Steel stocks are in focus and have seen sharp price movement lately. In its latest report, the domestic brokerage house Motilal Oswal has upgraded the price target for Tata Steel. The brokerage firm maintained its ‘Buy’ rating on the stock and set a target price of Rs 240. This implies an upside potential of about 15% from the current market price.
According to the brokerage house, the positive stance is based on a mix of strong domestic demand, policy-led price support, expansion plans in India and gradual improvement in European operations.
Let’s take a look at the key reason why the brokerage house is bullish on this stock and what is the rationale behind it –
Motilal Oswal on Tata Steel: Strong demand outlook in India
One of the key pillars of the upgrade is India’s steel demand. As per the brokerage report, India’s steel demand is expected to grow by around 8-10% between FY26-FY30. This growth is backed by infrastructure spending, government support and recovery in industrial activity.
Tata Steel is expanding its production capacity to tap this demand. As per the brokerage report, this steel sector company is also planning to increase its capacity in India from 26.5 million tonnes per annum in FY25 to 40 million tonnes per annum by FY31.
Moreover, the company has outlined an annual capital expenditure plan of around Rs 16,000 crore to support this expansion.
The report added, “Tata is aggressively expanding its capacity in India to capitalize on rising domestic demand.”
Recently, the company commissioned a 5 million tonnes per annum integrated expansion at Kalinganagar, taking the plant’s total capacity to 8 million tonnes per annum. Further expansion at the site is planned.
Motilal Oswal on Tata Steel: Multiple projects in pipeline
Beyond Kalinganagar, several projects are underway. According to the brokerage report, the company is scaling up Neelachal Ispat Nigam (NINL) from 1 million tonnes per annum to 5.8 million tonnes per annum. It is also commissioning a 0.75 million tonnes per annum scrap-based Electric Arc Furnace in Ludhiana by FY27, which will focus on higher-margin retail products.
The board has also approved a demonstration plant in Jamshedpur based on Hisarna low-carbon technology. In Europe, Tata Steel is shifting towards greener steelmaking by converting Port Talbot in the United Kingdom into a 3 million tonnes per annum Electric Arc Furnace-based facility.
Motilal Oswal on Tata Steel: Europe business showing improvement
The European business has been under pressure in recent years due to weak spreads and high energy costs. However, according to the brokerage report, there are signs of gradual improvement.
The report added that “Europe operations are making visible progress toward breakeven.” It noted that cost optimisation and softer energy prices could help lift Europe EBITDA to around $70 per tonne by FY28.
The introduction of the Carbon Border Adjustment Mechanism (CBAM) in the European Union is also expected to help.
Motilal Oswal on Tata Steel: Support from prices and policy
Domestic steel prices have also shown signs of recovery. According to data cited in the brokerage report from the Joint Plant Committee, India’s crude steel production rose 10% YoY to 123 million tonnes in the first nine months of FY26.
Motilal Oswal on Tata Steel: Valuation and balance sheet position
From a valuation perspective, the brokerage noted that the stock is trading at 7.7 times Enterprise Value to EBITDA and 2.3 times Price to Book value based on FY27 estimates.
Conclusion
Overall, as per the brokerage report, the upgrade is driven by a combination of domestic growth prospects, ongoing capacity expansion, government policies and gradual improvement in Europe.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.