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EBITDA above estimates as Europe’s performance improves; lower tax outgo drives sharp APAT beat

Standalone performance largely as anticipated

* Revenue stood at INR310b (fell 6% YoY and 10% QoQ), in line with our estimates. The decline was largely driven by muted volumes during 1Q.

* Steel production stood at 5.07mt (+1% YoY and -3% QoQ), while deliveries were in line with our estimates at 4.75mt, declining 4% YoY and 15% QoQ. Production and deliveries were affected by maintenance shutdown in the Jamshedpur and NINL plants.

* ASP strongly rebounded to INR65,293/t in 1QFY26, rising 6% QoQ, but remained 2% lower YoY during the quarter. EBITDA in 1QFY26 stood at INR71.2b (+5% YoY and +2% QoQ), in line with our est., translating into an EBITDA/t of INR14,988/t (+9% YoY and +20% QoQ).

* APAT for the quarter stood at INR37b (+5% YoY and +1% QoQ), against our estimate of INR34b, led by a lower tax outgo and better operating profit.

European operations report EBITDA improvement

* Consol. steel deliveries stood at 2.1mt (-2% YoY and -12% QoQ), in line with our estimates during the quarter.

* Revenue stood at INR207b (-1% YoY and flat QoQ), 8% above our estimates.

* EBITDA turned positive during the quarter at INR1.45b (our est. INR0.62b), against an EBITDA loss of INR5b in 1QFY25 and INR7.5b in 4QFY25.

* EBITDA/t stood at USD8/t in 1QFY26, against an EBITDA/t loss of USD28/t in 1QFY25 and USD38/t in 4QFY25.

Consolidated performance – Lower tax outgo drives sharp APAT beat

* Revenue stood at INR532b (-3% YoY and -5% QoQ) and was 6% above our estimate. The decline was mainly due to muted volumes during the quarter.

* Sales volume stood at 7.12mt (-4% YoY and -15% QoQ), which was offset by a better ASP of INR74,688/t (+1% YoY and +11% QoQ) in 1QFY26.

* Adjusted EBITDA stood at INR74.3b (+11% YoY and +13% QoQ) against our estimate of INR69.6b, translating into an EBITDA/t of INR10,432 (+15% YoY and +32% QoQ) in 1QFY26.

* APAT for the quarter stood at INR21.3b (+62% YoY and +26% QoQ), against our estimate of INR15.8b, on account of a lower tax outgo.

* Net debt stood at INR848b as of 1QFY26, which includes cash of INR141b. This translates into net debt/EBITDA of 3.21x as of Jun’25.

Highlights from the management commentary

* Despite the drop in 1Q volumes due to maintenance shutdown, TATA has maintained its ~1.5mt incremental volume guidance for India in FY26. This would be mainly driven by production ramp-up at Kalinganagar.

* Management guided India NSR to be INR2,000/t lower in 2QFY26 compared to 1Q, due to seasonal weakness and domestic supply pressure.

* Coking coal consumption cost is projected to reduce by USD10/t in both India and the Netherlands during Q2 FY26. Iron ore cost in the Netherlands is expected to be lower by USD7-8/t in 2QFY26.

* Total cost savings target of INR115b will be achieved in 12-18 months, of which INR44b (INR15b in FY25 and INR29b in 1QFY26) has already been realized as of 1QFY26

Valuation and view – Long-term outlook remains strong for TATA

* Overall, 1QFY26 posted a decent performance, primarily driven by EBITDA improvement at the European division. The Indian business continues to post healthy performance as anticipated, led by healthy NSR, which offset the muted volume caused by maintenance shutdown at the NINL and Jamshedpur capacities.

* EBITDA improvement in Europe operations is expected to continue steadily in the coming quarters on account of its cost-restructuring measures. The capacity ramp-up in the Netherlands and lower fixed costs should also support the overall EBITDA performance going forward.

* Though there are near-term uncertainties related to price volatility due to trade tension and recent correction in steel prices, the long-term outlook remains strong for TATA. We largely maintain our FY26/FY27 estimates, owing to decent performance during the quarter. At CMP, TATA is trading at 7x FY27E EV/EBITDA and 2.1x FY27E P/B. We reiterate our Neutral rating with a revised SOTP-based TP of INR165 per share.

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