EF-ON INC. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥4.92B
• Operating Income: ¥265M
• Net Income: ¥237M
• EPS: ¥5.03

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Earnings for FY2026 Q1 show mixed dynamics: revenue grew 10.7% YoY to ¥4.923bn, but operating income fell 22.7% YoY to ¥265m, and net income declined 55.1% YoY to ¥106m, implying notable margin compression and heavier non-operating headwinds. Reported gross profit is ¥575m, corresponding to an 11.7% gross margin, though this does not reconcile arithmetically with the stated cost of sales; we proceed using the provided gross profit/margin as the more reliable anchor. Operating margin stands at 5.4% (¥265m/¥4,923m), indicating meaningful SG&A/other operating costs relative to gross profit in the quarter. Ordinary income of ¥129m versus operating income of ¥265m suggests net non-operating expenses of roughly ¥136m, with interest expense of ¥72m a key driver and additional non-operating losses also present. Net margin is 2.15%, highlighting a steep drop through the P&L from gross to net due to both operating deleveraging and non-operating costs. DuPont shows a ROE of 0.57% for the quarter, decomposed into a 2.15% net margin, asset turnover of 0.112x, and financial leverage of 2.37x; annualized ROE would remain low, underscoring constrained profitability near term. Liquidity is comfortable with a current ratio of 180%, supported by ¥9.616bn of current assets against ¥5.340bn of current liabilities and working capital of ¥4.276bn. Capital structure is moderate with total liabilities of ¥25.891bn and equity of ¥18.617bn (implied equity ratio around 42% by computation, though the reported equity ratio is unfilled at 0.0%). Interest coverage at 3.7x is adequate but not high, leaving sensitivity to rate increases or earnings volatility. Cash flow statements (OCF/ICF/FCF) are unreported, and several commonly used metrics (D&A, cash, DPS) are also not disclosed in the XBRL, limiting cash-based assessments. Given the business profile (renewable IPP/energy efficiency), depreciation is typically significant; the unreported D&A makes EBITDA-based analysis and cash earnings assessment incomplete. The decline in operating income despite double-digit revenue growth implies cost pressures (fuel/biomass procurement, maintenance, or other opex) and/or a less favorable revenue mix. The sharper drop in net income relative to operating income points to heavier non-operating burdens and possibly tax/extraordinary factors not fully visible in the dataset. Overall, the quarter demonstrates top-line resilience but weaker earnings quality and margin pressure, with adequate liquidity and moderate leverage providing balance-sheet support. The outlook hinges on stabilizing operating margins (through fuel cost management and operational uptime) and containing non-operating costs, while maintaining disciplined capex and funding. Data limitations (notably cash flows, D&A, and share base) should be addressed in subsequent disclosures to refine the assessment. In the interim, monitoring cost pass-through under FIT schemes, procurement costs, and plant utilization will be key to judging earnings normalization.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 2.15%
• asset_turnover: 0.112x
• financial_leverage: 2.37x
• calculated_ROE: 0.57% (quarterly; not annualized) margin_quality:
• revenue: ¥4,923m (+10.7% YoY)
• gross_profit: ¥575m (gross margin 11.7%)
• operating_income: ¥265m (operating margin ~5.4%)
• ordinary_income: ¥129m (ordinary margin ~2.6%)
• net_income: ¥106m (net margin 2.15%)
• notes: ['Gross profit reported (¥575m) does not arithmetically match revenue minus stated cost of sales; analysis uses the reported gross profit/margin as the anchor.', 'Compression from operating to net levels reflects higher non-operating costs.'] operating_leverage:
• commentary: Revenue grew 10.7% YoY while operating income fell 22.7% YoY, indicating negative operating leverage in the quarter, likely driven by fuel/consumable cost inflation, maintenance, or other opex outpacing revenue.
• interest_coverage: 3.7x (Operating income/Interest expense ≈ 265/72)
• implication: Lower margin headroom and exposure to cost variability reduce the ability to convert incremental revenue into profit.

Growth Assessment

revenue_sustainability: Top-line growth of 10.7% YoY suggests stable demand and/or capacity contribution (e.g., higher plant utilization or contract pricing under FIT schemes). Sustainability depends on uptime, scheduled outages, and fuel procurement stability. profit_quality: The divergence between revenue growth and operating income decline indicates margin headwinds. Non-operating burdens (net -¥136m vs operating) further dilute profit quality. outlook: If input costs (biomass/fuel logistics) normalize and uptime remains high, margins could recover; otherwise, growth may not translate to earnings. Additional visibility on D&A and OCF is needed to assess underlying cash earnings trajectory.

Financial Health

liquidity:

• current_assets: ¥9,616m
• current_liabilities: ¥5,340m
• current_ratio: 180.1%
• quick_ratio: 180.1% (inventories not reported)
• working_capital: ¥4,276m
• assessment: Healthy near-term liquidity with ample working capital buffer. solvency:
• total_assets: ¥44,120m
• total_liabilities: ¥25,891m
• total_equity: ¥18,617m
• debt_to_equity: 1.39x (using total liabilities as proxy for interest-bearing debt due to disclosure limits)
• equity_ratio_computed: ≈42.2% (equity/assets); reported equity ratio unfilled
• assessment: Moderate leverage and a solid equity base; solvency appears stable provided earnings remain supportive and capex is disciplined. capital_structure: Leverage primarily manifests through non-operating charges (interest expense ¥72m). Interest coverage at 3.7x is adequate but warrants monitoring if rates rise or EBIT softens.

Cash Flow Quality

earnings_quality: Cash flow data are unreported (zeros indicate non-disclosure). EPS is ¥5.03, but without OCF and D&A, it is difficult to assess cash conversion. FCF_analysis: FCF cannot be derived without OCF and capex. Given the asset-heavy profile, maintenance capex and D&A are typically material. working_capital: Working capital of ¥4.276bn and a current ratio of 1.80x suggest flexibility, but actual cash and receivables mix are undisclosed. key_limitations: OCF/NI ratio shown as 0.00 is not meaningful due to non-disclosure., Depreciation & amortization unreported; EBITDA metrics are not usable., Cash & equivalents unreported.

Dividend Sustainability

payout_ratio_assessment: Dividend data are unreported (DPS and payout shown as 0.00). With net income of ¥106m for the quarter, payout capacity cannot be assessed without policy guidance and cash flow data. FCF_coverage: Not assessable due to unreported OCF and capex; the reported 0.00x is non-informative. policy_outlook: As an asset-intensive IPP/energy-efficiency operator, dividend policy typically balances maintenance capex and debt service; clarity will depend on full-year guidance and cash generation visibility.

Risk Assessment

Business Risks:

• Fuel/biomass procurement cost volatility and logistics constraints affecting gross margins.
• Plant availability/uptime and maintenance outages impacting revenue capture.
• Regulatory/tariff risk related to FIT frameworks and environmental policy changes.
• Counterparty risk on electricity offtake and receivables concentration.
• Project execution risk on new capacity or retrofits increasing cost overruns.

Financial Risks:

• Interest rate and refinancing risk given interest expense of ¥72m and moderate leverage.
• Negative operating leverage if costs rise faster than tariff-based revenues.
• Limited headroom in interest coverage (3.7x) under earnings stress.
• Potential cash flow timing mismatches due to receivables and settlement cycles.

Key Concerns:

• Margin compression despite double-digit revenue growth.
• Non-operating losses reducing ordinary income.
• Lack of disclosed cash flow and D&A data, impairing assessment of cash earnings and FCF.

Investment Implications

Key Takeaways:

• Solid revenue growth (+10.7% YoY) contrasted by weaker operating and net income.
• Gross margin at 11.7% and operating margin at ~5.4% indicate tight cost control is needed.
• Ordinary income burdened by net non-operating expenses (~¥136m), including ¥72m interest.
• Liquidity is strong (current ratio 1.80x; WC ¥4.276bn) and leverage moderate (D/E 1.39x).
• Quarterly ROE is low at 0.57%; improving margins and asset turnover are needed for better returns.
• Material disclosure gaps (OCF, D&A, DPS) limit cash-based valuation and dividend analysis.

Metrics to Watch:

• Gross margin and unit fuel cost trends versus FIT revenue per kWh.
• Operating margin and non-operating income/expense bridge to ordinary income.
• Interest coverage and effective borrowing costs.
• Plant utilization/availability rates and outage schedules.
• OCF and capex once disclosed; D&A to gauge maintenance intensity.
• Net debt to EBITDA once EBITDA is available.

Relative Positioning: Within Japan’s renewable IPP/energy-efficiency cohort, the company exhibits stable top-line growth and adequate balance sheet strength but currently lags on profitability conversion due to cost pressures and non-operating burdens; improved cost normalization and fuller disclosure would be needed to close the gap with more efficient peers.

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