| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥1691.7B | ¥1712.2B | -1.2% |
| Operating Income | ¥75.2B | ¥71.4B | +5.3% |
| Profit Before Tax | ¥89.7B | ¥63.3B | +41.8% |
| Net Income | ¥51.9B | ¥37.5B | +38.2% |
| ROE | 6.7% | 5.2% | - |
For the fiscal year ended March 2026, Revenue was ¥1691.7B (¥-20.5B YoY, -1.2%), a slight decline, while Operating Income was ¥75.2B (¥+3.8B, +5.3%), Ordinary Income was ¥71.8B (¥+16.5B, +29.9%), and Net Income Attributable to Owners of the Parent was ¥53.3B (¥+32.1B, +151.7%), representing a substantial increase in profitability. The revenue decline with profit growth was driven by a roughly 50bp decline in gross profit margin to 11.5% (prior year 12.0%), but non-core factors boosted operating-stage profit: Other Income rose to ¥29.3B (prior year ¥6.9B) (+¥22.4B), and Other Expenses decreased to ¥14.5B (prior year ¥31.6B) (-¥17.1B). Financial income improved to ¥14.7B (prior year ¥5.5B) while financial expenses fell to ¥5.0B (prior year ¥11.2B), and equity-method investment income turned positive to ¥4.8B (prior year -¥2.4B), driving substantial growth in Ordinary Income. At the Net Income stage, the effective tax rate was high at 42.2% (corporate tax expense ¥37.9B), but a swing in non-controlling interests to -¥1.5B (prior year +¥16.3B) resulted in Net Income Attributable to Owners of the Parent increasing by +151.7%. EPS improved materially to ¥68.36 (prior year ¥28.65, +138.6%), and BPS rose to ¥902.11, indicating steady accumulation of equity.
[Revenue] Revenue of ¥1691.7B (-1.2%) represented a slight decline. The business is primarily retail electricity and power generation; revenue was broadly flat due to fluctuations in fuel and spot power prices and the timing of hedges. Cost of Sales was ¥1496.9B (prior year ¥1507.1B), down ¥10.2B, resulting in Gross Profit of ¥194.8B (prior year ¥205.0B), down ¥10.2B, and gross margin declined to 11.5% from 12.0% (≈50bp). SG&A was ¥134.5B (prior year ¥108.9B), up ¥25.6B (+23.5%), and the SG&A increase amid slight revenue decline worsened operating leverage. This was mainly attributed to higher fixed costs from capital expenditure and organizational expansion.
[Profitability] Operating Income increased to ¥75.2B (+5.3%). Despite lower gross margin and higher SG&A, the increase was driven by non-core income improvement: Other Income ¥29.3B (prior year ¥6.9B) up ¥22.4B, and Other Expenses ¥14.5B (prior year ¥31.6B) down ¥17.1B, for about ¥39.5B improvement in non-core P&L. Other Income included ¥20.5B of subsidies, reflecting favorable business and regulatory conditions. Ordinary Income of ¥71.8B (+29.9%) benefited from Financial Income of ¥14.7B (prior year ¥5.5B) (+¥9.2B) and Financial Expenses of ¥5.0B (prior year ¥11.2B) (-¥6.2B), for approximately ¥15.4B improvement on the financial side, and equity-method investment income improved by ¥7.2B (from -¥2.4B to +¥4.8B), producing growth exceeding the operating-stage increase. Profit Before Tax was ¥89.7B (+41.8%); Income Taxes were ¥37.9B (prior year ¥25.8B), increasing the tax burden by ¥12.1B and yielding a high effective tax rate of 42.2%. Non-controlling interests swung to -¥1.5B (prior year +¥16.3B), resulting in Net Income Attributable to Owners of the Parent of ¥53.3B (+151.7%). In conclusion, the revenue down/profit up profile was primarily driven by increased non-core income, financial improvements, and equity-method earnings turning positive, while core operating improvement was limited.
[Profitability] Operating margin improved to 4.4% (prior year 4.2%), about +20bp, and Net Income margin improved to 3.1% (prior year 1.2%), about +190bp, while gross margin declined to 11.5% (prior year 12.0%), about -50bp. ROE improved significantly to 7.9% (prior year 3.8%), but the sharp Net Income increase was largely due to non-core items, so core profitability remains relatively low. DuPont decomposition gives Net Income margin × Total Asset Turnover × Leverage = 3.1% × 0.995 × 2.19 ≈ 6.8%, indicating leverage and Net Income margin improvements contributed to ROE uplift. [Cash Quality] Operating Cash Flow (OCF) was ¥18.9B versus Net Income Attributable to Owners of the Parent of ¥53.3B, so OCF/Net Income was 0.35x, low, primarily due to working capital headwinds (inventory +¥8.4B, trade payables -¥18.0B) and derivative-related cash outflows (adjustment of unrealized P/L about -¥25.4B). Subtotal OCF was ¥51.0B before income tax payments of -¥28.4B and working capital changes reduced it significantly. [Investment Efficiency] Capital expenditure of ¥135.7B was about 3.6× depreciation of ¥37.3B, indicating a growth investment phase. Tangible fixed assets increased substantially to ¥435.5B (prior year ¥352.6B, +23.5%), reflecting expansion of generation assets. Free Cash Flow was -¥136.4B, an investment excess, but subsidy receipts (Other CF +¥20.5B) and borrowings maintained liquidity. [Financial Soundness] Equity Ratio was 41.4% (prior year 41.8%), stable. Total assets were ¥1701.0B (prior year ¥1533.8B, +10.9%) due to growth investment. Interest-bearing debt comprised short-term borrowings ¥199.96B (prior year ¥126.2B, +58.5%) and long-term borrowings ¥344.6B (prior year ¥307.2B, +12.2%), totaling about ¥544.6B; D/E approximately 0.70x, a healthy level, but short-term ratio is high at 36.7%, so refinance management is important. Current ratio was 144%, and cash and cash equivalents were ¥275.7B (prior year ¥336.1B, -18.0%), maintaining sufficient liquidity.
OCF was ¥18.9B (prior year ¥195.0B, -90.3%), a large decrease. From subtotal ¥51.0B (prior year ¥197.8B), working capital outflows of about -¥32.1B (inventory increase -¥8.4B, trade payables decrease -¥18.0B, derivatives receivables/payables adjustment -¥25.4B, decrease in consumption tax receivable +¥1.0B, decrease in consumption tax payable -¥10.8B) and income tax payments -¥28.4B (difference from prior-year refunds ≈ -¥51.9B) were burdens. Adding back non-cash items—depreciation ¥37.3B and impairment losses ¥4.4B—and adjustments for financial expenses ¥4.9B and equity-method income -¥4.8B, the subtotal reflects core operating cash generation, but working capital volatility and hedging valuation timing (OCI cash flow hedge +¥36.6B recorded) depressed cash flow. Investing CF was -¥155.3B (prior year -¥55.3B), with tangible fixed asset purchases -¥135.7B (prior year -¥56.0B), about 2.4× increase, and loans receivable -¥43.1B also a cash outflow. Partially offset were subsidy receipts ¥20.5B and sale of subsidiary ¥7.0B. Financing CF was +¥71.6B (prior year +¥0.3B), with net short-term borrowings ~+¥11.3B, long-term borrowings +¥74.0B, repayments -¥64.9B, net borrowings +¥20.4B, dividend payments -¥8.6B and non-controlling interest dividends -¥9.1B, resulting in net financing. Free Cash Flow was -¥136.4B, largely funded by external borrowings. Ending cash of ¥275.7B declined ¥60.4B YoY but liquidity remains sufficient. Going forward, normalization of working capital, recovery of OCF, and realization of IRR from capex are keys to cash generation.
Of current-period Net Income of ¥53.3B, core Operating Income was ¥75.2B, but Other Income ¥29.3B (including ¥20.5B of subsidies) and the reduction in Other Expenses of approximately ¥17.1B boosted Operating Income, indicating significant temporary/non-recurring contributions. At the Ordinary Income stage, of ¥14.7B Financial Income, interest income ¥2.4B and dividends ¥0.6B appear recurring, but the remaining ~¥11.7B may be high in non-recurring items such as FX gains or valuation gains on financial assets. Equity-method investment income of ¥4.8B turned positive from -¥2.4B, suggesting ongoing benefit from investee recovery. No specific extraordinary items were noted, but Other Income/Expenses and OCI include temporary factors. Comprehensive Income was ¥96.7B (Owners of the Parent ¥98.1B) versus Net Income ¥51.9B, so a difference of about ¥44.8B was recorded in OCI. Breakdowns: cash flow hedge +¥36.6B, fair value measurement financial assets +¥8.3B, foreign currency translation -¥0.6B, equity-method OCI +¥0.8B, defined benefit plan remeasurements -¥0.2B, indicating hedge accounting valuation gains have been recognized in equity ahead of profit/loss. These valuation differences may be reclassified to profit and cash flow depending on realization timing, creating a divergence from current cash generation; accrual (difference between profit and CF) is high. The gap of about ¥34.4B between Operating Cash Flow ¥18.9B and Net Income ¥53.3B is mainly due to hedge valuation gains and working capital headwinds, so earnings quality is judged to rely on temporary factors.
A year-end dividend of ¥22 per share was implemented. Average shares outstanding during the period were 78,001 thousand shares, yielding total dividends of ¥17.2B, of which dividends attributable to owners of the parent were approximately ¥8.6B. The payout ratio is 38.4% (reported), a healthy level; relative to Net Income of ¥53.3B, the payout ratio is about 16%, showing room for distribution. Against OCF of ¥18.9B, dividend payments of ¥8.6B represent about a 45% payout ratio, payable within operating cash, but adding dividends to Free Cash Flow -¥136.4B shows total capital costs are not covered by internally generated funds; balancing growth investment and shareholder returns depends on external funding. Total dividends including non-controlling interests of ¥9.1B amount to ¥17.7B, within OCF ¥18.9B, but sustaining returns under negative Free Cash Flow assumes continued borrowings. There is no share buyback program noted, and returns are limited to dividends. Future dividend policy will focus on maintaining stable dividends and examining potential increases depending on capex progress, OCF recovery, and balancing borrowing levels; hedge accounting valuation timing could materially affect future profit and cash flow profiles.
Fuel price volatility and procurement risk: A large portion of Cost of Sales ¥1496.9B is presumed fuel costs; procurement prices for LNG, biomass, etc. are linked to international markets and FX. Inventory buildup of ¥25.4B (prior year ¥16.8B, +51.9%) increases valuation loss risk. With gross margin down to 11.5% (prior year 12.0%) and a declining trend, fuel price increases and delays in passing through costs to selling prices could compress profits. OCI valuation gain from hedge accounting of +¥36.6B defers gains to future profit, but realization timing and market volatility could reduce hedge effectiveness.
Working capital management and deterioration in cash flow quality: OCF of ¥18.9B is only 0.35× Net Income ¥53.3B, driven by working capital headwinds (trade payables -¥18.0B, inventory +¥8.4B, derivatives adjustment about -¥25.4B) and non-cash hedge valuation gains. If this structure persists, profit growth may not be accompanied by cash generation, and growth investment and dividends could become funded by borrowings. Short-term borrowings increased to ¥199.96B (+58.5%) and short-termization is progressing; delays in OCF recovery heighten refinancing pressure.
Short-term borrowing dependence and interest rate risk: Of interest-bearing debt ~¥544.6B, short-term borrowings are ¥199.96B (36.7%), a high short-term ratio. Interest payments ¥7.0B (prior year ¥8.3B) improved, but in a rising rate environment short-term rate volatility would directly increase financing costs. Interest coverage (EBIT / interest paid) is about 10.7x, offering some cushion, but unless short-term borrowings are extended, vulnerability to interest rate swings remains.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Return on Equity | 7.9% | 8.0% (2.9%–10.0%) | -0.1pt |
| Operating Margin | 4.4% | 19.9% (6.5%–38.3%) | -15.5pt |
| Net Margin | 3.1% | 5.6% (3.8%–22.2%) | -2.6pt |
ROE is around the industry median, but Operating Margin and Net Margin are well below the median, reflecting the cost-base characteristics of retail electricity and power generation.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -1.2% | -0.5% (-0.9%–13.1%) | -0.7pt |
Revenue growth is slightly below the industry median, with competitive intensity and market volatility evident.
※Source: Company compilation
Profits rose significantly due to non-core income contribution, but gross margin decline and SG&A increases indicate substantial room for core profitability improvement. Going forward, optimizing the fuel portfolio and absorbing fixed costs to stabilize gross margin and controlling SG&A will be key to sustainable ROE improvement. Whether capacity expansion through capex, and improvements in utilization and thermal efficiency, will translate into revenue growth and margin improvement is a key point to monitor.
The large divergence between OCF ¥18.9B and Net Income ¥53.3B is mainly due to working capital and non-cash hedge valuation gains; normalization of cash generation requires improved working capital turnover and management of hedge realization timing. While rising short-term borrowings have maintained liquidity, continued investment excess (Free Cash Flow -¥136.4B) means monitoring the pace of OCF recovery and realization of investment returns is critical for medium-term financial health.
A payout ratio of 38.4% is at a healthy level and payable within operating cash, but sustainability under negative Free Cash Flow depends on borrowings. Potential dividend increases hinge on the completion of growth investment cycles, OCF recovery, lengthening of interest-bearing debt maturities and lowering interest costs, as well as revenue growth and stabilization of core operating profits. The timing of hedge accounting valuation reclassifications to profit may materially affect profit and cash flow profiles in subsequent periods.
This report is an AI-generated earnings analysis document automatically produced from XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are compiled by our firm from publicly available financial statements as reference information. Investment decisions are your own responsibility; please consult a professional advisor as needed.