'Add' Tata Steel Shares Maintains ICICI Securities, Revises Target Price — Here's Why

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ICICI Securities Report

Tata Steel Ltd. is now focusing on capacity expansion in India and cost rationalisation in Europe to improve its financial performance. Indian capacities are expected to be extended to 40 mmte from 26 mnte currently, potentially in next five-six years.

Netherlands’ operations have the potential to earn better-than-historical Ebitda as the EU prepares for Carbon Boarded Adjustment Mechanism (CBAM).

Proper implementation of the same could be a key monitorable.

The brokerage do not expect UK’s operations to be profitable in near-to-medium term.

Given the capex announcement, ICICI Securities raises capex for FY27/28E by 15-20%. Consequently, target price has been revised downwards to Rs 188 (from Rs 196), keeping the multiple intact at 7.0x FY28E EV/Ebitda. Maintain Add.

Key risks

• Weaker-than-expected steel demand.

• Delays in Europe’s cost translation plans.

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