Hokuriku Electric Power Company (9505) FY2026 Q3 Earnings Report

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Executive Summary

The key point of this financial result is that the Company achieved earnings growth despite a decline in revenue, rather than experiencing revenue growth accompanied by lower earnings. Revenue declined to ¥583.11B (-7.0% YoY), while Operating Income rose to ¥80.08B (+2.1%), Ordinary Income to ¥82.21B (+11.7%), and Net Income to ¥60.56B (+9.8%). The primary factors behind the revenue decline were the decrease in electricity and gas price support subsidies (¥16.65B in the previous year → ¥7.28B in the current period) and lower electricity sales revenue from interregional and other counterparties. Earnings growth resulted from improvements in the cost structure of the Power Generation and Retail Business and expansion in the Transmission and Distribution Business.

Factors Affecting Financial Performance

【Revenue】Revenue declined 7.0% YoY (-¥43.66B) to ¥583.11B. By segment, the Power Generation and Retail Business declined to ¥482.40B (-7.6%), and Other Businesses declined to ¥55.39B (-16.7%), while the Transmission and Distribution Business increased to ¥45.33B (+18.7%). The primary factors behind the revenue decline were lower interregional and other electricity sales revenue (¥126.9B → ¥109.3B) and a decrease in national electricity and gas price support subsidies (¥16.65B → ¥7.28B).

【Profit and Loss】Operating Income increased to ¥80.08B (+2.1%), Ordinary Income to ¥82.21B (+11.7%), and Net Income to ¥60.56B (+9.8%). The Operating Income margin improved by 1.2pt from 12.5% in the previous year to 13.7%. Ordinary Income grew faster than Operating Income because of an increase in non-operating income (¥10.92B, including foreign exchange gains of ¥2.41B and equity-method gains/losses of ¥3.40B). On a segment profit basis (Ordinary Income basis), the Power Generation and Retail Business improved to ¥66.24B (+16.5%), and the Transmission and Distribution Business to ¥14.96B (+16.4%), while Other Businesses deteriorated to ¥5.90B (-28.6%), indicating a slight decline in the diversification benefits across businesses. In conclusion, the Company delivered earnings growth despite a decline in revenue.

Segment Analysis

The Power Generation and Retail Business recorded revenue of ¥482.40B (-7.6%) and segment profit of ¥66.24B (+16.5%). Its profit margin improved even amid lower revenue (10.2% → 13.7%), and as the core business accounting for approximately 76% of total segment profit, it led overall earnings growth. The Transmission and Distribution Business delivered both revenue and profit growth, with revenue of ¥45.33B (+18.7%) and segment profit of ¥14.96B (+16.4%), demonstrating stable growth as a regulated business. Other Businesses recorded revenue of ¥55.39B (-16.7%) and segment profit of ¥5.90B (-28.6%), posting declines in both revenue and profit and showing relative weakness within the business portfolio.

Key Financial Indicators

【Profitability】The Operating Income margin improved to 13.7% from 12.5% in the previous year (+1.2pt), while the Net Income margin improved to 10.4% from 8.6% (+1.8pt), indicating improved margins despite lower revenue and suggesting improvements in the cost structure and procurement conditions.【Cash Flow Quality】Cash and deposits declined by ¥59.92B YoY to ¥179.45B, while accounts payable also contracted by ¥3.665B (-¥27.0B YoY). Comprehensive income was ¥67.55B, of which ¥67.18B was attributable to owners of the parent, exceeding Net Income of ¥60.56B; improvement in OCI, including a ¥9.30B valuation difference on securities, contributed to the difference.【Capital Efficiency】Annualized ROE remained high at 18.1%. Because fixed assets account for 79.9% of total assets, the capital-intensive business structure results in low asset turnover. It should be noted that the ROE level includes the effect of financial leverage.【Financial Soundness】The Equity Ratio improved to 24.3% from 20.5% in the previous year. However, the Company has a structure centered on long-term liabilities, including long-term borrowings of ¥456.34B and bonds of ¥529.70B, and its leverage reflects the capital intensity characteristic of the electric power business.

Cash Flow Analysis

As the cash flow statement has not been directly disclosed, funding trends are analyzed based on changes in the balance sheet. Cash and deposits declined by ¥59.92B from ¥239.37B in the previous year to ¥179.45B, while retained earnings increased to ¥256.98B (+¥55.93B YoY) through the accumulation of Net Income. Accounts payable contracted to ¥36.65B (-¥27.09B YoY), suggesting the use of funds in working capital. Long-term borrowings increased slightly to ¥456.34B (+¥10.60B YoY), while bonds declined to ¥529.70B (-¥37.00B YoY), indicating progress in partially reviewing the long-term funding structure. Overall, the strengthening of the capital base through the retention of earnings and the allocation of funds accompanied by a reduction in cash levels are proceeding simultaneously.

Quality of Earnings

The reason Ordinary Income growth (+11.7%) exceeded Operating Income growth (+2.1%) was an increase in non-operating income. Foreign exchange gains of ¥2.41B and equity-method gains/losses of ¥3.40B, which increased significantly from ¥0.58B in the previous year, were the primary contributors. These factors are independent of the Company’s core operations, and their recurrence may vary depending on market conditions. Extraordinary gains of ¥1.95B were small, at approximately 0.3% of Revenue, and were not the primary driver of the improvement in Net Income. Comprehensive income of ¥67.55B exceeded Net Income of ¥60.56B, as the positive contribution of ¥9.30B from the valuation difference on securities exceeded the negative impact of -¥4.72B from adjustments related to retirement benefits. The divergence between Net Income and comprehensive income resulted from market-related factors affecting OCI items.

Earnings Forecast and Guidance

The Full-Year earnings forecast calls for Revenue of ¥780.00B, Operating Income of ¥70.00B (-30.7% YoY), and Ordinary Income of ¥65.00B (-28.9% YoY). However, cumulative Q3 Operating Income has already reached ¥80.08B and Ordinary Income ¥82.21B, representing progress rates of 114.4% and 126.5%, respectively, exceeding the Full-Year forecasts. Net Income has also reached ¥60.56B, or 125.7% of the Full-Year forecast of ¥48.00B. Neither the earnings forecast nor the dividend forecast has been revised. The relationship between this progress and the forecasts indicates that management has adopted cautious assumptions regarding fuel expenses, procurement costs, and the electricity supply-demand environment in Q4.

Shareholder Returns

An interim dividend of ¥10.0 per share was paid, and the Full-Year dividend forecast is ¥22.5. Accordingly, the year-end dividend is expected to be the difference of ¥12.5. The Payout Ratio based on the Full-Year forecast EPS of ¥229.79 is approximately 9.8%, a low level, with most Net Income allocated to retained earnings. Retained earnings increased to ¥256.98B (+27.8% YoY). Maintaining the dividend level while capital continues to accumulate indicates a policy that prioritizes strengthening financial soundness.

Risk Factors

1. Financial Leverage: Although the Equity Ratio improved to 24.3%, long-term debt, comprising long-term borrowings of ¥456.34B and bonds of ¥529.70B, reflects the capital-intensive nature of the electric power business. If interest rates rise, increased interest expense (¥5.49B in the previous year → ¥6.35B in the current period, +15.7%) could pressure earnings.

2. Gap Between Full-Year Forecast and Progress: Cumulative Q3 Operating Income and Ordinary Income have already exceeded their Full-Year forecasts, and Full-Year performance could fluctuate significantly depending on Q4 fuel procurement costs, electricity market prices, and demand trends. The continuation of a high progress rate without a forecast revision requires monitoring.

3. Subsidy Dependence and Contraction of Other Businesses: Electricity and gas price support subsidies declined from ¥16.65B in the previous year to ¥7.28B, weighing on revenue. At the same time, segment profit for Other Businesses declined by -28.6%, indicating a relative weakening of earnings diversification outside the electric power business.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (utilities)

Profitability and Returns

Because comparative data within the industry is limited, the positioning in terms of absolute levels should be regarded as reference information only.

Growth and Capital Efficiency

The Revenue growth rate was negative, affected by the decline in subsidies. Its positioning within the industry should be evaluated after median data has been expanded.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. While Revenue declined by -7.0%, the Company secured growth in Operating Income (+2.1%), Ordinary Income (+11.7%), and Net Income (+9.8%). Improvement in margins despite lower revenue (Operating Income margin +1.2pt, Net Income margin +1.8pt) is the structural feature of these financial results.

2. The segment profit margin of the Power Generation and Retail Business improved from 10.2% to 13.7%, and the Transmission and Distribution Business continued to achieve both revenue and profit growth. Meanwhile, segment profit for Other Businesses contracted by -28.6%, widening the disparity among businesses.

3. Despite progress rates against the Full-Year earnings forecasts reaching 114.4% for Operating Income and 125.7% for Net Income, the forecasts remain unchanged. This suggests management’s cautious stance toward Q4 uncertainty.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,231–¥2,368 at Cost of Equity ±1%; ¥2,294–¥2,305 at ω ±0.1.

Notes:

• Because Net Income progress against the Full-Year forecast (126%) exceeds the standard level (75%), Forecast EPS has been adjusted upward within a maximum range of +10% (because companies ahead of schedule tend to exceed forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Net assets as of the quarter-end have been used (there is a time lag relative to the Full-Year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated using only publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting professionals as necessary.

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