Electric Power Development (9513) FY2026 Q3 Earnings Report

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Executive Summary

During the quarter, Ordinary Income and Net Income increased, driven by the expansion of the overseas business and equity-method investment gains, in contrast to the decline in Revenue and Operating Income. Revenue fell to ¥8,645.6B (-9.8% YoY), while Operating Income declined to ¥882.6B (-22.8% YoY). However, Ordinary Income increased to ¥1,314.8B (+5.1% YoY), and Net Income rose to ¥944.0B (+5.2% YoY). While the core power generation business experienced declines in both Revenue and profit, segment profit from the overseas business grew to more than double its previous-year level, clearly illustrating a structure in which the decline at the operating level was offset by non-operating income and equity-method gains.

Factors Affecting Earnings

【Revenue】Revenue was ¥8,645.6B, representing a 9.8% YoY decline and marking the first decline in three periods. By segment, the power generation business, which accounts for 71.2% of the Revenue mix, experienced a 9.7% decline in Revenue, while the overseas business (19.4% of the mix) also saw Revenue decline by 9.8%. The transmission and transformation business (-1.7%) and the electricity-related peripheral business (-19.3%) also declined, resulting in lower Revenue across all four major segments.

【Profit and Loss】Operating Income was ¥882.6B (-22.8% YoY), primarily due to the decline in the power generation business’s profit margin to 6.5%. Meanwhile, Ordinary Income increased to ¥1,314.8B (+5.1% YoY), driven by a sharp increase in equity-method income to ¥565.8B (¥94.7B in the previous year). Segment profit from the overseas business rose to ¥746.8B (+131.9% YoY), with a profit margin of 44.5%, making it the company’s largest source of earnings. Net Income also increased to ¥944.0B (+5.2% YoY), resulting in a divergent earnings profile consisting of lower Operating Income, higher Ordinary Income, and higher Net Income. The coexistence of declines at the operating level and increases at the Ordinary Income and Net Income levels is a defining feature of the current period.

Segment Analysis

The power generation business (71.2% of the Revenue mix) recorded Revenue of ¥6,155.8B (-9.7%), profit of ¥398.3B (-37.3%), and a profit margin of 6.5%, representing a significant deterioration in profitability and serving as the primary cause of the decline in company-wide Operating Income. The overseas business (19.4% of the mix) recorded Revenue of ¥1,678.0B (-9.8%), but profit increased to ¥746.8B (+131.9%) and the profit margin improved to 44.5%, making it the largest profit source. The transmission and transformation business recorded profit of ¥67.0B (-16.8%), while the electricity-related peripheral business recorded profit of ¥96.2B (-54.8%); both declined, and profitability deteriorated across all segments except the overseas business. The contrast between the power generation business, where profit declined more than Revenue, and the overseas business, where profit increased substantially despite lower Revenue, indicates a shift in the earnings structure.

Key Financial Indicators

【Profitability】The Operating Income margin was 10.2%, down from 11.9% in the previous year, while the Ordinary Income margin rose to 15.2% (13.0% in the previous year), and the Net Income margin remained at a favorable level of 10.9%.【Cash Flow Quality】Non-operating income of ¥769.1B represented 8.9% of Revenue, with equity-method income of ¥565.8B accounting for more than 70% of the total. This indicates that the core component of non-operating income is concentrated in equity-method investment gains.【Investment Efficiency】ROE was 6.3%, while the Equity Ratio improved to 40.8% (equivalent to 40.4% in the previous year). Capital efficiency remains limited, reflecting the low asset turnover ratio.【Financial Soundness】Current assets of ¥6,893.1B exceeded current liabilities of ¥3,983.8B, while cash and deposits of ¥3,303.9B substantially exceeded short-term borrowings of ¥82.7B. Although the company has a capital-intensive liability structure, including long-term borrowings of ¥9,710.3B and bonds of ¥6,789.9B, the maturity matching with fixed assets of ¥29,939.4B is generally appropriate.

Cash Flow Analysis

As this data does not include cash flow statement items, cash trends are assessed based on changes in the balance sheet. Cash and deposits were ¥3,303.9B, an increase of ¥214.0B from ¥3,089.9B in the same period of the previous year, indicating stable cash management. Total assets were ¥36,832.5B, representing only a marginal increase of ¥145.1B YoY, while net assets increased by ¥386.0B to ¥15,021.0B, and retained earnings accumulated to ¥8,691.1B (¥8,031.9B in the previous year). Treasury stock increased from ¥3.5B to ¥163.9B, indicating that capital returns absorbed part of the increase in cash and deposits. Long-term borrowings declined to ¥9,710.3B, while bonds increased to ¥6,789.9B, indicating a shift in financing methods.

Quality of Earnings

The increase in Ordinary Income contrasts with the decline in Operating Income, and its quality requires careful examination. Equity-method income of ¥565.8B was the largest component of non-operating income of ¥769.1B, increasing approximately sixfold from ¥94.7B in the same period of the previous year and serving as the substantial driver of the increase in Ordinary Income. Equity-method investment gains are susceptible to external factors such as the performance of investee companies and foreign exchange rates, and differ in nature from recurring income generated directly by operating activities. Comprehensive income was ¥857.5B, below Net Income of ¥944.0B, while the portion attributable to owners of the parent was limited to ¥776.1B. Other comprehensive income made a negative contribution, including foreign currency translation adjustments of -¥115.9B and adjustments related to retirement benefits of -¥54.7B, resulting in a certain divergence between Net Income and comprehensive income. The earnings structure in which the decline in Operating Income is offset by equity-method income should be evaluated separately when assessing the profitability of the core business.

Earnings Forecast and Guidance

The full-year earnings forecast remains unchanged at Revenue of ¥1.212T (-7.9% YoY), Operating Income of ¥920.0B (-33.5% YoY), and Ordinary Income of ¥1,190.0B (-15.1% YoY). The Q3 cumulative progress rates were 71.3% for Revenue, 95.9% for Operating Income, and 110.5% for Ordinary Income. While Revenue was slightly below the standard 75% level, profit is progressing at a pace exceeding the full-year forecast, particularly for Ordinary Income. Cumulative Ordinary Income has already exceeded the full-year forecast, suggesting that the full-year plan may be conservative and incorporate a decline in equity-method investment gains and other items in Q4. Operating Income has also consumed most of the full-year forecast on a cumulative basis, indicating that Q4 is expected to continue the previous-year trend of declining profit.

Shareholder Returns

The annual dividend forecast remains unchanged at ¥100.00 (assumed to comprise ¥50.00 for Q2 and ¥50.00 at the fiscal year-end). Based on the full-year Net Income forecast of ¥890.0B (attributable to owners of the parent) and the average number of shares outstanding during the period of 180.9 million shares, the forecast Payout Ratio is approximately 20.3%, indicating a low dividend burden relative to the earnings level. Meanwhile, treasury stock increased from ¥3.5B in the same period of the previous year to ¥163.9B, indicating that capital returns through share repurchases have also been implemented. Although the Payout Ratio based solely on dividends is low, the Total Return Ratio including share repurchases cannot be calculated from this data. Given the low Payout Ratio and the accumulation of cash, deposits, and retained earnings, dividend sustainability appears to be secured for the time being.

Risk Factors

1. Declining profitability of the power generation business: The power generation business, which accounts for 71.2% of the Revenue mix, recorded a significant 37.3% decline in segment profit, while its profit margin fell to 6.5%. Fluctuations in fuel costs, electricity market conditions, and operating rates have a substantial impact on company-wide earnings.

2. Dependence on equity-method investment gains: Equity-method income was ¥565.8B, accounting for 43.0% of Ordinary Income, and increased sharply from ¥94.7B in the previous year. A subsequent decline may occur due to fluctuations in the performance of investee companies and foreign exchange rates, creating a source of volatility in Ordinary Income.

3. Capital efficiency challenges: ROE was 6.3%, and profitability on an Operating Income basis is also trending downward. Improving returns on invested capital remains an ongoing challenge amid the company’s capital-intensive business structure.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (utilities)

Profitability and Returns

The company’s Operating Income margin and Net Income margin are considered to be generally at standard levels within the industry.

Growth and Capital Efficiency

The Revenue growth rate is negative, confirming that the company is also in a Revenue-decline phase relative to the industry.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. While Operating Income declined by 22.8%, Net Income increased by 5.2% due to the expansion of the overseas business and equity-method investment gains. The fact that the quality of the earnings increase depends on factors outside the core business is a structural characteristic evident from the earnings data.

2. The overseas business accounts for only 19.4% of the Revenue mix, but generated the largest segment profit, with a profit margin reaching 44.5%. The profitability gap between the domestic power generation business and the overseas business is widening, indicating a shift in the center of gravity of the earnings portfolio.

3. While the Ordinary Income progress rate of 110.5% is ahead of the full-year forecast, Revenue and Operating Income remain at standard levels relative to the plan. The Q4 earnings trend, particularly the trajectory of equity-method investment gains, will determine the full-year outcome.

Theoretical Share Price (Reference Value)

Sensitivity: ¥7,547–¥7,995 at ±1% for the cost of equity, and ¥7,741–¥7,782 at ±0.1 for ω.

Notes:

• Because cumulative Net Income progress against the full-year forecast (94%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies with progress ahead of plan tend to exceed their forecasts. For businesses with strong seasonality, the adjustment may be excessive).
• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used (there is a timing difference relative to the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest Rate Reference Month: 2026-07 / Mechanically calculated value based solely on 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. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, and, where necessary, after consulting with a professional advisor.

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