Whalesbook
Tata Steel shares have surged to a fresh 52-week high, climbing 4.5% in intraday trade to Rs 211.10 on the National Stock Exchange (NSE). This upward momentum follows a robust 13% gain over the past month and a substantial 55% return over the last 12 months. Brokerage firms are closely watching the company's performance, particularly after its Q3 results.
Brokerage Revisions and Upside Potential
Top brokerages have revised their price targets upwards, signaling significant optimism. Nomura has reiterated its 'Buy' rating, increasing its target price by 2% to Rs 220, implying an 11.7% potential upside from current levels. The brokerage noted Tata Steel's strong performance even as hot-rolled coil (HRC) prices remain near trough levels.
JM Financial has set the most aggressive target, raising its price objective to Rs 240. This represents a potential upside of approximately 22% over the next 12 months, a move driven by upward revisions to earnings estimates for FY27 and FY28 by 12-13%. Nuvama Institutional Equities, while also raising its target to Rs 189, retains a 'Hold' rating, indicating a cautious approach and a preference for re-entry at lower price points.
Q3 Performance and Outlook
Tata Steel reported consolidated EBITDA of Rs 8,270 crore for Q3, slightly exceeding JM Financial's estimates. Indian operations delivered EBITDA of Rs 8,250 crore, with a per-tonne EBITDA of Rs 13,700, though this was down sequentially due to lower realisations. Conversely, Tata Steel Europe posted a negative EBITDA of $19 million, a slight deterioration from the previous quarter's positive $17 million.
Management guidance points to a $15 per tonne increase in coking coal costs for domestic operations in Q4 FY26, a factor that will impact profitability. However, this is expected to be offset by an anticipated Rs 2,300 per tonne increase in domestic blended realisations. European operations are expected to see a decline in Net Selling Realisation (NSR) by €33 per tonne.
Sectoral Dynamics and Risks
The company's Indian operations are benefiting from rising steel prices, which are improving spreads. The European region, however, is navigating challenges including the upcoming Carbon Border Adjustment Mechanism (CBAM) and quota cuts, which are expected to influence pricing and margins. Similar protective measures are anticipated for UK operations. Despite these regional disparities, the overall upward revision in earnings forecasts by brokerages underscores confidence in the company's ability to navigate these complexities and capitalize on market opportunities.