RENOVA,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥40.61B
• Operating Income: ¥4.89B
• Net Income: ¥4.09B
• EPS: ¥36.74

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

Verdict: A mixed quarter with strong top-line growth and operating leverage, but net profit fell year-on-year and capital efficiency remains below target. Revenue rose 20.5% YoY to 406.09, supported by higher generation and new capacity coming online. Operating income more than doubled to 48.88 (+127.1% YoY), yielding an operating margin of 12.0% versus ~6.4% a year ago (about 567 bps expansion). Despite this, net income declined 44.2% YoY to 33.23, driving net margin down to 8.2% from roughly 17.7% last year (about 950 bps compression). Operating cash flow was robust at 130.59, 3.93x net income, indicating high earnings quality this quarter. Free cash flow was positive at 71.92 after investing outflows of 58.67 and modest capex of 20.55. Balance sheet leverage is high with D/E at 2.86x and an equity ratio of 16.7%, consistent with project-finance-heavy renewable portfolios but still a financial risk factor. ROIC stands at 3.1%, below the 5% warning threshold and well under a 7–8% target range, underscoring capital efficiency challenges. Asset turnover is low at 0.073, typical for long-lived infrastructure assets but a drag on DuPont ROE (2.3%). Equity-method income was minimal at 1.16 (2.6% of profit), so results are predominantly driven by consolidated operations rather than affiliates. The divergence between stronger operating profit and weaker net profit likely reflects non-operating items, taxes, and/or higher non-controlling interests, though detail is unreported. Financing cash outflows of -113.21 suggest net debt repayment or scheduled amortization at project SPVs; interest expense is unreported, limiting coverage analysis. Liquidity metrics like current ratio are unreported, but current assets of 995.46 exceed accounts payable of 131.62, suggesting no immediate payables pressure. With positive FCF and healthy OCF conversion, near-term cash generation looks adequate, but upcoming project capex and debt amortization remain swing factors. Forward-looking, earnings visibility hinges on commissioning schedules, capacity factors, curtailment trends, and power price/FIP exposure, while deleveraging and ROIC uplift are key to improving valuation resilience.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin 8.2% × Asset Turnover 0.073 × Financial Leverage 3.86x = ROE ~2.3% (matches reported). The largest YoY change is the net profit margin: while operating margin expanded ~567 bps (12.0% vs ~6.4%), net margin contracted ~950 bps (8.2% vs ~17.7%) given net income fell 44.2% YoY despite revenue growth. Business drivers likely include increased non-operating charges, higher non-controlling interests, and mix effects as new projects ramp (detail unreported). Sustainability: the improved operating margin appears more structural as assets stabilize, but the depressed net margin may be transient if driven by one-offs; clarity depends on non-operating breakdown. Watch for SG&A and other opex growth versus revenue; while not disclosed this quarter, operating leverage looked favorable (EBITDA margin 33.3%). Overall, ROE remains constrained by low asset turnover inherent to IPP assets and high leverage; improving ROIC and managing non-operating drag are essential.

Growth Assessment

Revenue momentum (+20.5% YoY) reflects capacity additions and/or higher utilization, consistent with project ramp-ups. Operating profit growth (+127.1% YoY) indicates strong operating leverage as fixed costs are spread over a larger asset base. EBITDA of 135.09 (33.3% margin) is healthy for renewables with contracted/regulated revenues, though rising exposure to merchant/FIP pricing could introduce volatility. The YoY decline in net income (-44.2%) despite better operations suggests adverse non-operating impacts (e.g., valuation effects, FX, derivative fair value, higher minority interests), but details are unreported. Near-term growth should track commissioning schedules, capacity factor normalization, and curtailment levels; delays or grid constraints could defer revenue recognition. Medium-term outlook depends on pipeline execution and policy stability (FIT/FIP framework, interconnection, auction timelines), while inflation and interest rate trends affect project returns. With ROIC at 3.1%, incremental projects need tighter capital discipline or higher returns to lift portfolio averages.

Financial Health

Leverage is high: D/E 2.86x (warning) and equity ratio 16.7%, consistent with project-finance-heavy structures but still a solvency risk under stress. Liquidity: current ratio is unreported; however, current assets of 995.46 exceed accounts payable of 131.62, suggesting limited near-term payables pressure. Maturity mismatch cannot be fully assessed as short-term debt is unreported; financing CF (-113.21) indicates amortization or repayments are ongoing. Interest-bearing debt levels and interest expense are unreported, so interest coverage cannot be evaluated directly. No explicit off-balance sheet obligations were disclosed here; however, typical IPP exposures include EPC, O&M, PPA, and interconnection commitments and potential guarantees at SPVs. Cash and equivalents at period end were 197.19, providing some buffer against volatility.

Cash Flow Quality

OCF of 130.59 versus net income of 33.23 yields an OCF/NI ratio of 3.93x, indicating high-quality earnings with strong cash conversion (likely supported by EBITDA and working capital inflows). Investing CF was -58.67; capex was -20.55, implying additional investment outflows beyond tangible capex (e.g., development costs, equity injections). FCF was positive at 71.92, comfortably covering modest shareholder returns (share repurchase -0.78) and providing deleveraging optionality. With financing CF at -113.21, the firm is likely servicing and amortizing project debt; sustainability of FCF depends on maintaining OCF as new projects stabilize and on the cadence of future capex. No signs of aggressive working capital manipulation are visible from the limited disclosures, but more detail on receivables/payables turns would improve visibility.

Dividend Sustainability

Dividend data are unreported; historically, growth IPPs may prioritize reinvestment over cash dividends. From capacity: current FCF of 71.92 and strong OCF conversion suggest room for a modest dividend if policy allowed, but high leverage (D/E 2.86x) and ongoing growth capex argue for balance-sheet reinforcement. Payout ratios cannot be calculated this quarter due to missing dividend data. Policy outlook likely remains conservative until ROIC improves and leverage trends down; any dividend initiation or increase should be evaluated against projected FCF after capex and debt amortization.

Risk Assessment

Business Risks:

• Project execution risk: commissioning delays, permitting, EPC cost inflation
• Operational risk: curtailment, lower capacity factors, unplanned outages
• Regulatory risk: FIT/FIP rule changes, grid access constraints, auction outcomes
• Revenue volatility risk under FIP/merchant exposure to wholesale power prices
• Counterparty risk with utilities/offtakers and EPC/O&M providers
• Affiliate performance risk is limited this quarter (equity-method income only 1.16)

Financial Risks:

• High leverage (D/E 2.86x) and low equity ratio (16.7%) increase sensitivity to shocks
• Refinancing and amortization risk at project SPVs; maturity profiles undisclosed
• Interest rate risk affecting project returns and financing costs
• Potential non-operating P&L volatility (FX, derivatives, fair value) impacting net income
• Low ROIC (3.1%) raises risk of value dilution if growth outpaces returns

Key Concerns:

• Net margin compressed ~950 bps YoY despite strong operating margin expansion
• Capital efficiency below benchmarks (ROIC 3.1%) with ROE only 2.3%
• Limited disclosure on non-operating items and interest expense hampers assessment
• Liquidity metrics (current ratio) and debt maturity breakdown are unreported

Investment Implications

Key Takeaways:

• Top-line growth (+20.5% YoY) and operating margin expansion to 12.0% demonstrate improving operating leverage
• Net income fell 44.2% YoY, implying non-operating drag or higher NCI despite stronger operations
• Cash generation is solid (OCF/NI 3.93x; FCF 71.92), providing some balance-sheet flexibility
• Leverage remains elevated (D/E 2.86x; equity ratio 16.7%), keeping the focus on deleveraging
• ROIC at 3.1% signals need for disciplined capital allocation and returns uplift from pipeline
• Equity-method contributions are small (2.6% of profit); core performance is from consolidated IPP assets

Metrics to Watch:

• Commissioning schedule and MW additions versus plan
• Capacity factors and curtailment hours by asset
• Power price exposure under FIP/merchant and hedging coverage
• Debt amortization/refinancing schedule and average interest cost
• ROIC trajectory and cash-on-cash returns for new projects
• OCF/NI conversion and working capital movements
• Equity ratio and net debt/EBITDA once fully disclosed

Relative Positioning: Within Japan’s renewable IPPs, the company shows solid operational momentum and cash conversion but is constrained by high leverage and low ROIC; improving capital efficiency and moderating non-operating volatility are prerequisites to closing the gap with peers that combine stable contracted cash flows with stronger balance sheets.

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