel demand expansion.
India’s steel demand is projected to grow 8–10% CAGR over FY26–FY30, backed by infrastructure spending, policy thrust, and industrial recovery.
Against this backdrop, Tata Steel is expanding capacity aggressively from 26.5 mtpa in FY25 to 40 mtpa by FY31, supported by annual capex of approximately Rs160 billion.
The recently commissioned 5 mtpa integrated expansion at Kalinganagar (total capacity now 8 mtpa, with Phase III targeting 13 mtpa) reflects disciplined execution. Parallel expansion at NINL from 1 mtpa to 5.8 mtpa strengthens its long products portfolio, deepening exposure to high-growth construction demand.
Additionally, the commissioning of a 0.75 mtpa scrap-based EAF facility in Ludhiana by FY27 positions the company to capture high-margin retail segments. This multi-pronged expansion ensures volume-led earnings growth even in moderate pricing environments.
Pricing Tailwinds: Safeguard Duty and China Discipline
The domestic pricing environment has materially improved.
India’s crude steel production rose 10% YoY to 123 mt in 9MFY26, while imports declined 39% YoY due to safeguard duties and tighter controls. Domestic HRC prices rebounded from Rs47,500 per tonne to Rs53,500 per tonne following the government’s definitive 12% safeguard duty.
Below is a simplified representation of landed cost dynamics:
| Particulars | INR/t |
|---|---|
| Total Landed Cost (With Safeguard Duty) | Rs56,860 |
| Domestic HRC Price | Rs53,500 |
| Premium/(Discount) | (Rs3,360) |
The data clearly shows imported steel trading at a premium to domestic prices post-duty, effectively protecting Indian producers’ margins.
On the global front, China’s crude steel production declined 5% YoY to 950 mt in CY25, signaling supply discipline. Production curbs and export restrictions reduce the risk of global oversupply and support price stabilization.
European Operations: Gradual but Visible Recovery
Europe has long been Tata Steel’s weakest link, but signs of stabilization are emerging.
Losses narrowed from USD42/t in 3QFY25 to USD10/t in 3QFY26, despite weak realizations. The Rs115 billion cost transformation program across India, UK, and Netherlands is on track.
Key European highlights include:
UK operations targeted to achieve breakeven in the next few quarters
Netherlands business generated EUR210m EBITDA in 9MFY26 despite EUR150m carbon cost absorption
Consolidated EBITDA per tonne expected to rise to Rs13,000 by FY28E (vs Rs8,376 in FY25)
The Carbon Border Adjustment Mechanism (CBAM) further alters the competitive landscape. EU importers will progressively bear carbon costs from CY26 onward, narrowing the cost differential between EU and non-EU producers. This effectively raises the industry floor price rather than delivering direct cost savings.
Financial Trajectory: Earnings and Leverage Improvement
Consolidated financial metrics reflect cyclical recovery and structural strengthening:
| Metric | FY25 | FY27E | FY28E |
|---|---|---|---|
| Revenue (Rs b) | 2,185 | 2,619 | 2,704 |
| EBITDA (Rs b) | 259 | 436 | 471 |
| Adj. EPS (Rs) | 3.4 | 14.3 | 15.8 |
| Net Debt/EBITDA (x) | 3.2 | 1.7 | 1.3 |
Net debt stood at Rs818 billion as of 3QFY26, translating into a Net Debt/EBITDA ratio of 2.59x. The trajectory indicates steady deleveraging as earnings expand.
Return metrics are also expected to improve meaningfully, with RoE rising toward mid-teens levels over FY27–FY28.
Valuation Framework: Sum-of-the-Parts Justifies Rs240
The valuation is built on a sum-of-the-parts framework:
India standalone at 8.5x target EV/EBITDA
Europe at 7.0x
Other subsidiaries at 4.0x
The derived total equity value supports a target price of Rs240 per share.
At current levels, the stock trades at:
7.7x FY27E EV/EBITDA
2.3x FY27E P/B
These multiples remain below historical peaks and reasonable relative to forward earnings growth.
Investment Conclusion
Tata Steel is transitioning from cyclical recovery to structural earnings expansion. India’s demand tailwinds, protected pricing environment, disciplined capital allocation, and improving European economics collectively strengthen the investment case.
Target: Rs240
Current Price: Rs209
Implied Upside: ~15%
Rating: BUY
For long-term investors willing to ride commodity cyclicality, Tata Steel offers improving visibility on earnings, balance sheet repair, and margin normalization.
