Tata steel has declared its Q2FY09 consolidated result, which is better than our expectations. Company has registered a topline growth of 36% y-o-y to Rs44,199 crore from Rs32,441 crore during the same period last year.
The growth in topline was mainly on account of volume growth and strong prices during the quarter. On the operating margins front, company delivered 450bp improvement in the EBIDTA margins to 18.7% (14.2%).
The improvement in margins was on account of the synergy benefits, cost cutting and net positive impact of more than increase in the prices vis- a- vis cost.
Further, the margins improvement by almost 610bp delivered by Tata Steel India contributed in the overall consolidated margins. Hence, Net profit of the company grew by hefty 213% to Rs4,772 crore (Rs1,524cr-proforma).
However, the impact of steep correction in the steel prices and production cuts of 30% announced by Corus due to sluggish demand would reflect in the 2HFY2009 performance. We remain NEUTRAL on Tata Steel.