The Siemens Ltd stock staged a dramatic recovery on Thursday. The stock, which slumped as much as 4% in intra-day trading, closed with a marginal gain of 0.42% on the National Stock Exchange. Short covering may have helped. But the company’s performance in the December quarter was also not as bad as feared. Sales fell at a slower pace than analyst expectations. Compared with a Bloomberg consensus estimate of a 4.7% drop, sales fell by 4.1%. The margin of difference is not much. What may have pleased investors, though, is an improvement in operational performance.

Indigenization efforts and focus on cost optimization helped the company lower raw material costs. Compared with a year ago, raw material costs as a percentage of sales fell by about four percentage points. Add to this the improvement in margins at the infrastructure and energy business segments and the company was able to maintain its earnings before interest, tax, depreciation and amortization (Ebitda) margin at 6.2%.

Flat margins are nothing to cheer about. But falling sales and high usage of imported raw materials, which dilutes economies of scale and increases costs, have led to the belief that margins at the company will be squeezed substantially. Compared with the year-ago period, analysts, on average, had been expecting the margin to be lower by 60 basis points.

Finance costs, meanwhile, fell sharply. This, along with higher other income, helped the company report a 2.4% increase in net profit. One basis point is one-hundredth of a percentage point.

The third-quarter performance, even though not remarkable, does show that the company is slowly stabilizing. Raw material costs are easing and margins at key business segments—infrastructure and energy—are improving. While new order inflows at 2,005 crore are little changed from the year-ago period, an improvement in the business environment and more evidence that margins at key businesses are recovering will help the stock gain positive momentum.