Tata Steel shares get a downgrade after Q4 but Jefferies raises target

Shares of Tata Steel Ltd. will be in focus on Monday, May 18, after the company reported a better operational performance across both domestic and overseas businesses in the March quarter.

The company reported standalone steel volumes growth of 11% year-on-year, while volumes in the Netherlands business rose 9% sequentially. Losses in the UK operations also narrowed during the quarter.

For Q4FY26, Tata Steel reported revenue of ₹63,270 crore, ahead of the Street estimate of ₹63,150 crore. Profit after tax stood at ₹2,965 crore against estimates of ₹2,751 crore.

EBITDA came in at ₹9,829 crore versus expectations of ₹9,719 crore, while margins stood at 15.5% compared to the poll estimate of 15.4%.

India EBITDA per tonne stood at ₹15,245, slightly ahead of expectations of ₹15,020 per tonne. The Europe business also turned marginally profitable, reporting EBITDA of $1.5 per tonne against expectations of a loss of $5 per tonne.

The company’s cost transformation programme continued to deliver benefits, with Tata Steel achieving savings of around ₹10,868 crore across geographies in FY26. The company is targeting additional cost savings of ₹7,140 crore in FY27.

Capital expenditure for FY26 stood at ₹14,026 crore, while net debt-to-EBITDA remained comfortable at 2.3x.

The board has also recommended a dividend of ₹4 per share compared to ₹3.60 per share paid in each of the previous three fiscals.

Tata Steel's way ahead

Management has guided for incremental steel volumes growth of 2 million tonnes in FY27 over FY26, largely led by Indian operations.

The company expects benefits from higher steel prices in India to flow through in Q1FY27, partially offset by higher costs.

Tata Steel also expects UK losses to narrow further, although margins in the Netherlands business may remain under pressure due to lower volumes and elevated costs.

Tata Steel sees mixed reactions from brokerages

CLSA has maintained a 'Hold' rating on Tata Steel with a price target of ₹225. The brokerage said Q4 earnings were largely in line with expectations, with standalone profitability improving sequentially and losses in the UK business narrowing.

CLSA expects near-term profitability to improve in Q1FY27 due to higher steel prices across geographies, although it sees limited medium-term volume growth until the NINL expansion is commissioned in FY30 or FY31.

JPMorgan downgraded the stock to 'Neutral' with a price target of ₹220 following the stock’s 38% rally over the past year against a 5.5% decline in the Nifty.

The brokerage flagged regulatory cost headwinds in the Netherlands business, including the risk of early closure of coke and gas plants, which may increase costs related to raw materials, freight and employee restructuring.

It also pointed to delays in the UK electric arc furnace project and the India NINL expansion.

Citi maintained a 'Sell' rating with a price target of ₹200.

Citi said that adjusted EBITDA of ₹9,950 crore was 5% ahead of estimates and rose 20% sequentially, supported by better India realisations and lower UK losses. However, the brokerage remains cautious due to uncertainty around environmental regulations in the Netherlands and slower growth visibility beyond FY27.

Goldman Sachs retained a 'Neutral' rating with a price target of ₹218.

The brokerage said positive price-cost spreads across all geographies in Q1FY27, likely 7% India volume growth in FY27 and expectations of the UK business breaking even at the EBITDA level.

However, it flagged concerns over regulatory challenges in the Netherlands and delays in the UK EAF ramp-up.

Jefferies maintained a 'Buy' rating on Tata Steel and raised its price target to ₹275. The brokerage increased its FY27 and FY28 EPS estimates by 6% to 14%, and expects the India business to deliver 9% volume growth along with margin expansion in FY27.

Jefferies added that India remains the key driver for stock performance despite continuing regulatory issues in Europe.

Investec maintained a 'Hold' rating with a price target of ₹240. The brokerage highlighted strong earnings driven by resilient India operations and reduced losses in Europe, while also pointing to improving domestic spreads in Q1FY27.

Morgan Stanley retained its 'Overweight' rating with a price target of ₹215. The brokerage said Tata Steel delivered strong performance across domestic and overseas operations and expects the near-term outlook to remain favourable due to higher India prices and policy support in the UK and EU.

Morgan Stanley also highlighted Tata Steel’s FY27 capital expenditure guidance of ₹20,000 crore, compared to ₹14,000 crore in FY26, primarily driven by downstream expansion, the NINL project and mining-related spending in India.

The brokerage added that the company achieved nearly 95% of its FY26 cost savings target and is targeting another ₹7,100 crore of savings in FY27.