RENOVA,Inc. FY2027 Q1 Earnings Report

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Executive Summary

Both revenue and profit fell below the same period of the previous year, with a particularly significant decline from Operating Income onward. Revenue was ¥193.3B (¥205.3B in the previous year, YoY -5.8%), Operating Income was ¥10.4B (¥33.0B in the previous year, YoY -68.4%), Profit Before Tax was ¥4.95B (¥17.4B in the previous year, YoY -71.6%), and quarterly Net Income attributable to owners of the parent was ¥0.95B (¥8.62B in the previous year, YoY -89.0%). In addition to lower revenue from the core renewable energy power generation and related business, increases in fuel costs, depreciation and amortization, other expenses, and finance costs, together with a higher effective tax rate, resulted in the decline widening progressively from Operating Income to Net Income.

Factors Affecting Performance

【Revenue】Revenue was ¥193.3B (YoY -5.8%). The renewable energy power generation and related business, which accounted for 99.4% of the revenue mix, declined to ¥192.2B (YoY -4.6%), primarily due to lower power generation revenue, while the development and operations business decreased substantially to ¥1.1B (YoY -70.0%).

【Profit and Loss】Operating Income was ¥10.4B (YoY -68.4%), and the Operating Income margin was 5.4%. Increases in fuel costs of ¥9.16B (¥8.97B in the previous year), other expenses of ¥27.6B (¥24.1B in the previous year, +14.5%), and depreciation and amortization of ¥45.3B (¥43.1B in the previous year, +5.3%) weighed on profit. Meanwhile, an option fair value measurement gain of ¥11.1B (¥0.5B in the previous year) temporarily boosted Profit Before Tax. Finance costs increased to ¥18.5B (¥17.6B in the previous year), leaving Profit Before Tax at ¥4.95B (YoY -71.6%). The effective tax rate associated with income taxes of ¥3.25B rose to approximately 65.7% (approximately 25.6% in the previous year), and quarterly Net Income attributable to owners of the parent was compressed to ¥0.95B (YoY -89.0%). Lower revenue and lower profit.

Segment Analysis

The renewable energy power generation and related business (99.4% of revenue) recorded revenue of ¥192.2B (YoY -4.6%) and segment profit of ¥76.8B (¥94.1B in the previous year, YoY -18.4%), resulting in a segment profit margin of 40.0%, down 6.7pt from 46.7% in the previous year. Revenue from the development and operations business contracted to ¥1.1B (YoY -70.0%), and segment profit turned from a profit of ¥7.9B in the previous year to a loss of ¥0.1B in the current period. In addition to declining profitability in the core business, the non-power-generation business also deteriorated, indicating worsening profitability in both segments alongside concentration of revenue sources.

Key Financial Indicators

【Profitability】The Operating Income margin was 5.4%, compressed by increases in fuel costs, depreciation and amortization, and other expenses. EBITDA, calculated by adding depreciation and amortization to Operating Income, was ¥55.8B, and the EBITDA margin was 28.8%, indicating that cash-based earnings generation remained at a certain level.【Cash Quality】Operating Cash Flow (OCF) was ¥44.7B, substantially exceeding quarterly Net Income attributable to owners of the parent of ¥0.95B, with depreciation and amortization and the collection of trade receivables making significant contributions.【Investment Efficiency】ROE was 0.1%, while the Equity Ratio was 21.1%, a slight improvement from 20.1% in the same period of the previous year.【Financial Soundness】Total assets were ¥6,278.2B and net assets were ¥1,998.9B. Cash and cash equivalents stood at only ¥202.4B against interest-bearing debt, primarily non-current bonds and borrowings of ¥2,974.8B.

Cash Flow Analysis

Operating Cash Flow (OCF) was ¥44.7B, a substantial increase from ¥14.8B in the same period of the previous year. Despite the decline in Profit Before Tax, collection of trade receivables (+¥40.3B) and receipt of subsidies (¥4.6B) contributed positively, while an increase in inventories (-¥9.5B) and a decrease in trade payables (-¥15.5B) weighed on cash flow. Investing Cash Flow was -¥24.1B, primarily reflecting capital expenditures of -¥25.9B. Financing Cash Flow was -¥49.2B, mainly comprising repayments of long-term borrowings of -¥36.0B and a net increase in restricted deposits of -¥18.0B. Although Free Cash Flow, calculated as Operating Cash Flow plus Investing Cash Flow, remained positive at ¥20.6B, Cash and cash equivalents declined from ¥230.8B at the end of the previous fiscal period to ¥202.4B due to the outflow from Financing Cash Flow.

Earnings Quality

In the current period, an option fair value measurement gain of ¥11.1B temporarily boosted Profit Before Tax, while finance costs of ¥18.5B continued as a recurring burden. The effective tax rate on income taxes rose substantially to approximately 65.7% (income taxes of ¥3.25B / Profit Before Tax of ¥4.95B) from approximately 25.6% in the previous year, with tax-related factors increasing the volatility of Net Income. Operating Cash Flow was ¥44.7B, significantly exceeding quarterly Net Income attributable to owners of the parent of ¥0.95B, indicating that cash generation supporting earnings was secured from an accrual perspective. Comprehensive income was ¥141.1B (¥97.6B attributable to owners of the parent), substantially exceeding Net Income; this was primarily attributable to other comprehensive income from the effective portion of cash flow hedges of ¥131.7B and does not indicate an improvement in recurring earnings power.

Earnings Forecast and Guidance

Progress against the full-year plan was 20.2% for Revenue (¥193.3B / ¥957.0B), 9.2% for Operating Income (¥10.4B / ¥113.0B), and 2.8% for Net Income (¥0.95B / ¥34.0B). Compared with simple quarterly progress of 25%, all indicators were below plan, with the delays in Operating Income and Net Income particularly significant. The full-year Operating Income forecast anticipates an increase of +36.5% year on year, suggesting that the plan assumes an accumulation of power generation volume toward the second half of the year and improvements in the cost structure. There were no revisions to either the earnings forecast or the dividend forecast.

Shareholder Returns

The dividend forecast is ¥0 per share for both the previous and current fiscal years, and the no-dividend policy continues. While Free Cash Flow of ¥20.6B was secured, capital allocation prioritized repayment of borrowings, and no dividend payments subject to the Payout Ratio calculation were made.

Risk Factors

1. Revenue concentration risk: The renewable energy power generation and related business accounts for 99.4% of revenue (¥192.2B), indicating a high degree of dependence on a single business. Revenue from the development and operations business contracted to ¥1.1B (YoY -70.0%), and segment profit turned from a profit of ¥7.9B in the previous year to a loss of ¥0.1B in the current period.

2. Interest burden risk: Finance costs increased to ¥18.5B (¥17.6B in the previous year), representing a significant burden relative to Profit Before Tax of ¥4.95B. Non-current bonds and borrowings totaled ¥2,974.8B, resulting in a financial structure susceptible to interest rate fluctuations under a capital structure with an Equity Ratio of 21.1%.

3. Tax burden uncertainty: The effective tax rate rose substantially to approximately 65.7% (income taxes of ¥3.25B / Profit Before Tax of ¥4.95B) from approximately 25.6% in the previous year, increasing Net Income volatility due to tax-related factors.

Industry Benchmark (For Reference; Company Analysis)

Profitability and Returns

Growth and Capital Efficiency

※Source: Company compilation

Key Points in the Financial Results

1. The Operating Income margin declined to 5.4%, 6.2pt below the industry median of 11.6%. The decline was attributable to increases in fuel costs, depreciation and amortization, and other expenses. Determining whether the changes in the cost structure are temporary or structural will be a key focus going forward.

2. Progress against the full-year plan was 20.2% for Revenue, 9.2% for Operating Income, and 2.8% for Net Income, below quarterly progress of 25%. The plan may assume a bias toward the second half of the year, and quarterly trends in power generation volume and costs will be key points for monitoring.

3. The high effective tax rate of 65.7% and the temporary option fair value measurement gain of ¥11.1B were combined in current-period earnings. For assessing recurring earnings power, continued monitoring on an Operating Income and Profit Before Tax basis is useful.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,154–¥1,222 at Cost of Equity ±1%, and ¥1,178–¥1,194 at ω±0.1.

Notes:

• Net Income has been substantially compressed relative to Operating Income due to tax burdens, acquisition-related expenses, and non-controlling interests, among other factors (Net Income ÷ Operating Income 30%). This value reflects that compression at face value; if these factors are temporary, underlying earnings power may be higher.
• Because forecast ROE is below the Cost of Equity, the theoretical value is below Book Value Per Share.
• Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).

(Calculation model: Residual Income Model / Interest rate reference month: 2026-07 / This value does not forecast or guarantee the future share price)

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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 responsibility, after consulting professionals as necessary.

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