J.G Chemicals - India’s Leading Zinc Oxide Manufacturer

[learner1]

J.G Chemicals is a chemical company manufacturing Zinc Oxide (ZnO) and Zinc Sulphate.
It is the largest zinc oxide manufacturer in India with a 30% market share, and a top-5 global producer, employing the widely adopted French process technology.

Product Application
Rubber (tyre & other rubber products), ceramics, paints & coatings, pharmaceuticals & cosmetics, electronics & batteries, agrochemicals & fertilizers, specialty chemicals, lubricants, oil &gas, and animal feed.

Zinc Oxide plays a crucial role in the tyre manufacturing process. It enhances tyre durability, heat dissipation, UV resistance, and vulcanization. It improves tensile strength, fuel efficiency, and rolling resistance, ensuring better grip, longevity, and performance in passenger, commercial, and specialty tyres.

Manufacturing Facilities
The company operates 3 manufacturing facilities in Jangalpur and Belur, both in Kolkata, West Bengal, and Naidupeta in Nellore District, Andhra Pradesh. Naidupeta is the largest facility, owned and operated by the Material subsidiary. Total capacity is about 70,000 MTPA

Expansion
In May 2025, purchased 11 acresof land in Gujarat (24 Cr) to set up a unit to sell inthe western part of India

Competitive Edge
a) Strong Recycling Technology: Uses 73% secondary zinc, reducing energy consumption by 82% and carbon footprint by 70%.
b) Direct Sales Model: 95%+ of sales are direct to end customers.
c) High Entry Barriers: The Products take Long approval times (4-5 years) for tyre industry, with a stringent regulatory standards (IATF, WHO-GMP).

Leading Supplier Tyre industry companies are the largest consumers of their products. Apart from being a supplier to 9 out of the top 10 global tire manufacturers and to all of the top 11 tire manufacturers in India, they also supply to leading paint manufacturers, footwear players, and cosmetics players in India.

Certification
The company’s material subsidiary BDJ Oxides is the only zinc oxide manufacturing facility in India to have an IATF certification, which is
preferred by tyre manufacturers supplying to original equipment manufacturers.

Financial Highlights (FY25)

• Revenue: ₹848 Cr, a 27% increase from the previous year
• EBITDA: ₹96 Cr (11.3% EBITDA margin )
• Net Profit: 67Cr (7.9% PAT Margin)
• Net Worth: ₹4,59 Cr

Investment Considerations and Valuations

• Mkt cap 1482 Cr | Stock price (5th June 2025): 378
• PE: 23.2 and PEG: 0.61 → reasonable valuations
• Marquee investors → MIT, Carnelian and SBI insurance
• Competitive advantage in a commodity play - long sales cycle, certification, raw material links
• Promoters are young and hungry - 2X revenue goal in 3 years
• Clean track record - no known corporate governance issues

Risks/things to consider

• Assets are around 40Cr, and the company does a turnover of 800+ cr. Very high asset turnover. Not sure how this is possible.
• Are switching costs for the tyre manufacturer high, as claimed by J.G - This needs verification
• Margins and topline vulnerable to Zn prices
• Management does not do any conference calls, so limited information on utilisation

I would appreciate your thoughts on this company.

My views can be biased. I have a small position in the stock.

[Malak_Gada]

Hi
Thanks for initating talks on this company

JG Chemicals is the only producer to use 100% zinc scrap for rubber and tyre industry

The prices of Zinc Oxide are determined by Zinc prices on the LME.
Following is the sales mix as per different end users

Sales Mix	FY25	FY24
Rubber and tyre	85%	89.70%
Pharma and chemical	8.20%	7%
Agri	3.70%	1.20%
Others	3.10%	2%

The EBITDA margins for Zinc Oxide and Zinc Sulphate business is given below

Zinc Oxide	EBITDA Margin
Rubber and tyre	10-11%
Pharma	18-20%
Ceramic	10-11%

Zinc Sulphate	EBITDA Margins
Agriculture	14-15%

There are three methods of producing zinc oxide which are American, French and wet.
JG Chemical undertakes the French process which is generally considered better than the American process (AP) due to superior performance in various metrics.

As mentioned above, it is the largest zinc oxide manufacturer in India with a 30% market share. There are 2 unlisted players who have a combined 20% market share named Rubamen and Cylox and the rest of the market is unorganised.
The management is of the belief that the tyre industry, which was going through a consolidation phase made a decision to reduce the number of supplier it relies on in order to optimise operations and in that way, the smaller unorganised players bear the brunt of it, thereby benefitting J.G. Chemicals.

The company has a high export concentration to Thailand, since major tyre manufacturers have their factories situated there. JG Chemicals is also planning to expand to Thailand, either by setting up their own manufacturing facility (leading to saving on logistics expenses), or to acquire a smaller player, i.e a Build or Buy model is being contemplated.

The company is net debt free as well and has about 31 Cr of cash on the books.

Manufacturing Facility
In the Naidupeta facility, out of a capacity of 43,704 MTPA, about 40% is for pharma end use production. The company has also acquired 2.96 acre in Naidupeta and is venturing into advanced recycling components - recycled rubber.

The Gujarat plant will be operational by H1FY27 and will produce zinc oxide and zinc carbonate.
In Gujarat, a capex of 24cr for 11 acres of land was done and it would cost another 10-12 cr for plant and machinery (estimate given by IR).

Guidance
By FY28, the company plans to double its volume. The current capacity utilisation is at 60-65% which is envisioned to go up to 80-85%.

Risks involved
Slowdown of the automotive industry, where the company has 80-85% exposure to through the tyre and rubber industry.
One thing to note is that even though margins and topline is vulnerable to Zn prices, the management does not undertake any hedging to sagfeguard against this.

Although it is unclear of the importance of IATF certification, the company seems attractive based on the publicly available information and the information relayed by their IR.

[UrsRafeek]

They scheduled a investors call

Good point is Neither FII nor DII decreased their stake during whole year even in down turn. Just two days ago started watching this company now a thread pops up