Tata Sponge on strong footing

Tata Sponge has done very well for itself today, going to an intra day high of Rs.672, while its 52-week high stands at Rs.684.

The company declared its Q1FY17 performance today. Despite a 24% drop in net sales at Rs.119 crore, a 29% drop in raw material costs, 27% drop in Excise duty outgo and 27% fall in total expenses helped the company end the quarter with a 43% jump in net profit at Rs.10 crore.

EBITDA has doubled to Rs.8 crore and margins have risen from 2.55% to 6.72%. In fact interest outgo is usually provided at Rs.56-57 lakh in Q1 and bulk of it paid in Q4. Thus that too helped.

Its two units, sponge iron and power showed a mixed performance. By mixed we mean – sponge iron which contributes 90% to the revenue showed a loss at EBIT level but power, which contributes just around 13% to the revenue, contributed 67% to the EBIT. Its EBIT margin rose from 66.72% to 67.56%.