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The escalating brent prices to $78.4/barrel of oil in FY22-year-to-date (from $44.4/bbl in FY21) along with elevated key raw material prices contracted the gross margins of the specialty chemical companies under our coverage by as much as 14.4% during Q1 FY21-Q3 FY22.
Further, tightening of freight rates and utility costs due to soaring energy prices resulted in an Ebitdam contraction of 5-17% for our coverage universe during the same period.
Our study confirms the hypothesis that the companies, which have higher contribution from specialty chemicals, were able to manage their gross margins much better than the ones that have higher contribution from commodity chemicals. This also shows why the market ascribes higher multiples to the first set of companies.
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