EDP Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥137M
• Operating Income: ¥-507M
• Net Income: ¥-576M
• EPS: ¥-34.90

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

EDP Corporation (TSE: 7794) reported FY2026 Q2 consolidated results under JGAAP marked by a severe top-line contraction and continued operating losses, offset by a solid equity cushion and ample short-term liquidity. Revenue fell 68.4% year over year to ¥137 million, evidencing a sharp demand slowdown and/or shipment timing issues. Gross profit was negative at ¥-102.6 million, and operating income remained deeply negative at ¥-507 million (flat YoY per disclosure), underscoring significant under-absorption of fixed costs and adverse mix. Ordinary loss of ¥-501 million and net loss of ¥-504 million indicate minimal non-operating items and no material tax burden due to losses. EBITDA was ¥-278.0 million, and the EBITDA margin of -202.9% reflects extreme operating deleverage on a depressed revenue base. Depreciation and amortization of ¥229.0 million are substantial relative to revenue, highlighting a capital-intensive cost structure that amplifies losses at low utilization. The DuPont decomposition yields a net margin of -367.9%, asset turnover of 0.035x, and financial leverage of 1.29x, resulting in an ROE of -16.7%. Liquidity is strong: current assets of ¥2,721.9 million versus current liabilities of ¥354.0 million produce a current ratio of 7.69x and quick ratio of 6.61x. The balance sheet remains equity-heavy with total equity of ¥3,022 million against total liabilities of ¥958.9 million (D/E 0.32x), implying an inferred equity ratio around 77% despite the reported 0.0% (likely undisclosed). Operating cash outflow was ¥-159.8 million, materially better than the net loss due to non-cash D&A and likely working capital release. Financing cash inflow of ¥68.8 million supplemented liquidity; investing cash flows were undisclosed. Dividend remains suspended (DPS ¥0), which is appropriate given losses and negative operating cash flow. Data limitations exist: certain cash flow categories, cash and equivalents, share counts, and equity ratio were undisclosed or reported as zero placeholders; analysis focuses on available non-zero items and logical inferences. Overall, the quarter reflects demand volatility and a steep utilization reset, but the company retains a sizeable liquidity buffer and low leverage, providing time to execute on commercialization and demand recovery. Key to normalization will be revenue reacceleration, absorption of fixed costs, and disciplined cash burn management over the next few quarters.

Profitability Analysis

ROE is -16.68%, decomposed as: net margin -367.88% × asset turnover 0.035 × financial leverage 1.29. The dominant driver is the exceptionally weak net margin as revenue collapsed. Gross margin was negative at -74.9%, indicating severe under-absorption and/or pricing pressure; the discrepancy between revenue (¥137m) and cost of sales (¥539.2m) alongside reported gross profit (¥-102.6m) suggests potential classification differences in cost lines versus the gross profit subtotal. Operating margin (¥-507m on ¥137m) is deeply negative, consistent with high fixed costs relative to current shipment levels. EBITDA of ¥-278.0m shows that even before D&A, the business is loss-making, highlighting low utilization and limited pricing leverage. Operating leverage is unfavorable: small revenue base cannot cover fixed manufacturing and R&D/admin overhead, and margin should be highly sensitive to volume recovery. Ordinary loss (¥-501m) is close to operating loss, implying limited non-operating drag (interest expense only ¥0.7m). Effective tax rate is effectively nil due to losses. Overall profitability will hinge on restoring volume and yields to absorb fixed costs; near-term margins likely remain volatile until demand and throughput stabilize.

Growth Assessment

Revenue declined 68.4% YoY to ¥137m, signaling a sharp slowdown likely tied to end-market digestion, customer qualification timing, or shipment deferrals. The severity of the top-line decline suggests non-linear demand in core products and a potential lumpiness in order conversion. Profit quality is weak in the quarter due to negative gross margins and heavy fixed cost absorption, but D&A size indicates capacity and technology investments that could support future scaling if demand normalizes. Asset turnover at 0.035x is very low, reflecting underutilized assets; normalization would require a sustained rebound in shipments. Near-term outlook depends on backlog visibility, customer qualification milestones, and capex cycles in targeted industries; absent explicit order data, sequential revenue improvement remains an open question. Given the magnitude of loss and low asset turns, management likely needs to prioritize commercial ramp, pricing discipline, and cost base flexibility. Sustainability of growth will also depend on yield improvements and production stability to protect margin as volumes return.

Financial Health

Total assets are ¥3,909m and equity is ¥3,022m, yielding low leverage (liabilities ¥958.9m; D/E 0.32x). While the reported equity ratio is 0.0%, the inferred equity ratio from available balances is approximately 77% (equity/assets), indicating a strong capital base. Liquidity appears robust: current assets ¥2,721.9m versus current liabilities ¥354.0m yield a current ratio of 7.69x and quick ratio of 6.61x; working capital is ¥2,367.9m. Cash and equivalents were undisclosed, so the composition of current assets (cash vs. receivables vs. other) is not available; however, inventories are ¥383.5m, a manageable slice of current assets. Interest burden is minimal (interest expense ¥0.7m) and interest coverage is not meaningful given negative EBIT, but low absolute interest cost reduces solvency risk near term. Overall solvency is strong due to high equity and low debt, providing runway to navigate losses, contingent on cash burn and access to incremental financing if needed.

Cash Flow Quality

Operating cash flow was ¥-159.8m versus a net loss of ¥-504.0m, yielding an OCF/NI ratio of 0.32x; this gap is primarily explained by non-cash D&A of ¥229.0m and likely working capital release. EBITDA was ¥-278.0m, and the OCF outflow being smaller than EBITDA suggests positive working capital contributions or other non-cash add-backs. Free cash flow was not computable as capex was undisclosed; investing cash flow was reported as zero (treated as undisclosed, not actual zero). Financing inflow of ¥68.8m partially offset operating burn; the source (debt vs. equity) is not specified. Working capital management appears supportive in the quarter, but sustainability depends on future inventory and receivables movements as volumes recover. Earnings quality is weak from a profitability standpoint, yet cash conversion of losses is cushioned by non-cash expenses; continued negative OCF is a key risk if revenue remains depressed.

Dividend Sustainability

The company paid no dividend (DPS ¥0) with a payout ratio of 0%, appropriate given losses and negative operating cash flow. With FCF not disclosed and OCF negative, distributable capacity is currently absent. Balance sheet strength (low leverage, significant equity) is a positive, but policy resumption would likely require a return to positive OCF and visibility on sustained profitability. Near-term dividend outlook remains constrained until margin normalization and volume recovery restore internal funding capacity.

Risk Assessment

Business Risks:

• Severe revenue volatility and concentration risk in core end-markets
• Under-absorption of fixed costs leading to negative gross margins at low volumes
• Yield ramp and manufacturing execution risks in scaling production
• Pricing pressure and mix shifts during demand downturns
• Customer qualification and adoption timing uncertainty
• Potential supply chain constraints for specialized inputs

Financial Risks:

• Sustained negative operating cash flow leading to cash burn
• Dependence on external financing to bridge losses if revenue recovery lags
• Inventory and receivables build risk if demand remains soft
• Accounting presentation differences affecting margin comparability (e.g., cost classification)
• Limited interest coverage due to negative EBIT despite low absolute interest expense

Key Concerns:

• Top-line decline of 68.4% YoY to ¥137m
• Negative gross margin (-74.9%) and EBITDA margin (-202.9%)
• Operating loss of ¥-507m remaining large and flat YoY
• OCF negativity (¥-159.8m) despite material non-cash add-backs
• Data gaps: cash balance, capex/FCF, share count, and equity ratio disclosure

Investment Implications

Key Takeaways:

• Demand reset has driven extreme operating deleverage and negative gross margins
• Balance sheet remains strong with low leverage (D/E 0.32x) and substantial working capital
• Cash burn is meaningful but moderated by non-cash D&A; runway depends on actual cash on hand
• Profit recovery hinges on volume rebound, yield improvements, and cost absorption
• Disclosure gaps (cash, investing flows) limit precision of cash runway analysis

Metrics to Watch:

• Quarterly revenue trajectory and order/backlog indicators
• Gross margin recovery and factory utilization rates
• Operating cash flow and capex to infer true FCF
• Inventory and receivables movements (working capital intensity)
• EBITDA progression and breakeven revenue threshold
• Leverage and liquidity actions (new debt/equity financing)

Relative Positioning: Within Japanese small-cap advanced materials/semiconductor adjacencies, EDP exhibits weaker near-term profitability and asset turns versus peers due to a steep demand drawdown, but maintains above-average balance sheet strength and liquidity, offering time to stabilize operations if end-market demand normalizes.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis