Tata Steel Q2 Results Review: Near-Term Pain To Spill Over To December Quarter As Analysts Cut Target

Tata Steel Ltd. is expected to post another soft quarter going ahead, as analysts caution that near-term challenges related to imports and prices will weigh on the steel maker.

The company swung back into the black with a net profit of Rs 759 crore in the quarter ended Sept. 30, 2024. In the year-ago period, Tata Steel had posted a net loss of Rs 6,511 crore on account of a Rs 3,255-crore provision of impairment of non-current assets.

Though there are near-term challenges related to high imports and lower realisations, the long-term outlook remains strong, analysts at Motilal Oswal Financial Services Ltd. said.

India's business is expected to continue its strong performance, the brokerage said, adding that improving performance in Europe would support overall earnings.

Motilal Oswal maintained a 'neutral' rating and cut the target price to Rs 160 per share, an upside of 6% from the previous close.

The weak performance will continue going ahead into the third quarter, Nuvama Institutional Equities said in a report. "We reckon third quarter Ebitda per tonne shall be lower by Rs 1,000 per tonne due to lower steel prices, partly offset by lower coal prices."

Likewise, the brokerage reduced its fiscal 2025 and 2026 Ebitda estimates by 30% and 7%, respectively, to factor in lower steel prices and higher loss in Europe.

Lower steel prices and incremental cost associated with the transition of the UK business led to a further increase in losses in Europe, it said. Earnings recovery at Netherlands is pushed to the next fiscal. "Expectations of a break-even in UK operations in Q3FY25 have been delayed to Q1FY26 now."

Nuvama maintained a 'hold' rating with a target price that was equal to the previous close.

The steel manufacturer is still not out of the woods and has been deploying operation efficiency measures to improve the bottomline, T V Narendran, chief executive officer and managing director, told NDTV Profit in an interview.

"We are going through a period where market conditions have been quite tough, both in Europe and in India," he said, adding, that Tata Steel has taken action on what can be controlled, like cost, efficiencies, capital assets and others. "That work is going on."

The Tata group company will focus on cost reduction across businesses, Citi Research said in a note. "Further, fiscal 2026 could benefit better India volumes and should be relatively capex light, it said. Lower Ebitda through fiscal 2025 to 2027 are largely driven by European cuts based on trends thus far, the brokerage said.

Citi maintained its 'sell' rating and cut its target price to Rs 135 per share versus Rs 145 apiece earlier, implying a downside of 10% from the previous close.