On Friday, BofA Securities adjusted its outlook on Tata Steel (NS:TISC) Ltd (TATA:IN), reducing the price target from INR180.00 to INR170.00, while keeping a neutral stance on the stock. The revision comes after Tata Steel's second quarter fiscal year 2025 operating performance surpassed BofA's estimates, largely due to reduced other expenses in India.
The company's conference call revealed several key points that influenced the analyst's perspective. In the United Kingdom (TADAWUL:4280), Tata Steel's expectation to reach break-even has been pushed back from the second half of fiscal year 2025 to the first half of fiscal year 2026.
This delay is attributed to prolonged grant funding agreements, an extended consultation process with the employee union, and challenging market conditions. Despite these setbacks, management is targeting a reduction in fixed costs by GBP100 per ton over the coming quarters.
Regarding capital allocation, Tata Steel anticipates a significant reduction in capital expenditures for fiscal year 2026 compared to fiscal year 2025. The company is in the process of detailed engineering work and is aiming to secure environmental clearances for a potential expansion at Neelachal Ispat Nigam Limited (NINL) before proceeding to board approval. A continued emphasis on reducing debt remains a top priority for the company.
Furthermore, Tata Steel provided guidance on volume growth, expecting consolidated volumes to increase by 1.4 million tons year-over-year in fiscal year 2025. The Kalinganagar Plant Phase II (KPO-II) is projected to contribute additional volumes of 1.1 million tons in fiscal year 2025, with an increase to 3.5-4 million tons in fiscal year 2026, and reaching 5 million tons by fiscal year 2027.
Lastly, the company addressed its operations in the Netherlands, noting that no decarbonization capital expenditures are anticipated for the next 12 months. This decision aligns with the company's current financial strategies and operational plans.
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