Electric Power Development (9513) FY2026 FY Earnings Report

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Executive Summary

For the fiscal year ended March 2026, operating income declined due to deteriorating profitability in the domestic power generation business, while Ordinary Income increased, supported by a sharp rise in income from overseas equity-method investments. Revenue declined 10.2% year on year to ¥1兆1,822.6億円, and Operating Income fell 27.0% to ¥1,009.9億円, resulting in lower revenue and operating income. However, Ordinary Income increased 13.2% to ¥1,585.3億円. Net Income attributable to owners of the parent was ¥585.4億円, down 36.7% year on year, as extraordinary losses of ¥518.2億円, including impairment losses of ¥329.9億円, weighed on bottom-line earnings. The improvement at the Ordinary Income level was primarily attributable to an increase in equity-method investment income from ¥144.6億円 to ¥638.8億円, highlighting the company’s high dependence on equity-method earnings from its overseas businesses.

Factors Affecting Financial Performance

【Revenue】Revenue declined 10.2% year on year to ¥1兆1,822.6億円, with all reported segments posting lower revenue. The core Power Generation Business generated ¥8,404.5億円, down 11.1% year on year, accounting for 71.1% of consolidated revenue and representing the main source of the overall decline. The Overseas Business generated ¥2,279.0億円, down 6.9%; the Transmission and Transformation Business generated ¥492.7億円, down 1.2%; the Electricity-Related Peripheral Business generated ¥496.4億円, down 16.2%; and Other Businesses generated ¥150.1億円, down 12.9%. All businesses reported lower revenue.

【Profit and Loss】Operating Income was ¥1,009.9億円, down 27.0% year on year, and the Operating Margin declined to 8.5% from 10.5% in the previous period, a decrease of 1.96pt. Segment profit in the Power Generation Business declined 33.8% to ¥453.5億円, indicating weakening underlying profitability in Japan. In contrast, segment profit in the Overseas Business surged 174.9% to ¥948.6億円, driven by ¥653.1億円 in equity-method investment income. Consequently, Ordinary Income increased 13.2% to ¥1,585.3億円. However, the company recorded extraordinary losses of ¥518.2億円, comprising ¥329.9億円 in impairment losses and ¥188.3億円 in losses on disposal of fixed assets. As a result, Net Income declined 41.4% to ¥738.3億円, while Net Income attributable to owners of the parent fell 36.7% to ¥585.4億円. The earnings profile was characterized by lower revenue and higher Ordinary Income, but lower revenue and lower bottom-line earnings, with overseas equity-method income and temporary extraordinary losses amplifying earnings volatility.

Segment Analysis

The Overseas Business generated segment profit of ¥948.6億円, accounting for 59.5% of total segment profit and making a profit contribution substantially above its 19.3% revenue mix. This was attributable to a sharp increase in equity-method investment income of ¥653.1億円, and investors should note that it was not accompanied by growth in the business’s own revenue. The Power Generation Business generated segment profit of ¥453.5億円, down 33.8% year on year, with a 5.4% profit margin, substantially below the Overseas Business margin of 41.6%. The Transmission and Transformation Business, with profit of ¥17.8億円, down 37.4%, and the Electricity-Related Peripheral Business, with profit of ¥169.9億円, down 50.2%, also reported lower earnings, indicating deteriorating profitability in domestic peripheral businesses beyond power generation. Segment profit is based on Ordinary Income and therefore differs in measurement basis from consolidated Operating Income.

Key Financial Metrics

【Profitability】The Operating Margin was 8.5%, down from 10.5% in the previous period, a decline of 1.96pt. The Ordinary Income Margin was 13.4%, up from 10.6%, an increase of 2.77pt. The divergence between the two was attributable to the ¥638.8億円 contribution from equity-method investment income, which accounted for approximately 59.9% of Profit Before Tax. ROE was 4.8%, and EPS was ¥325.51, compared with ¥505.64 in the previous period, representing a year-on-year decline of 35.6%.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥2,242.7億円, down 10.4% year on year. However, it was approximately 3.8 times Net Income attributable to owners of the parent of ¥585.4億円, reflecting an earnings composition that included non-cash items such as depreciation and amortization of ¥1,160.7億円 and impairment losses of ¥329.9億円.【Investment Efficiency】Capital expenditures on fixed assets of ¥1,773.8億円 were approximately 1.53 times depreciation and amortization, indicating an investment phase exceeding maintenance and replacement investment. Free Cash Flow (FCF) was ¥310.2億円, remaining positive despite continued investment exceeding operating cash generation.【Financial Soundness】The Equity Ratio improved from the previous period to 41.0%, while cash and deposits increased 28.5% from the end of the previous period to ¥3,969.6億円. The funding structure is centered on long-term liabilities, including long-term borrowings of ¥9,897.0億円 and bonds of ¥6,789.9億円. Interest-bearing debt accounts for approximately 26.7% of total assets.

Cash Flow Analysis

Operating Cash Flow (OCF) was ¥2,242.7億円, down 10.4% year on year, but remained well above Net Income attributable to owners of the parent of ¥585.4億円, indicating strong cash backing for earnings. Adjustments for non-cash items, including depreciation and amortization of ¥1,160.7億円 and impairment losses of ¥329.9億円, widened the gap between OCF and Net Income. In working capital, trade receivables declined by ¥43.5億円 and contributed to cash generation, while trade payables declined by ¥63.0億円 and inventories increased by ¥47.8億円, absorbing cash. Investing Cash Flow involved an outflow of ¥1,932.5億円, primarily due to capital expenditures on fixed assets of ¥1,773.8億円, leaving FCF positive at ¥310.2億円. Financing Cash Flow involved an outflow of ¥642.2億円, with shareholder returns, including ¥204.6億円 in share repurchases, as well as debt repayments, contributing to cash outflows. FCF exceeded dividend payments of approximately ¥181.2億円, but fell short of total shareholder returns of approximately ¥385.8億円 including share repurchases. Accordingly, total shareholder returns were implemented as part of capital allocation utilizing cash on hand and external financing as well.

Earnings Quality

The increase in Ordinary Income during the period was attributable to a sharp rise in equity-method investment income from ¥144.6億円 to ¥638.8億円. Since this improvement was not accompanied by an improvement in consolidated Operating Income, caution is warranted when assessing earnings quality. Equity-method investment income accounted for 59.9% of Profit Before Tax of ¥1,067.1億円 and represents a source of earnings highly sensitive to external factors, including the operations of investees, commodity prices, foreign exchange rates, and dividend policies. Meanwhile, extraordinary losses of ¥518.2億円, comprising impairment losses of ¥329.9億円 and losses on disposal of fixed assets of ¥188.3億円, depressed bottom-line earnings as a temporary factor. The extraordinary losses were equivalent to 88.5% of Net Income attributable to owners of the parent of ¥585.4億円. Non-operating income was ¥974.0億円 versus non-operating expenses of ¥398.6億円, resulting in a net positive contribution of ¥575.4億円 and supporting Ordinary Income; this amount also included equity-method income. Although OCF substantially exceeded Net Income, suggesting limited accrual-related concerns and solid cash flow backing, the overall earnings composition was highly dependent on temporary factors and equity-method income. Accordingly, earnings should be interpreted cautiously when assessing whether the current level represents normalized earnings power.

Earnings Forecast and Guidance

For the next fiscal year, ending March 2027, the company forecasts Revenue of ¥1兆3,800億円, up 16.7% year on year; Operating Income of ¥1,250億円, up 23.8%; and Net Income attributable to owners of the parent of ¥810億円, up 38.4%. The Operating Margin is expected to improve to approximately 9.1%, based on an assumed recovery in profitability in the domestic Power Generation Business and a reduction in temporary losses. In contrast, the Ordinary Income forecast is ¥1,250億円, representing an expected decline of 21.2% year on year. The company’s plan does not appear to assume that the elevated level of overseas equity-method income recorded in the current period will be recurring. The combination of higher Revenue and Operating Income but lower Ordinary Income suggests a conservative view regarding the repeatability of overseas equity-method income.

Shareholder Returns

The annual dividend for the current period was ¥100 per share, resulting in a Payout Ratio of 30.7% based on Net Income attributable to owners of the parent. The company repurchased ¥204.6億円 of its own shares. Total shareholder returns, comprising dividends and share repurchases, amounted to approximately ¥385.8億円, resulting in a Total Return Ratio of approximately 65.9%. Total shareholder returns exceeded FCF of ¥310.2億円. While dividends alone were covered by FCF, total shareholder returns including share repurchases represented capital allocation utilizing cash on hand and other funding sources. The annual dividend forecast for the next period is ¥105 per share, representing a planned increase of ¥5. Based on forecast Net Income of ¥810億円, the Payout Ratio is expected to remain at approximately 23%, suggesting that capacity for further dividend increases will be maintained assuming the plan is achieved.

Risk Factors

1. Concentration of Revenue in the Power Generation Business: External revenue from the Power Generation Business was ¥8,404.5億円, accounting for 71.1% of consolidated revenue. This structure means that wholesale electricity prices, the timing of fuel cost adjustments, and fluctuations in plant operating rates directly affect company-wide performance.

2. Dependence on Overseas Equity-Method Income: Segment profit in the Overseas Business was ¥948.6億円, accounting for 59.5% of total segment profit, with ¥653.1億円 in equity-method investment income representing the primary contributor. The business is highly exposed to the operating conditions of investees, commodity prices, and foreign exchange movements, and the increase in Ordinary Income during the current period depended substantially on this temporary uplift.

3. Recognition of Impairment and Disposal Losses: The company recorded extraordinary losses of ¥518.2億円 during the current period, including impairment losses of ¥329.9億円. If the outlook for future cash flows from facilities or overseas investment projects deteriorates, additional impairment losses could place further pressure on Net Income.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (utilities)

Profitability and Returns

The company’s profitability is substantially below the industry median, placing it at a relatively low margin level even within the power infrastructure industry.

Growth and Capital Efficiency

The company’s Revenue Growth Rate is also below the industry median, placing it among the companies with the largest revenue declines within the industry.

※Source: Company compilation

Key Takeaways from the Financial Results

1. The Operating Margin declined by 1.96pt to 8.5%, but Ordinary Income increased 13.2% due to higher overseas equity-method investment income. A key feature of the current period was the significant volatility between the Ordinary Income stage and the bottom-line earnings stage.

2. The Overseas Business accounted for 19.3% of the revenue mix but 59.5% of total segment profit, indicating a high degree of geographic and investee concentration in the earnings base. The repeatability of equity-method investment income will be a key focus going forward.

3. Extraordinary losses of ¥518.2億円, including impairment losses of ¥329.9億円, weighed on bottom-line earnings, and the current-period Net Income level does not fully reflect normalized business earnings power. Meanwhile, OCF of ¥2,242.7億円 substantially exceeded Net Income, indicating that cash-generating capacity itself remained intact.

Theoretical Share Price (Reference Value)

Sensitivity: ¥7,116–¥7,538 at ±1% in the Cost of Equity, and ¥7,299–¥7,338 at ±0.1 in ω.

Notes:

• As forecast ROE is below the Cost of Equity, the theoretical value is below Book Value per Share.

（Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data. It is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee the future share price.）

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

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