Motilal Oswal's research report on TATA Steel
Tata Steel (TATA) is pursuing an aggressive capacity expansion strategy in India to capitalize on the rising domestic demand. The company has outlined a target to double its crude steel capacity from the current 21.6MTPA to 40MTPA by FY30, with an annual capex commitment of ~INR100b. TATA commissioned India’s largest BF at Kalinganagar in FY25, increasing the capacity from 3MTPA to 8MTPA, backed by an investment of INR270b. The capacity ramp-up is currently on track and in phase-II of expansion. Management aims to increase the capacity by another 5MTPA, bringing the total to 13MTPA. Other initiatives include scaling Neelachal Ispat Nigam Ltd (NINL) from 1MTPA to 5.5MTPA, and commissioning a 0.75MTPA scrapbased electric arc furnace in Ludhiana by 2026. The company also plans to expand the Meramandali unit from 5 MTPA to 6.5 MTPA, aligning with broader capacity goals.
Outlook
At CMP, TATA is trading at 7.6x EV/EBITDA and 4.1x FY27E P/B. We believe that all the positives are well priced in. We reiterate our Neutral rating with an SOTP-based TP of INR180 per share on FY27 estimate.
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