Tata Steel shares lag peers over three months; is European business weakness priced in?
On a five-year average basis, Tata Steel has historically traded at an enterprise value to EBITDA (EV/EBITDA) discount of around 28 per cent to JSW Steel Ltd and 11 per cent to Jindal Steel Ltd.
- Sep 28, 2026,
- Updated Sep 28, 2026 5:09 PM IST
Shares of Tata Steel have underperformed key domestic steel peers over the past three months, with concerns around its European business, the potential narrowing of its margin gap with peers after 2030 and recent group-related news flow weighing on the counter, according to Elara Capital.
However, the domestic brokerage said these concerns appear to be largely reflected in Tata Steel's current valuation. It retained its 'Buy' rating and maintained its 12-month target price at Rs 235, implying potential upside of about 26 per cent from Monday's closing price of Rs 186.
On a five-year average basis, Tata Steel has historically traded at an enterprise value to EBITDA (EV/EBITDA) discount of around 28 per cent to JSW Steel Ltd and 11 per cent to Jindal Steel Ltd. These discounts have widened to around 39 per cent and 32 per cent, respectively, at current valuations, Elara stated.
The relative valuation versus SAIL (Steel Authority of India Ltd) has also reversed. Tata Steel is currently trading at around a 19 per cent discount to SAIL, compared with a premium historically, the brokerage said.
Europe business in focus
Tata Steel's European operations turned EBITDA-negative in Q1 FY27, primarily due to the temporary shutdown of its Direct Sheet Plant (DSP) in the Netherlands after chromium emissions exceeded permissible limits.
With the DSP restarting in August, Elara expects sequential improvement in the European business's profitability from Q2 FY27 through Q1 FY28. It expects further improvement in Q3 FY27 as the plant achieves more stable operations.
The brokerage said Q4 FY27 could benefit from the scheduled implementation of the Carbon Border Adjustment Mechanism (CBAM) in the UK, while Q1 FY28 may see an additional improvement as annual contract repricing takes effect.
Domestic steel prices hold firm
Elara noted that Q2 is typically a seasonally weak quarter for Indian steel, with HRC (Hot-Rolled Coil) prices declining by an average 5.7 per cent over the past five years. However, Q2 FY27 HRC prices have so far risen around 2 per cent from the Q1 FY27 average.
The brokerage pointed to restocking demand, healthy demand from the auto segment, improved construction activity and strong auto demand, particularly for galvanised products.
Elara's target of Rs 235 is based on 6.5x EV/EBITDA for Indian operations and 4x for European operations.
Shares of Tata Steel have underperformed key domestic steel peers over the past three months, with concerns around its European business, the potential narrowing of its margin gap with peers after 2030 and recent group-related news flow weighing on the counter, according to Elara Capital.
However, the domestic brokerage said these concerns appear to be largely reflected in Tata Steel's current valuation. It retained its 'Buy' rating and maintained its 12-month target price at Rs 235, implying potential upside of about 26 per cent from Monday's closing price of Rs 186.
On a five-year average basis, Tata Steel has historically traded at an enterprise value to EBITDA (EV/EBITDA) discount of around 28 per cent to JSW Steel Ltd and 11 per cent to Jindal Steel Ltd. These discounts have widened to around 39 per cent and 32 per cent, respectively, at current valuations, Elara stated.
The relative valuation versus SAIL (Steel Authority of India Ltd) has also reversed. Tata Steel is currently trading at around a 19 per cent discount to SAIL, compared with a premium historically, the brokerage said.
Europe business in focus
Tata Steel's European operations turned EBITDA-negative in Q1 FY27, primarily due to the temporary shutdown of its Direct Sheet Plant (DSP) in the Netherlands after chromium emissions exceeded permissible limits.
With the DSP restarting in August, Elara expects sequential improvement in the European business's profitability from Q2 FY27 through Q1 FY28. It expects further improvement in Q3 FY27 as the plant achieves more stable operations.
The brokerage said Q4 FY27 could benefit from the scheduled implementation of the Carbon Border Adjustment Mechanism (CBAM) in the UK, while Q1 FY28 may see an additional improvement as annual contract repricing takes effect.
Domestic steel prices hold firm
Elara noted that Q2 is typically a seasonally weak quarter for Indian steel, with HRC (Hot-Rolled Coil) prices declining by an average 5.7 per cent over the past five years. However, Q2 FY27 HRC prices have so far risen around 2 per cent from the Q1 FY27 average.
The brokerage pointed to restocking demand, healthy demand from the auto segment, improved construction activity and strong auto demand, particularly for galvanised products.
Elara's target of Rs 235 is based on 6.5x EV/EBITDA for Indian operations and 4x for European operations.