Tata Steel Shares Hit 52-Week High After U.K. Deal; Here's What Analysts Say

The company and the U.K. government jointly agreed on a proposal for the largest investment in the U.K. steel industry for decades

<div class="paragraphs"><p>Tata Steel's Kalinganagar plant in Odisha. (Source: Company website)</p></div>
Tata Steel's Kalinganagar plant in Odisha. (Source: Company website)

Shares of Tata Steel Ltd. hit a 52-week high on Monday after it announced a £1.25 billion investment with the U.K. government.

The investment includes a £500 million grant from the UK government for setting up a 3 million tonne electric arc furnace in Tata Steel's Port Talbot facility. Tata Steel will invest the remainder of £750 million.

The greener EAF is expected to result in total savings of £150–175 per tonne, including £50–60 per tonne carbon-cost savings, according to an exchange filing.

The plant is expected to be operational within 36 months. The company also plans to restructure the existing 'heavy-end' carbon-intensive assets like blast furnaces and coke ovens that are reaching the end of their operational lives.

Shares of Tata Steel were trading 0.08% lower at 131.85 apiece, compared to a 0.05% decline in the benchmark NSE Nifty 50 as of 11:18 a.m. The stock rose as much as 2.3% during the day to Rs 135 per share, the highest since April 19, 2022.

The stock has risen 17% on a year-to-date basis. The total traded volume stood at 2.2 times its 30-day average. The relative strength index was at 68.7.

Twenty-five out of the 31 analysts tracking Tata Steel maintain a 'buy' rating on the stock, four recommend a 'hold', and 'two' maintain a 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential upside of 3.7%.

Here's What Brokerages Say:

Morgan Stanley

  • Maintains an 'equal-weight' rating with a price target of Rs 110, implying a 16.6% downside.

  • Positive as UK business uncertainty was an overhang.

  • Helps the company strive towards decarbonisation since this would be among the first green steel plants in Europe.

  • Management expects cost recovery over the life of the project with 15–16% rate of return.

  • The UK government will also support in scrap and renewable-energy availability along with green transition as the carbon border adjustment mechanism kicks in.

  • Project capex to be funded through internal equity.

Motilal Oswal

  • Maintains 'neutral' rating with price target of Rs 120, implying a 9% downside.

  • Facility to help curb emissions of up to 50 million tonne of carbon dioxide over the next decade.

  • While the investment is encouraging, the brokerage awaits more clarity on financials, write-offs and other operational details.

  • Clarity on restructuring and other details expected after the second quarter results.

  • The stock is currently trading at 6.3 times FY25E EV/Ebitda and 1.4 times its FY25E price to book.

  • Existing UK facility had operational issues due to assets nearing end of lifespan leading to higher operating costs.

  • Tata Steel UK to import additional steel substrate to feed its downstream unit.


  • Maintains 'buy' rating with price target of Rs 145, implying a 9.8% upside.

  • Investment is a missed opportunity to reduce exposure to historically high-cost low-margin geography.

  • Decision to either invest in a new plant or stop crude steel production at the facility was imminent.

  • Investment of £750 million over an expected four-year period implies a cash outflow of Rs 230 million per year.

  • Cash outflow management with the brokerage expecting free cash flows of $1.4–1.9 billion annually during fiscal 2025–26

  • The company expects the facility to see £150–170 per tonne of higher spreads.

  • The management is aiming to transform the UK business into a sustainable, capital-efficient and profitable business.

Kotak Institutional Equities

  • Maintains 'buy' rating while upgrading the target price to Rs 150 from Rs 135, implying a 13.6% upside.

  • Development is a step in the right direction and if the proposal is approved, could sustainably reduce UK losses.

  • In Tata Steel Europe, the UK business is the key loss-making entity with a fourth quartile cost structure.

  • The EAF would be able to source scrap at a competitive cost locally as the UK is a net exporter of 9 MT of scrap annually.

  • The potential restructuring cost can offset the reduction in losses from the UK over FY24–26E and be cash-flow neutral.

ICICI Securities

  • Retains buy rating while upgrading the target price to Rs 150 from Rs 135, implying a 13.6% upside.

  • The development is significant as support from the parent for the UK operations is likely to reduce in future.

  • Development to ensure the future readiness of the business from both profitability and ESG perspective.

  • Incremental value of Rs 10–16 per share at the steady state based on different scenarios of cost-saving potential.

  • The British industry supercharger scheme is likely to aid EAF-based operations more than blast furnace-based operations.

  • The brokerage expects both additional restructuring costs and policy support as the consultation process picks up.

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