Tata Steel’s Q2FY23 profitability was below our expectations. Although India salesvolumes grew by 22% QoQ to 4.76 mn tonnes, EBITDA/t fell by 59% QoQ toRs10,117 due to fall in steel realization and higher raw material cost (mainly cokingcoal). European operations profitability was also hit by lower sales volume andweak realizations. EBITDA/t fell by 66% QoQ to Rs9,540. Consolidated net debtincreased by Rs202 bn QoQ to Rs717 bn led by acquisition of Nilanchal Ispat,dividend payout and capital expenditure. We cut our FY23 EBITDA estimate by 17%to factor lower than expected EBITDA reported in Q2FY23 but broadly maintain ourestimates for FY24. We revise our SOTP-based target price to Rs105 (earlier Rs112).The recent rise in stock price discounts the positives; hence, we downgrade thestock to a HOLD from a BUY.