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Anand Rathi Report
The implementation of the Carbon Border Adjustment Mechanism in January 2026 has coincided with a sustained uptrend in EU steel prices, with spot prices improving ~$100/tonne over the past three months, benefiting incumbents such as Tata Steel Ltd.
Further, the UK government's move to realign its steel import quota regime mirroring EU policy marks a structural positive. As tighter quotas take effect from July-26, the brokerage expects a meaningful reduction in import pressure, enabling a more level playing field for Tata EU. Consequently, the brokerage now factors in UK Ebitda breakeven by H2 FY27, a key inflection for consolidated profitability.
On the domestic front, steel realizations have rebounded sharply, with Q4 average HRC/primary rebar prices up ~14.8%/~20.7% QoQ to Rs 54,165/Rs 56,938 per tonne. Anand Rathi believes the magnitude of price improvement is trending ahead of management's earlier guidance, supporting Q4 standalone Ebitda/tonne of >Rs15,000 — implying a stronger exit run-rate into FY27. Operationally, Tata Steel continues to strengthen its India footprint with commissioning of 0.75 million tonnes EAF facility at Ludhiana, taking domestic capacity to 27.35m tonnes.
While legacy packaging contracts in the Netherlands may cap near-term ASP expansion, this is likely to be transient. The combination of firm EU pricing, domestic strength, an improving product mix and expected price hikes in automotive contracts from Apr'26 is expected drive margin expansion.
Factoring in these tailwinds, the brokerage raises its FY26e/FY27e/FY28e Ebitda estimates by 3.1%/7.6%/5.6%, respectively. With UK operations approaching breakeven and continued domestic scale-up toward 40m tonnes capacity the brokerage sees durable earnings trajectory emerging.
Anand Rathi upgrades the stock to Buy, with a revised target price of Rs 240 (based on FY28e SoTP valuation).
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