Neutral Tata Steel; target of Rs 140: Motilal Oswal

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26 Aug, 2025 12:21

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Tata Steel Nederland (TSN) has adopted a comprehensive transformation program to maximize production efficiencies, reduce fixed costs, and optimize product mix and margins. As part of this initiative, the TSN will standardize the processes, increase automation, and eliminate duplication across its operations. Through this cost restructuring, the company aims to reduce costs by 15% in FY26 compared to FY25E. In value terms, management has guided for cost savings of EUR500m (incl. a part of employee-related savings) in FY26, primarily driven by cost reductions (ex-RM and energy cost). The restructuring will not involve discontinuation of any downstream operations in the region. TSN plans to reduce ~1,600 jobs from its total workforce of around 9,000 in Ijmuiden, Netherlands. Of the targeted EUR500m in cost savings, EUR120-160m is expected to come from employee-related expenses. FY27 could see incremental savings of EUR50- 60m.

Escalating trade tensions are likely to pose near-term challenges for commodities like ferrous. Developments related to tariffs will remain a key monitorable in the near to medium term. TATA is trading at 5.6x EV/EBITDA and 1.6x FY27E P/B. We reiterate our Neutral rating with an SOTP-based TP of INR140.

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