Tata Steel share price: MOFSL sees limited upside amid near-term challenges

MOFSL on Tuesday took note of Tata Steel's ongoing strategy to double its domestic crude steel capacity and restructure its European operations for improved competitiveness and sustainability. For now, the domestic brokerage maintained a 'Neutral' rating for Tata Steel, noting that at current market parameters the company trades at 7.6 times EV/Ebitda and 4.1 times FY27 P/B and all the positives are well priced in.

MOFSL suggested a target price of Rs 200 per share on Tata Steel on FY27 basis, which suggests a limited upside ahead. "While near-term global uncertainties persist, the Indian business is expected to maintain robust performance, with improvements underway in Europe, it said.

Tata Steel is pursuing an aggressive capacity expansion strategy in India to capitalise on the rising domestic demand. The steelmaker has outlined a target to double its crude steel capacity from the current 21.6MTPA to 40MTPA by FY30, with an annual capex commitment of approximately Rs 10,000 crore."

The Tata group firm has made significant progress on several key projects. Tata Steel commissioned India's largest blast furnace at Kalinganagar during FY25, increasing capacity from 3MTPA to 8MTPA, supported by an investment of Rs 27,000 crore. Phase-II is underway, aiming to add another 5MTPA to reach 13MTPA. Other initiatives include plans to scale Neelachal Ispat Nigam Ltd (NINL) from 1MTPA to 5.5MTPA, commissioning a 0.75MTPA scrap-based electric arc furnace in Ludhiana by 2026, and expanding the Meramandali unit from 5MTPA to 6.5MTPA.

MOFSL said Tata Steel is actively restructuring its European operations for decarbonisation and competitiveness. In the UK, it is converting its Port Talbot site to a 3 MTPA electric arc furnace (EAF), replacing traditional blast furnaces for significant cost savings and emission reduction. In the Netherlands (IJmuiden), TATA is evaluating a gas-based direct-reduced iron (DRI) and EAF route, but progression is contingent on Dutch government funding and regulatory clarity.

"Tata Steel's multi-pronged expansion plan is set to meet India's surging steel demand, maintain industry leadership, and align with global sustainability imperatives by FY30," MOFSL said. The company’s strategy aims to meet rising domestic demand and ensure alignment with international sustainability standards.

MOFSL said Tata Steel's India steel demand is projected to grow approximately 8 to 10 per cent over FY26-27, backed by a robust demand environment, policy support, and ongoing recovery in industry fundamentals." To protect local producers, the Indian government has imposed a 12 per cent safeguard duty on flat steel products, supporting domestic prices in the face of increasing imports.

MOFSL said Tata Steel is well-positioned to benefit from India's strong domestic growth story through its capacity expansion and product diversification strategies. Currently, market sentiment for H2FY26 points to a gradual price recovery, muted costs (especially coking coal prices), and demand tailwinds." This assessment reflects favourable conditions for the company in the near to medium term.

European operations, particularly in the UK and the Netherlands, have faced ongoing challenges such as high energy and operational costs and the necessity to reduce carbon emissions. However, the company is making progress towards breakeven, with recent quarters showing narrowed losses—an operating loss of $76 per tonne in 2QFY25 turned positive to $8 per tonne in 1QFY26. Management expects further reductions in Ebitda losses from UK operations, bolstered by the capacity ramp-up in the Netherlands and lower fixed costs.