Target: ₹150

CMP: ₹136.45

Tata Steel Nederland (TSN) has announced a major transformation programme to enhance competitiveness in the backdrop of tightening steel spreads in Europe. The steel spot spreads in Europe are under stress due to elevated energy and carbon costs over the last 2 years. The spot spreads were at multi-year low in Q3FY25 at €170/t vs. historical average levels of €240/t.

The company is focusing on cost reduction programmes to offset the impact of lower spreads. The company is focusing on optimising ‘controllable cost’ parameters by maximising production efficiencies, lowering fixed costs, and optimising product mix to focus on cash flow and EBITDA.

We cut our EV/EBITDA multiple for Indian operations from 7.0x to 6.5x, citing current macro uncertainty and headwinds arising due to the US tariffs. We raise our EBITDA estimates for FY26 by 16 per cent as we factor in lower coking coal prices and tweak down Europe Opex.

We use SoTP and ascribe a 1-year Fwd EV/EBITDA multiple of 6.5x (from 7x), 5x, and 4x to India standalone, other operations, and Europe, respectively, on Mar’27 EBITDA (From Dec’26) to arrive at our Mar’25 forward TP of ₹150/share (from ₹155).

Key Risks: A decrease/increase in HRC prices vs. our assumption; higher/lower coking coal costs than our assumptions; and resolution/un-resolution of the trade uncertainty arising due to tariff actions could pose an upside/downside risk to our TP.

Published on April 15, 2025

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