Five reasons why Nomura expects this Tata Group stock to surge 25%

Brokerage firm Nomura has initiated coverage on Tata Group's Tata Steel Ltd

., with a 'Buy' recommendation. The initiation comes with a price target of ₹215 on the stock, which implies a potential upside of 25% from Monday's closing price.

Nomura's initiation is based on five key factors, including the company's strong domestic focus amid robust demand dynamics, improved utilisation at the Kalinganagar plant, a turnaround in European operations, a partial benefit from lower iron ore costs likely to persist beyond FY30F, and overall valuation comfort.

The foreign brokerage expects Tata Steel to strengthen its leadership in India over the next few years, driven by capacity expansion, efficiency gains, and sustainability initiatives.

It projects higher asset utilisation (up to 96% by FY28F) and improved operating leverage, which are expected to drive margin expansion.

Nomura mentioned that reduced conversion costs and enhanced profitability will strengthen Tata Steel's position as one of the most efficient and sustainable steel producers in the country.

Addressing investor concerns, Nomura said that fears over the potential loss of iron ore mines post-FY30 are overstated. It expects Tata Steel to remain the lowest raw material cost-per-ton producer in the industry.

On the European front, the brokerage expects Tata Steel Europe to report positive EBITDA by end-FY26F, supported by efficiency improvements, policy incentives, and recovering demand.

Once production ramps up fully, Tata Steel Europe is expected to generate an average EBITDA of around GBP 60 per ton, in line with its regional peers.

Key risks, according to Nomura, include delays in Neelachal Ispat Nigam Ltd.'s (NINL, unlisted) expansion, slower-than-expected demand growth, narrower spreads, and a sustained increase in iron ore prices beyond FY30F.

Shares of Tata Steel ended slightly higher during Tuesday's special session at ₹172.80. The stock has risen 7% so far in 2025.