JG Chemicals: Navigating Growth and Sustainability in Q2/H1 FY26

JG Chemicals Limited, a leading Indian manufacturer and recycler of Zinc Oxide, recently announced its financial results for the second quarter and first half of fiscal year 2026. The company reported a consolidated revenue from operations of INR 220.3 crores for Q2 FY26, marking a 4% year-on-year increase. For the first half (H1 FY26), revenue stood at INR 438.3 crores, reflecting a 6% growth compared to the previous year. While the company experienced a slight dip in Q2 EBITDA margins, management remains optimistic about future improvements, driven by strategic expansions and a focus on diversified, high-margin segments.

The Q2 FY26 EBITDA came in at INR 21.9 crores, with a margin of 9.94%, while Profit After Tax (PAT) was INR 15.0 crores. For H1 FY26, EBITDA was INR 45.1 crores (10.29% margin) and PAT was INR 31.4 crores. The marginal decline in Q2 EBITDA margins was attributed to the consumption of higher-cost inventory, a temporary effect stemming from shipping delays in the prior period. Management has indicated that logistics are stabilizing, and improving zinc prices are expected to positively impact margins in the coming quarters. The company's core manufacturing business of Zinc Oxide typically maintains steady-state EBITDA margins in the 10-11% range, with aspirations to reach 13-14% as non-rubber applications grow.

Strategic Initiatives and Future Growth Drivers

JG Chemicals is actively pursuing several strategic initiatives to bolster its market position and diversify its revenue streams. A cornerstone of this strategy is the Dahej greenfield expansion in Gujarat. This new state-of-the-art facility, spread across 11.43 acres, will produce a wide range of zinc chemicals using advanced in-house recycling technologies. With an investment of INR 100 crores, entirely funded by internal accruals, the project aims for Phase-1 commissioning in H1 FY27, with a potential to generate over INR 900 crores in revenue from both phases combined. This expansion is crucial for strengthening the company's presence in Western India and deepening its reach in high-growth segments like ceramics, specialty chemicals, agro, and pharmaceuticals.

Another key focus is the development of a new recycled rubber product. Recognizing the increasing demand for sustainable solutions in the tyre industry, JG Chemicals is conducting pilot trials for an advanced recycled rubber product, expected to commence in Q4 FY26. This initiative aligns with the company's objective to increase the recycled content per tyre, targeting a usage of approximately 15%, significantly higher than the current 3-4% for traditional reclaimed rubber. This move is expected to contribute to the company's goal of increasing non-rubber revenue share from 15% to 30% over the next four to five years.

Operational Excellence and Sustainability

JG Chemicals prides itself on its operational excellence and commitment to sustainability. The company is India's largest zinc recycling company, with strong in-house R&D and proprietary technology for processing various forms of zinc waste and scrap. This not only reduces CO2 emissions, air and water pollution but also positions the company as an ESG-compliant supplier. The Naidupeta facility is globally recognized as the only IATF-approved ZnO plant and holds WHO GMP certification, enabling it to serve highly regulated industries.

In a significant step towards environmental responsibility, the company is in advanced stages of installing solar power generation at its Naidupeta facility. This project aims to meet over 60% of its electricity requirements through renewable sources within the next five years, further reducing its carbon footprint. Additionally, the company is exploring brownfield expansion opportunities at its Naidupeta plant to augment capacity and increase efficiencies, ensuring it can meet customer demand until the Dahej project is fully operational.

Market Outlook and Diversification

Management anticipates robust growth in the tyre industry, projected at 7-8% over the next couple of years, further boosted by recent GST cuts. The company's diversified customer base, serving 9 out of 10 global and 11 domestic tyre manufacturers, provides a strong foundation. Beyond rubber, JG Chemicals sees significant opportunities in non-rubber applications such as healthcare, cosmetics, and specialty chemicals, driven by the growth of homegrown brands and increasing purchasing power in India. The company's ability to offer over 80 specialized grades of zinc oxide, tailored to specific application needs, gives it a competitive edge in these diverse markets.

Concluding Thoughts

JG Chemicals Limited is strategically positioned for sustained growth, leveraging its market leadership, recycling expertise, and commitment to innovation. The Dahej expansion, coupled with a strong focus on high-growth non-rubber segments and sustainability initiatives, underscores the company's forward-thinking approach. Despite short-term margin fluctuations, the long-term outlook remains positive, with management's disciplined capital allocation and clear strategic roadmap instilling confidence in its future trajectory.