Motilal Oswal Maintains Buy Recommendation for Tata Steel, Targets Rs 250
Tata Steel Reports Strong 4QFY26 Earnings, Reaffirms BUY Rating
Tata Steel's (TATA) standalone revenue for the fourth quarter of fiscal year 2026 (4QFY26) stood at INR385 billion, marking a 12% year-over-year (YoY) and 8% quarter-over-quarter (QoQ) growth. This performance was largely driven by improved domestic volumes and strong normalized selling price (NSR) recovery.
Key statistics for 4QFY26 include steel production of 5.97 million tons (mt), a 14% YoY increase and flat QoQ performance, and deliveries of 6.2 mt, up 11% YoY and 2% QoQ. The average selling price (ASP) improved by 5% sequentially to INR62,113 per ton in 4QFY26, a 1% YoY growth, driven by strong steel price recovery led by safeguard duty.
The company's earnings before interest, tax, depreciation, and amortization (EBITDA) stood at INR94.7 billion, a 36% YoY and 23% QoQ growth, in line with the research firm's estimate. This translated to an EBITDA per ton of INR15,300, a 23% YoY and 20% QoQ increase in 4QFY26. The input cost inflation, led by higher coking coal consumption cost, was fully offset by strong NSR.
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For the full fiscal year 2026 (FY26), Tata Steel's revenue grew 5% YoY to INR1,397 billion, aided by volume growth of 8% YoY to 22.5 mt. However, this was partially offset by muted NSR of 2% YoY. The company's EBITDA stood at INR325 billion, a 17% YoY growth, translating to an EBITDA per ton of INR14,413, an 8% YoY increase. APAT (attributable profit after tax) stood at INR172 billion, up 15% YoY in FY26.
Valuation and Outlook
At the current market price (CMP), Tata Steel is trading at 7.1x enterprise value to EBITDA (EV/EBITDA) and 2x price-to-book value (P/BV) on a fiscal year 2028 estimate (FY28E). The research firm reiterates its BUY rating with a standalone target price (SOTP) of INR250 on fiscal year 2028 earnings per share (EPS).
| Metric | 4QFY26 | FY26 |
|---|---|---|
| Revenue (INR billion) | 385 | 1397 |
| YoY Growth | 12% | 5% |
| QoQ Growth | 8% | - |
| Steel Production (mt) | 5.97 | 22.5 |
| YoY Growth | 14% | 8% |
| Deliveries (mt) | 6.2 | - |
| YoY Growth | 11% | - |
| ASP (INR per ton) | 62113 | - |
| YoY Growth | 1% | - |
| EBITDA (INR billion) | 94.7 | 325 |
| YoY Growth | 36% | 17% |
| EBITDA per ton (INR) | 15300 | 14413 |
| YoY Growth | 23% | 8% |
| APAT (INR billion) | 48 | 172 |
| YoY Growth | 29% | 15% |
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Investor Takeaway
Investors should consider Tata Steel as a potential buy due to its strong revenue growth and improved EBITDA margins.
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