Tata Steel sees stronger H2 earnings from India volumes and Europe recovery

Investment View and Outlook

Elara Securities' November 7, 2026 result update on Tata Steel reiterates a Buy rating with a target price of Rs 235. The broker expects stronger H2FY27 earnings, supported by higher volumes, improved steel prices across geographies, a recovery in Tata Steel Netherlands and lower losses in the UK.

The key risk identified by Elara Securities is a slowdown in steel demand.

Q2FY27 Consolidated Performance

Tata Steel reported consolidated Q2FY27 EBITDA of Rs 10,533 crore, up 18.4 per cent YoY and 13.7 per cent QoQ. This was broadly in line with Elara Securities' estimate of Rs 10,305 crore and slightly above the Rs 10,000 crore consensus estimate.

Adjusted PAT was 6.1 per cent ahead of Elara Securities' estimate.

Indian Business: Volume and Realisation Growth

The Indian business was driven by domestic price realisation and volume growth. Tata Steel standalone sales volume increased 7.7 per cent YoY and 15.7 per cent QoQ to 6.0 million tonnes in Q2FY27. Standalone realisation rose 14.2 per cent YoY to Rs 70,405 per tonne and was broadly flat QoQ.

Standalone EBITDA rose 22.9 per cent YoY and 9.0 per cent QoQ to Rs 10,012 crore. EBITDA per tonne increased 14.0 per cent YoY to Rs 16,742, although it declined 5.7 per cent QoQ. Management has guided for Q3 realisation in India to increase by Rs 3,500-3,600 per tonne QoQ.

Overseas Operations

Tata Steel Netherlands

Tata Steel Netherlands generated Q2 EBITDA of about Rs 790 crore, compared with about Rs 39 crore in Q1FY27. Performance was aided by the August restart of the Direct Sheet Plant and its return to rated capacity, which improved the product mix.

Management targets Netherlands quarterly deliveries of about 1.7 million tonnes in H2FY27, around 30 per cent above Q2FY27.

Tata Steel UK

Tata Steel UK volumes declined about 21 per cent QoQ because of weak demand and inventory build-up ahead of revised trade measures effective July 1, 2026. UK EBITDA per tonne loss widened to Rs 19,027, compared with losses of Rs 7,071 in Q1FY27 and Rs 13,510 in Q2FY26.

Management targets UK break-even by Q4FY27 as excess imports clear and Q3 realisation rises by GBP 28-30 per tonne.

H2FY27 Outlook, Cost Programme and Expansion

Management expects stronger H2FY27 operating and financial performance, led by seasonally higher domestic deliveries and firmer realisations. Group profitability is also expected to benefit from a FY27 cost takeout target of about Rs 7,000 crore and a multi-year cost transformation programme through 2030.

Neelachal Ispat Nigam generated Q2 EBITDA of Rs 318 crore. Its amalgamation with Tata Steel remains targeted for completion in FY27, subject to NCLT approval.

The proposed 4.8 million tonne NINL expansion is expected to enter execution and be commissioned by FY30. It includes four long-product mills, with one rebar mill expected to begin before upstream facilities. Other capex includes a 0.7 million tonne hot rolled pickling and galvanising line and a 300 kilotonne tinplate expansion.

Estimates, Valuation and Balance Sheet

Elara Securities raised its FY27E EBITDA estimate by 9.0 per cent and FY28E EBITDA estimate by 1.8 per cent, while retaining its FY29E EBITDA estimate. The changes reflect stronger volume and realisation assumptions.

The unchanged Rs 235 target price is based on September 2028E valuation using 6.5 times EV/EBITDA for Tata Steel standalone operations, 4.0 times for European operations and 5.0 times for other businesses. The valuation also deducts net debt and adds work in progress at 40 per cent.

Net debt was Rs 91,423 crore at September-end 2026, versus Rs 80,140 crore at March-end 2026.