Motilal Oswal Research has upgraded Tata Steel (TATA) to a BUY rating, with a target price of Rs 210, implying a 19% upside from the current market price of Rs 177. The research highlights Tata Steel’s aggressive capacity expansion in India to capitalize on robust domestic demand, the transition to green steelmaking in Europe with improving profitability, and supportive domestic price environment fortified by government safeguard duties. The European operations are moving towards breakeven through cost restructuring, while Tata Steel’s strong operating cash flow will fund ongoing expansions without increasing leverage, making the long-term outlook promising despite near-term uncertainties. Investors should watch key levels with entry points above Rs 177, targeting Rs 210 with strong fundamental support.

Research House and Recommendation for Steel Major

Motilal Oswal Financial Services (MOFSL) has upgraded Tata Steel from Neutral to BUY in its October 2025 report. The target price is set at Rs 210 by September 2027, reflecting a potential 19% gain from the current market price of Rs 177. The recommendation is grounded on Tata Steel’s dominant position in the Indian steel sector, improving steel price realizations, and operational efficiencies, alongside a strengthening domestic demand scenario.

Capacity Expansion and Earnings Prospect

Tata Steel is aggressively expanding its Indian capacity from 26.5 million tonnes per annum (mtpa) in FY25 to a targeted 40 mtpa by FY30. The recent commissioning of an integrated 5 mtpa plant at Kalinganagar (total 8 mtpa) with INR 270 billion investment and additional expansions at NINL (scaling from 1 mtpa to 4.5 mtpa), an electric arc furnace (EAF) at Ludhiana (0.75 mtpa by FY27), and Meramandali (from 5.6 mtpa to 8.2 mtpa) underpin rising production. This capacity build will position Tata Steel well to meet accelerated domestic steel demand, forecasted at ~8-10% growth over FY26-27.

Europe Operations Transition and Breakeven Path

Tata Steel Europe is transitioning towards green steelmaking, with UK’s Port Talbot converting to a 3 mtpa electric arc furnace (EAF) and exploring gas-based direct reduced iron (DRI) + EAF projects in the Netherlands. The company is realizing benefits from restructuring and cost optimization, reducing EBITDA losses from USD 76 per tonne in 2QFY25 to an EBITDA gain of USD 8 per tonne in 1QFY26. The Europe segment’s EBITDA is expected to reach USD 70 per tonne by FY28, supporting consolidated EBITDA per tonne growth to Rs 13,000, a 55% increase over FY25. The UK blast furnace shutdown and Netherlands capacity ramp-up play significant roles here.

Domestic Pricing Environment and Policy Support

Indian steel prices are forecasted to improve with the government’s imposition of a 12% safeguard duty on flat steel products to curb cheap imports, alongside higher exports to Middle East & Africa and European Union markets. Domestic hot-rolled coil (HRC) prices stood at Rs 49,500 per tonne in 2QFY26, with China’s landed steel being costlier due to duties, providing pricing leverage. The market sentiment for the second half of FY26 shows a gradual price recovery, supported by stable coking coal prices and broad demand tailwinds.

Financial Strength and Valuation Metrics

Tata Steel is expected to generate a strong operating cash flow of Rs 957 billion, sufficient to fund the planned annual capital expenditures of Rs 160 billion without additional leverage. Net debt stood at Rs 848 billion as of 1QFY26, translating into a manageable net debt to EBITDA ratio of 3.21x, with cash reserves of Rs 141 billion. The stock trades at a reasonable 6.8x EV/EBITDA and 1.9x price-to-book (P/B) ratio on FY27 estimates, providing a healthy risk-reward profile.

Financial Projections and Ratios

These projections reflect a structurally improving profitability aided by capacity expansion and cost restructuring, with returns expected to improve notably in FY27 and FY28.

Key Investment Levels and Target

- Current Market Price (CMP): Rs 177 - Support Level: Rs 165, a critical zone near recent consolidations. - Immediate Resistance Level: Rs 185, near short-term highs. - Target Price: Rs 210 by September 2027, aligned to Sum of the Parts valuation and enhanced operational performance. - Stop Loss Recommendation: Rs 160, to manage downside risks amid global uncertainties.

Risks and Near-term Challenges

Despite the bullish long-term outlook, risks include global tariff uncertainties, volatility in input costs (especially coking coal), and regulatory delays in green steel projects. European markets remain susceptible to energy price fluctuations and policy clarity delays regarding decarbonization, which may temporarily impact profitability.

Bottomline: Strategic Buy for Growth and Value

Motilal Oswal’s Buy upgrade on Tata Steel is driven by a robust strategic expansion plan, improving European business health, and strong domestic market fundamentals cushioned by government support through safeguard duties. The stock provides a compelling investment opportunity supported by attractive valuations, healthy cash flow, and superior volume growth visibility.