Safeguard Duties and EU Policy Changes Support

TATASTEEL

reported a 15% YoY rise in consolidated EBITDA (adjusted for forex) to ₹8,200 crore in Q3FY26, while revenue grew 6% YoY to ₹57,000 crore. Lower raw material costs, cost-efficiency initiatives, and higher volumes offset continued losses in UK operations. Standalone performance was strong, with volumes up 14% but realizations down 4.5%, limiting EBITDA growth. The outlook for Q4 is positive, aided by higher domestic steel prices following safeguard duties. Financial Performance - Consolidated revenue: ₹57,000 crore, +6% YoY. - Consolidated EBITDA: ₹8,200 crore, +15% YoY. - Standalone revenue: ₹35,600 crore, +9% YoY. - Standalone EBITDA: ₹7,900 crore, +5% YoY. - EBITDA per tonne: ₹13,090, down 8% YoY. - Volume growth: +14% YoY, realizations down 4.5%. Q4 Outlook - Domestic steel prices expected to rise post safeguard duty (Dec 2025). - Realizations projected to improve by ₹2,300 per tonne. - Coking coal costs to increase by $15/tonne (~₹1,350), partly offsetting gains. - Volumes expected to remain stable. Europe & UK Operations - EU’s Carbon Border Adjustment Mechanism (CBAM) effective Jan 2026. - Import quotas cut by 50% and duties raised to 50% from July 2026. - European steel prices expected to firm up, aiding Netherlands profitability. - UK operations remain under stress; spreads need to rise by £100/tonne (~₹12,300) to break even. - UK government already intervened to prevent plant closures. Expansion Plans - Ludhiana plant (0.75 mtpa) commissioning in Feb 2026. - Larger expansion of 7.3 mtpa slated for FY30, implying gradual volume growth till then. Valuation & Investor View - Stock up ~50% in past year, aided by safeguard duty. - Trades at 7.4x FY27E EBITDA. - Earnings trajectory hinges on European price trends and UK policy support. - Domestic margin strength and expansion pipeline provide medium-term visibility.