JGChemicals Ltd Q4 FY2026 Concall Summary

Key Takeaways

• Record year, messy quarter: FY26 delivered highest-ever revenue, EBITDA and PAT, but Q4 EBITDA margin stayed at 10.26% after a March cost spike from supply-chain disruption and energy prices nearly doubling.
• Demand is not the problem: Tire-industry demand was extremely robust through Q4 and has continued into the current quarter, with leading tire majors reporting best-ever quarters.
• Cost pass-through is working, with a lag: All incremental costs from the March disruption were transparently passed to customers effective 1 April 2026; the LME impact on the sell side only hits from April onward.
• Dahej is the margin and mix story: The Gujarat greenfield plant commissions in H1 FY27 and unlocks ceramics, specialty chemicals and pharma, segments where wallet share is currently zero and margins are higher.
• What to watch next quarter: Whether the cost pass-through restores margins to the 10%+ EBITDA level management expects, the pace of Dahej commissioning, and any demand normalisation in the Morbi ceramics cluster.

Demand Environment

• Tire demand robust: The Indian automobile industry closed FY26 at an all-time high per SIAM; leading tire majors reported double-digit revenue growth for Q4, several posting best-ever quarters. GST rate reductions from September 2025 improved affordability and sentiment across OEM and replacement segments.
• Order book healthy: Management reports a very healthy order book for May and June, with June projections at par with April and May; no slowdown witnessed from the tire industry.
• Ceramics: temporary gas shortage: Some Morbi plants closed due to a gas shortage tied to geopolitical tensions. Management expects pent-up demand when production normalises, though the recovery timeline is uncertain: hopefully not more than 5-6 months.
• Export green shoots: Recently concluded trade agreements with the EU and US have opened significant export opportunities for customers; green shoots of demand are already visible.
• Zinc sulphate recovery: Prices kept rising every month in FY26 due to input cost pressures (zinc ash, sulphuric acid), causing farmers to defer purchases. In the last couple of months, farmers have accepted the new normal pricing and green shoots of demand are emerging.

Anirudh Jhunjhunwala: "Today the ceramic market is slightly not as organized as today's tire market, but we feel that the ceramic industry is also coming of age. In the sense that today we have foreign ceramic companies setting up shops in the Gujarat region. We have some of our own facilities who are supplying to international brands. So, the ceramic industry also gradually is, you know, developing and finding the need to have suppliers who have a better scale, size, systems, etcetera."

Q4 Margin: The March Disruption

• The shock: Geopolitical conflict disrupted global supply chains for zinc dross, JG's primary raw material. In March, there was a complete freeze in imports from the Middle East and huge delays in shipments from Europe, forcing spot purchases from the domestic market at much higher LME prices. Energy prices nearly doubled in March.
• The margin math: The combined impact of higher raw material costs and energy was about 150 bps on Q4 EBITDA margin, per management's projection. Materials contracted at lower LMEs in January/December did not arrive in March, forcing spot purchases at higher domestic prices.
• Inventory gains muted: Zinc prices between December and March rose hardly 2%, so the inventory gain benefit was small and was offset by the March cost increases. Management does not quantify inventory gains separately due to rolling inventory on a FIFO basis.
• Pass-through mechanics: All incremental costs (higher freight, energy, ancillary costs) were transparently passed on to customers effective 1 April 2026. The bulk of sales is contractual with the sales price directly linked to LME, so the sell-side LME impact only affects April onward.
• Raw material security as moat: JG's scale, financial strength, two-decade-plus track record and relationships with dross suppliers globally made it the preferred customer; it fully secured raw material requirements and ensured uninterrupted supply even when smaller players struggled.

Anuj Jhunjhunwala: "Crises like these only reinforce our conviction that JG's franchise gets stronger, not weaker, when the operating environment becomes more challenging."

Dahej: The Growth and Mix Catalyst

• Timeline and investment: The Gujarat greenfield plant commissions in H1 FY27. The investment is ₹100 crores from internal accruals, expected to generate ₹900 crores of sales at full achievable capacity.
• Utilisation ramp: Management expects 35-40% utilisation for the six months of H2 FY27, rising to 65-70% for FY28. By FY29, the ₹900 crores sales contribution is more or less achievable.
• Sales mix unlocks margin: About 30-35% of Gujarat sales will come from ceramics, an equal percentage from tire business, and the remainder from non-rubber excluding ceramics (specialty chemicals, pharma, electronics). Margins for tire and ceramic are more or less similar, but higher for specialty chemicals and pharma.
• Wallet share from zero: Large tire customers with plants in Gujarat currently give JG zero wallet share because JG's plants are only in South and Eastern India. By virtue of having a presence there, it is very natural for those customers to include JG for their Gujarat plants.
• Ceramic customer seeding underway: JG has already started seeding the ceramic market in the last 6-8 months with small supplies (e.g., 9-10 tons per month to a customer using 200 tons). Newer products for ceramic markets are being introduced.
• Non-rubber share inflection: Material differences in non-rubber share will only accrue once Dahej starts, because the majority of non-rubber consumption (ceramics, specialty chemicals, pharma) is in the Gujarat belt, not in Southern/Eastern India where JG currently operates. Incremental gains of 3-4% occurred between FY24 and FY25, but large shifts await Dahej.

Anirudh Jhunjhunwala: "Today say for example a large customer of ours is in the tire segment. They have plants there. Now they are looking to leverage our presence, our product even in those plants. But today because our plants are only situated in South and Eastern India, as I mentioned our wallet share with them is zero. By virtue of JG having a presence there, it is very natural for them to also include us in their scheme of things for those plants."

Capacity Build-Out

• Combined capacity by 2029: Once both phases at Dahej are on stream by 2029, combined zinc chemical capacity will exceed 115,000 metric tons per annum.
• Naidupeta debottlenecking: Actively working on debottlenecking at the existing Naidupeta facility; expect complete debottlenecking by December 2026. Brownfield expansion is taking place for both zinc oxide and zinc sulphate units, with different products being developed for both.
• Current utilisation headroom: Zinc oxide at 77% utilisation with ability to reach 86-87%; zinc sulphate at 60% of installed capacity. When utilisation reaches 80%+, the company starts looking at more expansions.
• Further capacity review: JG has surplus land at Naidupeta for further zinc chemicals capacity expansion; will review further capacity addition strategy in line with market demand by next fiscal. Further capacity additions in the eastern region will be evaluated in the future.
• Startup costs manageable: Small startup costs are possible in FY27 from the Gujarat plant, but overall volume growth should more than compensate.

Competitive Position & Market Structure

• Scale leadership: JG is by far the largest player in India; the difference in size and capacity versus the nearest competitor is significant. The top three to four players control about 60-67% market share, but there is a long tail of 30-40 smaller zinc oxide players prevalent in most regions.
• Consolidation tailwind: Customer requirements are getting very stringent; customers want to deal with larger, organised factories. As smaller players are not able to ramp up, that bodes well for larger producers like JG.
• Certification moat: The certification process for tire-industry suppliers is a multi-year effort involving system upgrades, consistency, credibility and adaptation to tire-industry needs, not just paying a fee.
• Pricing philosophy: In times of crisis, the idea is not to make any undue advantage or undue profit. Cost increases are transparently passed on; any negatives from zinc price drops have also been absorbed by the company in the past. Inventory gains from rising commodity prices are retained by the company and not passed on.

Anirudh Jhunjhunwala: "The top three-four people would be controlling about 60% to 67% share in the market, but there in there is a long tail of smaller-smaller zinc oxide players prevalent in most regions, maybe 30-40 of them. So, what will eventually benefit the larger players is as the smaller guys are not able to ramp up because the customer requirements are getting very stringent, customers want to deal with larger organized factories, that definitely is going to bode well for the larger producers."

New Initiatives

• Recycled rubber project: Pilot trials have continued; customer feedback is extremely positive and validating. JG is actively working on a detailed commercial-scale project for this product and adjacent related products. More granular details (capex, capacity, timelines, revenue potential) will be shared at an appropriate time.
• New zinc oxide varieties: Working on developing other varieties of zinc oxide to aid customers' compounding process; to be introduced in the current financial year.
• Solar power: Phase 1 commissioned at Naidupeta in FY26 at a cost of ₹2 crores, with a payback of 3-3.5 years. The company wants to increase the quantum of solar energy at both Naidupeta and Dahej going forward.
• Circular economy: Maximising use of recycled zinc as feedstock lowers the cost base, energy intensity, carbon emissions and carbon footprint.

Anirudh Jhunjhunwala: "We are very gung-ho about the prospects here, and we will share more granular details like capex, capacity, timelines, revenue potential at an appropriate time."

Guidance & Commitments

Key Metrics