Motilal Oswal says buy Tata Steel at ₹250 — Europe EBITDA turns positive and India hits ₹15,300 per tonne

Motilal Oswal maintains SOTP-based ₹250 target on Tata Steel after in-line Q4FY26 — India EBITDA up 36% YoY, Europe swings from ₹750 crore loss to breakeven; stock at 7.1x FY28 EV/EBITDA

Motilal Oswal Financial Services has reiterated its Buy rating on Tata Steel Limited with an SOTP-based target price of ₹250 on FY28 estimates, describing Q4FY26 as a strong and broadly anticipated performance driven by healthy domestic volumes, strong net steel realisations, and a long-awaited swing to EBITDA breakeven in the European operations.

India standalone: the engine is firing

Tata Steel's standalone India revenue came in at ₹38,500 crore in Q4FY26 — up 12% year on year and 8% sequentially — in line with Motilal Oswal's estimate. Steel production of 5.97 million tonnes was up 14% year on year, and deliveries of 6.2 million tonnes were up 11% year on year and 2% sequentially. Average selling price improved 5% sequentially to ₹62,113 per tonne, driven by steel price recovery supported by safeguard duty measures.

India EBITDA was ₹9,470 crore — up 36% year on year and 23% sequentially — with EBITDA per tonne of ₹15,300, up 23% year on year and 20% sequentially. The strong per-tonne improvement was achieved despite higher coking coal consumption costs, which were fully offset by the NSR recovery. Adjusted PAT for the standalone India business was ₹4,800 crore — up 29% year on year and 15% sequentially — in line with estimates.

For the full year FY26, India revenue grew 5% year on year to ₹1,39,700 crore on volume growth of 8% year on year to 22.5 million tonnes — a robust volume performance even as NSR grew only 2% year on year. Full-year EBITDA of ₹32,500 crore translated to EBITDA per tonne of ₹14,413 — up 8% year on year — and adjusted PAT grew 15% year on year to ₹17,200 crore.

Europe: the long-awaited turning point

The most strategically significant development in Q4FY26 is the swing to EBITDA breakeven in the combined European operations — the number the market has been watching for over two years. Combined Europe EBITDA was positive at ₹32 crore in Q4FY26, representing a turnaround from an EBITDA loss of ₹750 crore in Q4FY25 and a loss of ₹170 crore in Q3FY26. On a per-tonne basis, this translates to EBITDA of $2 per tonne against a loss of $36 per tonne in Q4FY25 and a loss of $10 per tonne in Q3FY26.

Combined Europe revenue was ₹22,800 crore — up 10% year on year and 17% sequentially — with deliveries of 2.2 million tonnes and ASP of $1,123 per tonne, up 11% year on year. The Netherlands business, which contributed revenue of €1,605 million, and the UK business, which contributed £470 million, are both still operating in a structurally challenged environment — the UK posted an EBITDA loss of £48 million — but the consolidated European swing to breakeven marks a meaningful inflection point in the multi-year restructuring narrative.

What Motilal Oswal expects going forward

The brokerage maintained its FY27 and FY28 earnings estimates unchanged, citing better volume outlook and an improved pricing environment for both India and Europe. For Europe specifically, Motilal Oswal expects EBITDA improvement in coming quarters driven by ongoing cost restructuring, improving steel prices, and regulatory measures — including carbon border adjustment mechanisms and reduction in import quotas — that support domestic European steel producers. The capacity ramp-up in the Netherlands and lower fixed costs from completed restructuring are expected to be incremental EBITDA drivers.

Near-term risks acknowledged include price volatility in global steel markets and emission regulation challenges in Europe — particularly the regulatory uncertainty around the IJmuiden site's coke and gas plants in the Netherlands, which JP Morgan flagged in its downgrade to Neutral on the same day.

At the current price of approximately ₹208.89 following the May 18 selloff, Motilal Oswal's ₹250 target implies upside of approximately 19.7%. The stock is currently trading at 7.1x EV/EBITDA and 2x price-to-book on FY28 estimates — multiples the brokerage views as undemanding given the improving India profitability trajectory and the European breakeven achieved in Q4FY26.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Please consult a SEBI-registered financial advisor before making investment decisions.