JGChemicals Ltd Q1 FY2027 Concall Summary

Key Takeaways

• Record quarter, structural margin step-up: Revenue, EBITDA, and PAT hit all-time quarterly highs, with EBITDA margin rising to 11.5% from 10.64% YoY on operating leverage, higher-margin orders, and sustainable cost initiatives.
• Supply-chain disruption became a moat: War-driven Zinc Dross shortages pushed customers toward financially strong, globally sourced players like JGC, ensuring uninterrupted supply while smaller rivals struggled.
• Dahej is the next leg of the story: Phase 1 commissioning is targeted for Q3 FY27, with 50–60% utilization guided for FY28 and a path to top-three global zinc chemical capacity once both phases are live.
• Non-rubber diversification is real but back-loaded: Non-rubber share is close to 18% and inching up, but the meaningful step-up waits on Dahej, given Western India's concentration of ceramics, pharma, and specialty chemical demand.
• What to watch next quarter: Dahej commissioning timing, whether Q2 margins hold at the improved 11.5% profile, and any quantification of the JG TUR recycled rubber commercial plan.

Quarterly Performance & Margin Drivers

• Record across the board: Revenue, EBITDA, and PAT each reached all-time quarterly highs in Q1 FY27, continuing momentum from FY26.
• Volume-led growth: Double-digit volume growth came across categories, with utilization in the early 80s of achievable capacity.
• Margin walk: EBITDA margin rose to 11.5% from 10.64% YoY, driven by operating leverage, higher-priced and higher-margin orders, increased share of specialized applications, and a small inventory gain.
• Cost initiatives are sticky: Management took strong cost-cutting and optimization actions over the last three months after Q4's geopolitical cost push; these are described as sustainable, not dependent on short-term gains, and accrue over a longer period.
• Inventory gain not quantified: Management declined to size the inventory gain, calling it difficult to quantify and "not been that significant," attributing margin improvement to a broader set of factors.
• Q2 margin continuity: The current quarter is experiencing a similar margin profile and numbers, suggesting the improved level is holding.

Anuj Jhunjhunwala: "It is a function of operating leverage, it is a function of higher-priced and higher-margin orders, and plus a small amount of inventory gains which accrued during the current quarter. I would say, structurally, our EBITDA should be in this range going forward..."

Supply Chain & Competitive Position

• Raw material security as differentiator: Severe global supply chain disruption from war affected Zinc Dross, JGC's primary raw material, but scale, financial strength, and long-standing supplier relationships ensured uninterrupted supply to customers.
• Customer confidence shift: Geopolitical sourcing difficulties pushed business toward organized, established players; customers running plants at near-full capacity increased their reliance on vendors with global reach.
• Zinc price neutrality: Management is neutral to zinc prices, stating it does not matter whether zinc is at 3,000, 3,500, or 3,600.
• Realizations as new normal: Prices of all commodities have increased, zinc included, and management sees no reason for commodity prices to fall in the near future.
• Certification moat: Certifications create differentiation; customers in India do not have the option to deal with zinc oxide producers holding these certifications, and they serve as minimum benchmarks for global export approvals.
• Utilization headroom: The early-80s utilization refers to achievable capacity, not installed capacity; room remains to reach 100% through debottlenecking and efficiency improvements, with productivity per line having increased over recent years.

Anuj Jhunjhunwala: "We are neutral to zinc prices, if you ask me honestly. So, whether zinc is at 3,000 or 3,500 or 3,600, it really doesn't matter to us."

Dahej Expansion & Capacity Roadmap

• Phase 1 timeline: Dahej plant commissioning targeted for Q3 FY27, with civil work in advanced stages and equipment installation underway.
• Strategic positioning: Once operational and stabilized, Dahej strengthens Western India presence, enables deeper penetration into high-growth non-rubber segments, and supports margin expansion through higher value-added products and improved mix.
• Global scale ambition: With both phases on stream, combined capacity exceeding 1,15,000 MTA would position JGC among the top three zinc chemical producers globally.
• Utilization path: Minimum 50–60% utilization expected in FY28, the first full year; 70s range the following year, at which point Phase 2 construction would start.
• Phase 2 scope: Total capacity addition is about 40,000 tons; Phase 1 is 15,000–17,000 tons, purely zinc oxide.
• Customer mix at Dahej: Tire about 60%, others 40%, catering to tire, ceramic, agriculture, and specialty chemical segments.
• Phase 1 financials: Revenue potential of INR 300–400 crores with EBITDA margins expected at 11–12%.
• Payback and ROCE: Target for Dahej and other capex plans is payback of 3–4 years with ROCE in the mid-20s.
• Naidupeta brownfield: About 5,000 tons being added, expected to commission in Q3 FY27; exact capex figure not readily available as utilities were created beforehand over recent years.
• Capacity trigger: Once utilization hits late 70s to early 80s, that is the time to start looking at further capex.

Non-Rubber Diversification & Product Pipeline

• Non-rubber share inching up: Non-rubber share is close to 18% and rising every quarter year-on-year as markets get created in India and fresh demand comes from those segments.
• Dahej as the step-change: The more meaningful step-up in non-rubber share comes once Dahej is commissioned, given significant non-rubber consumption concentrated in Western India, particularly the Gujarat belt.
• Ceramic market seeding: JGC has been seeding the ceramic market for over a year; customer relationships are established, and customers are asking JGC to set up a facility nearby to service them more closely.
• Zinc sulphate advantage: One major raw material for zinc sulphate is a byproduct of the zinc oxide business, giving inherent raw material advantage from day one; waste from zinc oxide process is consumed internally.
• New product launches: LabPure zinc oxide, a high-purity grade for analytical reagent application, and JG-ZRA, a rubber activator for specific non-tire customer requirements with export potential, were introduced during Q1.
• Patent in advanced stage: Another chemical jointly developed with a premier Indian research institute, offering improved processability, superior cure characteristics, and easy handling, has a patent acquisition in advanced stage.
• R&D infrastructure: An R&D center was inaugurated at Naidupeta, supporting new product development, polymer testing, and enhanced product quality across rubber, cosmetic, agriculture, and other end-user industries.
• Margin drivers by sector: Pharma, specialty chemicals, cosmetic, and certain electronic applications are expected to lead the higher margin profile.

Anirudh Jhunjhunwala: "when you're solving somebody's problem, it is always a happy scenario for both the seller and the buyer."

Recycled Rubber (JG TUR) & New Business Lines

• JG TUR branding: The recycled rubber project is now branded "JG TUR" (tire upscaled rubber); pilot trials received very good response from key customers.
• Customer pull: Customers have tried pilot-scale material and been happy, suggested formulations, and JGC is working closely with them while parallelly setting up commercial scale.
• Commercial timeline: Management hopes to commercially start the project in the next 12 months, with a detailed commercial plan covering capex, capacity, timelines, and revenue potential to be shared at an appropriate time.
• Faster traction expected: The product addresses an eminent need for the tire industry to find recycling alternatives, is made from 100% recycled rubber, and supports tire industry ESG commitments.
• Different line of business: New products like devulc rubber sit in the tire and rubber segment but are a completely different line of business, very different from zinc oxide.
• Direct sales strategy: Aim is always direct-to-customer, with close to 90% of new sales expected to be direct.

Anirudh Jhunjhunwala: "when the customer needs something, the things move faster than when you need the customer."

Demand Environment & End-Market Trends

• Tire industry robust: Demand momentum across the tire industry remained robust through Q4 FY26 and continued into Q1 FY27 and the current quarter; customers are operating at high capacity utilization.
• OEM and replacement support: Strong OEM demand coupled with healthy replacement demand is expected to support future growth; several large OEMs are expanding production capacity in India for domestic and export markets.
• Non-rubber traction: Encouraging traction in pharmaceuticals, ceramics, specialty chemicals, and agri segments.
• Volume growth outlook: Volume growth has been in mid-teens for the current quarter.
• Exports outlook: Going ahead into FY28 and FY29, exports are expected to remain similar at about 15%, with efforts to inch up.
• Demand sustainability: Management remains optimistic demand momentum will sustain throughout the year, citing structural improvement in India post-GST reforms and strong automobile, tire, rubber, ceramics, pharma, and consumer products demand.
• Zinc sulphate growth: Southern India market continues to be attractive with no large players; JGC will continue growing in South India and will also try to capture Western India due to easy raw material availability from Dahej's zinc oxide process.

Anirudh Jhunjhunwala: "When the tire industry invests, JG Chemicals is a direct beneficiary, and our customers today continue to operate at high capacity utilization, which is very encouraging."

Guidance & Commitments

Key Metrics