| Metric | Current Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥2201.8B | ¥2365.4B | -6.9% |
| Operating Income / Operating Profit | ¥92.9B | ¥73.2B | +26.9% |
| Ordinary Income | ¥81.7B | ¥56.6B | +44.2% |
| Net Income / Net Profit | ¥42.5B | ¥34.8B | +21.9% |
| ROE | 3.2% | 2.8% | - |
FY2026 full-year results showed Revenue of ¥2,201.8B (YoY -¥163.6B, -6.9%), while Operating Income improved to ¥92.9B (YoY +¥19.7B, +26.9%), Ordinary Income to ¥81.7B (YoY +¥25.1B, +44.2%), and Net Income attributable to owners of the parent to ¥42.5B (YoY +¥7.7B, +21.9%), delivering substantial profit growth. The revenue decline was driven by a reduction in electricity rate support subsidies (prior year ¥99.1B → current ¥56.9B) and a fall in unit prices due to normalization of fuel costs. Profitability benefited from lower procurement costs and strengthened cost control, with Operating Margin improving to 4.2% (up 1.1ppt from 3.1%), Ordinary Income Margin to 3.7% (up 1.3ppt), and Net Income Margin to 1.9% (up 0.5ppt). By segment, the Electricity Business posted Operating Income of ¥56.3B (+5.3%) and remained resilient, while Other Businesses delivered ¥31.5B (+72.9%) at a high margin of 8.2%, driving corporate margins. Total assets expanded to ¥5,224.8B (+¥220.7B) as CAPEX progressed, and Net Assets increased to ¥1,328.7B (+¥93.2B) supported by profit accumulation and Comprehensive Income of ¥106.9B. The pattern of lower revenue but higher profit indicates that adjustments in unit prices following the cycle of fuel costs and subsidies were absorbed and that improvements in cost structure have led to a recovery in profitability.
[Revenue] Revenue was ¥2,201.8B (YoY -6.9%), down ¥163.6B. The primary drivers were a contraction in electricity rate support measures (Electricity Business ¥56.1B, Other ¥0.8B, total ¥56.9B; down ¥42.2B from prior year total ¥99.1B) and a decline in electricity unit prices associated with lower fuel costs. By segment, the core Electricity Business accounted for ¥2,075.8B (-7.3%), representing 94.3% of total revenue and was affected by subsidy reduction and unit price declines. The Construction Business declined slightly to ¥255.7B (-3.0%), while Other Businesses rose modestly to ¥383.7B (+1.5%), supported by diversification such as contract operations and real estate. Externally, fuel prices continued a downtrend YoY, passing through reduced procurement costs to operating profit. Sales volume and demand assumptions are not disclosed, but unit price effects were significant and volume is estimated to be broadly flat.
[Profitability] Operating Income was ¥92.9B (YoY +26.9%), up ¥19.7B, with an Operating Margin of 4.2% (up 1.1ppt from 3.1%). The increase was mainly due to lower procurement costs from normalization of fuel cost adjustments and improved absorption of fixed costs. By segment, Electricity Business Operating Income was ¥56.3B (+5.3%) with a low margin of 2.7% but remained resilient. Construction Business improved to ¥13.9B (+51.7%) with a 5.5% margin, and Other Businesses rose to ¥31.5B (+72.9%) with an 8.2% margin, contributing to corporate margin improvement. Non-operating income included dividend income ¥2.97B, equity-method investment gains ¥2.42B, and gains on sale of securities ¥6.37B, while interest expense increased to ¥26.45B (up ¥7.2B from prior year ¥19.26B). As a result, Ordinary Income grew to ¥81.7B (YoY +44.2%), outpacing Operating Income growth, achieving an Ordinary Income Margin of 3.7% (up 1.3ppt from 2.4%). Extraordinary losses were negligible (impairment loss ¥0.03B). After corporate taxes and others of ¥16.6B (effective tax rate 20.3%), Net Income attributable to owners of the parent was ¥42.5B (YoY +21.9%), with a Net Income Margin of 1.9% (up 0.5ppt). Comprehensive Income was ¥106.9B, 2.5x Net Income, as valuation gains on available-for-sale securities ¥29.7B and actuarial adjustments related to retirement benefits ¥12.1B boosted equity. In conclusion, despite revenue decline, normalization of fuel expenses and cost management improved Operating Margin, and growth in high-margin segments together with non-operating income complemented profit increases.
The core Electricity Business recorded Revenue ¥2,075.8B (YoY -7.3%), Operating Income ¥56.3B (YoY +5.3%), and a margin of 2.7%—low but stable. Electricity rate support subsidies decreased to ¥56.1B (down ¥43.0B from prior year ¥99.1B), but procurement cost reductions from fuel cost adjustments supported profitability. The Construction Business posted Revenue ¥255.7B (YoY -3.0%), Operating Income ¥13.9B (YoY +51.7%), and margin 5.5%, with improved project profitability and fixed-cost absorption. Other Businesses (contract operations of electrical machinery equipment, real estate, etc., not included in reporting segments) recorded Revenue ¥383.7B (+1.5%), Operating Income ¥31.5B (+72.9%), and margin 8.2%, accounting for roughly 34% of consolidated operating profit and acting as a driver of overall margin improvement. Segment revenue composition (external customers) was Electricity Business 94.3%, Construction 11.6%, Other 17.4%, indicating continued high concentration in the Electricity Business. Segment operating income breakdown was Electricity ¥56.3B, Construction ¥13.9B, Other ¥31.5B, with Other contributing substantially to profit and indicating portfolio diversification progress.
[Profitability] Operating Margin was 4.2% (up 1.1ppt from 3.1%), Ordinary Income Margin 3.7% (up 1.3ppt), and Net Income Margin 1.9% (up 0.5ppt), improving across the board. ROE was 3.2% (prior year disclosure noted Net Income / Equity ratio 0.05), and DuPont decomposition gives approximately 3.1% from Net Income Margin 1.9% × Total Asset Turnover 0.42 × Financial Leverage 3.93x, indicating that the main driver of improvement was the recovery in Net Income Margin. EBITDA was Operating Income ¥92.9B + Depreciation & Amortization ¥236.3B = ¥329.2B, with an EBITDA Margin of 15.0%, showing stable pre-depreciation earning power. By segment, margins differ markedly: Electricity 2.7%, Other 8.2%, Construction 5.5%, and mix improvement boosted corporate margins. [Cash Quality] Operating Cash Flow (OCF) was ¥273.0B, 6.4x Net Income ¥42.5B, indicating high quality; OCF/EBITDA was 0.83x, and the accrual ratio (Net Income - OCF) / Total Assets was -4.4%, indicating sound accrual quality. [Investment Efficiency] Total Asset Turnover was 0.42x (Revenue ¥2,201.8B / Total Assets ¥5,224.8B), down from 0.47x prior year, reflecting short-term dilution of asset efficiency due to front-loaded CAPEX. CAPEX ¥381.2B / Depreciation ¥236.3B = 1.61x, indicating continued renewal and growth investment. [Financial Soundness] Equity Ratio was 25.4% (up 1.1ppt from 24.3%), and debt-to-equity multiple was 2.93x (Interest-bearing debt ¥2,931B / Net Assets ¥1,328.7B, after excluding non-controlling interests), indicating high leverage. Debt/EBITDA was 8.9x (Interest-bearing debt ¥2,931B / EBITDA ¥329.2B) at a high level, showing sensitivity to interest rates. Interest coverage was EBIT ¥92.9B / Interest Expense ¥26.45B = 3.51x, providing a minimal safety buffer.
Operating Cash Flow was ¥273.0B (YoY -19.9%), 6.4x Net Income ¥42.5B, indicating high quality. Subtotal (before working capital changes) was ¥313.6B, with Depreciation & Amortization ¥236.3B the principal non-cash add-back. Working capital changes comprised decrease in inventories +¥6.1B, decrease in trade receivables +¥18.1B, and increase in trade payables +¥6.7B, indicating solid cash collection despite demand softness. After deducting corporate taxes paid -¥18.5B and interest paid -¥25.4B, OCF was ¥273.0B, with OCF/EBITDA 0.83x near a healthy range. Investing CF was -¥350.6B, driven by purchases of tangible fixed assets -¥381.2B as CAPEX progressed and increased cash demand. Proceeds from disposals ¥3.5B and change in deposits and other +¥21.6B partially offset outflows. Free Cash Flow (OCF + Investing CF) was -¥77.6B, negative, indicating CAPEX was not fully covered by OCF. Financing CF was +¥83.4B, reflecting proceeds from long-term borrowings ¥334.8B and bond issuances ¥199.5B (total ¥534.3B), offset by repayments of long-term borrowings -¥145.1B, bond redemptions -¥290.0B, and dividends paid -¥13.6B. Cash and cash equivalents increased from ¥186.4B at the beginning of the period to ¥198.1B at year-end, up ¥5.8B, showing that Financing CF supplemented the FCF deficit. Interest paid -¥25.4B was paid from OCF, and interest burden could constrain earnings power. Signs of working capital manipulation are limited and accrual quality is good.
Most revenues derive from electricity sales in the Electricity Business and revenues from Construction and Other Businesses, and are generally recurring. Non-operating income ¥19.6B (0.9% of Revenue) includes dividend income ¥2.97B, equity-method investment gains ¥2.42B, and gains on sale of securities ¥6.37B, but the overall impact is limited. Gains on sale of securities are one-off, but amount to only 7.8% of Ordinary Income and do not materially distort core earning power. The main non-operating expense is interest expense ¥26.45B, which is a recurring financial cost. Extraordinary losses (impairment loss ¥0.03B) are negligible and do not affect earnings quality. The gap between Ordinary Income ¥81.7B and Net Income ¥42.5B is due to corporate taxes and others ¥16.6B and non-controlling interests ¥2.8B; the effective tax rate of 20.3% is standard. OCF ¥273.0B being 6.4x Net Income ¥42.5B and an accrual ratio of -4.4% indicate strong cash backing of profits and low accounting manipulation risk. The fact that Comprehensive Income ¥106.9B is 2.5x Net Income is driven by valuation gains on available-for-sale securities +¥29.7B and actuarial adjustments related to retirement benefits +¥12.1B, contributing to qualitative improvement in Net Assets. The sustainability of recurring income depends on fuel costs, regulation, and subsidy trends, but the ability to absorb subsidy reductions and still achieve profit growth suggests strengthening of fundamental earning power.
The annual dividend was ¥30 per share (interim ¥15, year-end ¥15). Based on issued shares 56,927 thousand less treasury stock 2,613 thousand, the year-end outstanding shares base is 54,315 thousand, implying total dividends of approximately ¥1.63B. The disclosed payout ratio on a calculation basis is 25.1%; using dividend cash payments ¥1.36B (CF basis) against Net Income ¥42.5B yields about 32%, but both are conservative levels. Dividend capacity from earnings is sufficient, but Free Cash Flow was -¥77.6B and the current dividends were supplemented by internal funds and debt raising, so cash-based sustainability depends on investment trends. Regarding future dividend policy, the company states that “following completion of the recovery period, dividends will be paid based on the basic policy on profit distribution,” but because next fiscal year profit levels are undecided, the dividend forecast for FY2027 ending March 2027 is “undecided.” Prior dividend was ¥10 annual, so this fiscal year’s ¥30 represents a ¥20 increase, reflecting profit recovery in shareholder returns. No share buybacks were executed, and the Total Return Ratio equals the payout ratio at 25.1%.
Fuel Cost and FX Volatility Risk: In addition to interest expense ¥26.45B within non-operating expenses, procurement costs for fuel are the most critical variable affecting Electricity Business profitability. This period saw margin improvement from fuel cost normalization, but rises in crude oil/LNG prices or further yen depreciation could increase procurement costs and, with delayed tariff pass-through, compress the Electricity Business margin of 2.7%. Details of FX hedging are unknown, but deferred hedge gains/losses are ¥0.5B and believed to be limited, suggesting a low hedge ratio. A 10% increase in fuel costs could reduce gross profit by several ¥B, and tariff mechanism flexibility would be an important buffer.
Interest Rate Risk from High Leverage: Interest-bearing debt is ¥2,931B (long-term borrowings ¥1,571B + bonds ¥1,360B), Debt/EBITDA is 8.9x, and Interest Coverage is 3.51x—only a minimal safety margin. Interest expense ¥26.45B increased by ¥7.2B YoY, and in a rising rate environment interest burden would rise further, pressuring Ordinary Income. A 1% rise in interest rates could add approximately ¥2.9B annually in interest expense (note: the report estimates ¥29B, likely indicating a different base; however figures presented above should be used), which would correspond to about 36% of Ordinary Income ¥81.7B. Maturity management of bonds and long-term borrowings and timing of refinancing are key, and capital market volatility directly affects financial flexibility.
Liquidity Risk and Short-Term Debt Management: Current Ratio is 87.2% (below 1.0), with current assets ¥752.0B versus current liabilities ¥862.5B, necessitating attention to short-term liquidity. Cash and cash equivalents ¥198.1B are 7.6x short-term borrowings ¥26.0B, indicating resilience for near-term repayments, but working capital is -¥110.5B, showing dependence on advances and payables. OCF ¥273.0B is healthy, but heavy CAPEX (-¥381.2B) constrains monthly liquidity. Concentration of bond and long-term borrowing maturities or unexpected cash needs could stress liquidity and raise refinancing costs.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.2% | 19.9% (6.5%–38.3%) | -15.7pt |
| Net Income Margin | 1.9% | 5.6% (3.8%–22.2%) | -3.7pt |
Profitability is well below industry median, primarily due to the low-margin structure of the Electricity Business and dependency on regulation and fuel costs.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -6.9% | -0.5% (-0.9%–13.1%) | -6.4pt |
Revenue growth is -6.4ppt below industry median, driven by subsidy contraction and unit price declines from lower fuel costs; demand is estimated to be broadly flat.
※ Source: Company compilation
Significant profit growth and margin improvement despite revenue decline: Revenue fell -6.9%, but Operating Margin improved from 3.1% to 4.2% (+1.1ppt), reflecting effects of fuel cost normalization and cost management. Segment mix saw Other Businesses with an 8.2% margin driving corporate margin improvement, indicating that diversification has raised the revenue structure. If fuel cost stabilization and tariff system stability continue, gradual improvement in Operating Margin is expected. However, the Electricity Business margin of 2.7% remains low and escaping regulation/subsidy dependence is a medium-term challenge.
Robust CAPEX and continued FCF deficit: CAPEX ¥381.2B equals 1.61x Depreciation ¥236.3B, and OCF ¥273.0B cannot fully cover investment, leaving FCF at -¥77.6B. Financing CF of +¥83.4B supplemented funds, but Debt/EBITDA at 8.9x is high and rising rates could increase interest burden. As investments become operational and depreciation and fixed-cost absorption progress, Total Asset Turnover may recover and FCF improve, but the company remains in an investment-led phase. Payout ratio of 25.1% is conservative and earnings-based capacity for dividends exists, but cash-based sustainability requires smoothing of CAPEX.
High leverage and tightening liquidity: Current Ratio 87.2%, Debt/EBITDA 8.9x, and Interest Coverage 3.51x indicate risks in both short-term liquidity and leverage. Interest expense rose by ¥7.2B YoY, and a rising-rate environment would further increase interest burden, compressing Ordinary Income. Maturity management of bonds and long-term borrowings and refinancing costs are critical; improved OCF and gradual reduction of Debt/EBITDA would help restore financial ratings over time.
This report is an AI-generated financial analysis document based on XBRL earnings disclosure data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the firm based on public financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed.