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On Wednesday, Citi analysts revised the price target for Tata Steel (NSE:TISC) Ltd (TATA:IN) shares, reducing it to INR 115.00 from the previous INR 135.00, while keeping a Sell rating on the stock. The adjustment comes after the company’s adjusted EBITDA was reported at Rs 57.4 billion, in line with Citi’s estimate of Rs 45 billion, showing a flat year-over-year performance and approximately a 13% increase quarter-over-quarter.
Tata Steel’s earnings before interest, taxes, depreciation, and amortization (EBITDA) per tonne in India adjusted for certain items stood at Rs 12,100, which is a decrease from Rs 12,600 in the previous quarter and significantly lower than Rs 17,000 reported last year. The European operations recorded a negative EBITDA per tonne of $45, which, while still negative, is an improvement compared to negative $80 in the previous quarter and negative $190 in the same period last year.
The company’s net debt to EBITDA ratio showed a slight improvement, coming in at 3.3 times, compared to 3.4 times as of December 24th. Management expects steel realizations in India to remain relatively flat in the fourth quarter compared to the third, with potential mitigation from reduced coking coal costs. However, realizations in the Netherlands and the UK are projected to decline in the fourth quarter, although this may be partially offset by cost reductions.
Tata Steel is working towards increasing volumes in India, which should lower fixed costs, and aims for the UK operations to reach break-even by the second half of fiscal year 2026. The company also maintains a focus on cost-efficiency in the Netherlands. Despite these strategic measures, the goal is to maintain the net debt to EBITDA ratio below 3 times, with the current ratio being 3.3 times.
Citi’s analysts expressed concern over the lack of visibility regarding the potential upside to Chinese steel demand, which could affect regional and domestic prices. They noted that Tata Steel is trading at 7.7 times FY26 earnings, which is above the 15-year mean plus one standard deviation, typically around 7.3 times. The Sell rating reflects these concerns and the revised price target of INR 115.00 underscores the cautious outlook on the stock.
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