Our recommendation is premised on (1) stickiness of business as 55% of the revenue mix comes from MNCs, (2) stable EBITDA margin at >12% since fluctuations in raw material costs (RMC) are easily passed on to customers, and (3) strong return ratios (RoE/RoIC of 25/24% in FY23E). 4Q EBITDA/APAT was 14/20% lower than estimates due to higher-than-expected raw material costs and opex, higher- than-anticipated depreciation, offset by a 5% rise in revenue and lower-than- anticipated tax outgo.

Revenue: 4Q revenue grew 16/19% QoQ/YoY to INR 8bn, on account of better sales volumes in both segments and a better sales mix.

Margins: Gross margin fell 121bps QoQ and grew 17bps YoY to 36.5% as fatty alcohol prices shot up significantly in 4Q. EBITDAM fell 273/65bps QoQ/YoY to 15.0% in 4Q owing to the trickle-down effect of lower GM, lower export incentives received, and higher employee costs and provisions in 4Q.

Volumes: Total volumes in 4Q came in at 63kT (+8/+8% QoQ/YoY). Performance surfactants (66% of volume mix) volumes were at 42kT (+14/+7% QoQ/YoY) and specialty care volumes came in at 21kT (-2/+11% QoQ/YoY). Growth was driven by both the segments across geographies. India's market grew 5.8% YoY, AMET grew 13.4% YoY, and rest of the world grew 3.8% YoY.

Con call takeaways: (1) Capex guidance for FY22 is of INR 1.5bn. A large part of the Capex will be spent on the specialty care portfolio. Projects started by the company at Tarapur and Jhagadia are expected to be completed in 1HFY22, which will result in introduction of new products. This will aid volume growth post 2HFY22. (2) Currently, blended capacity utilisation at plants of the performance surfactants segment is 65-68%. (3) The Board has declared a final dividend of INR 4 per equity share for FY21 (total dividend of INR 18/sh in FY21).