SAIBU GAS HOLDINGS CO.,LTD. FY2026 FY Earnings Report

Financial Highlights

• Net Sales: ¥261.82B
• Operating Income: ¥12.46B
• Net Income: ¥642M
• EPS: ¥196.20

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

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AI Financial Analysis

Executive Summary

Verdict: Solid operating recovery with margin expansion and strong cash conversion, but liquidity tightness and high leverage temper the outlook. Revenue rose 2.9% YoY to 2,618.2, while operating income grew 18.4% to 124.6. Gross profit increased to 812.7, lifting gross margin to 31.0%. Operating margin improved to 4.8% from 4.1% (+62 bps), reflecting better cost control and the normalization of gas input costs. Net income attributable to owners rose 12.3% YoY to 71.5, pushing net margin to 2.7% from 2.5% (+23 bps). Ordinary income increased 18.6% to 125.8, with interest coverage at 5.9x indicating manageable interest burden. OCF was 253.3, 3.5x net income, underscoring high earnings quality; cash conversion (OCF/EBITDA) was 0.90x. Free cash flow was negative at -84.8 due to capex of roughly 2,975, well above depreciation of 1,569 (capex/depreciation ~1.9x), signaling growth and maintenance investments. Balance sheet shows total assets of 4,658.5 and equity of 1,233.3, with D/E at 2.78x and Debt/EBITDA at 6.4x, indicating elevated leverage. Liquidity is tight: current ratio 0.94 and quick ratio 0.85, with short-term loans (460.1) exceeding cash (234.8). Segmentally, GAS remained the core profit driver (54% of revenue, operating income +39% YoY), while Electric Power and Other Energy delivered outsized profit growth from a low base. Extraordinary items netted nearly flat (income 16.3 vs loss 17.1), implying earnings were primarily recurring. Comprehensive income improved sharply to 163.8, aided by valuation gains on securities. For the next year, management guides revenue of 2,530.0 and operating income of 100.0, implying a modest step-down from the current year but net income to owners of 80.0, slightly above the current year. Dividend totaled 70 yen (payout ~36%), while the forecast DPS of 35 yen indicates potential normalization; total return also included 2.0 in buybacks. Overall, the company demonstrated operational progress and high cash earnings quality, yet must address liquidity, capex financing, and leverage to sustain shareholder returns.

Profitability Analysis

ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 2.7% × 0.562 × 3.78x ≈ 5.8%. The biggest YoY change came from margin improvement: operating margin expanded by 62 bps to 4.8%, and gross margin expanded by 76 bps, outweighing flat-to-slight changes in asset turnover. The improvement stems from better cost pass-through and normalization of fuel costs in the gas business, alongside a sharp turnaround in Electric Power and Other Energy profitability. This looks partly sustainable as tariff/fuel adjustments and cost disciplines persist, though margins remain sub-5% and sensitive to commodity and demand. SG&A discipline is evident in operating leverage: operating income grew 18.4% versus revenue growth of 2.9%, indicating cost control and mix benefits.

Growth Assessment

Top-line growth of 2.9% was supported by strong expansion in Electric Power and Other Energy (+35.0% revenue) and Real Estate (+15.4%), offsetting declines in GAS (-3.5%) and LPG (-2.9%). Operating income rose 18.4%, with core GAS profit +39.3% and Electric Power and Other Energy +441.7%, showing broad-based recovery. EBITDA was 281.5 (margin 10.8%), reflecting improving underlying profitability. Extraordinary items were small and netted near zero, so the earnings uplift was largely recurring. The guidance for the next fiscal year implies a modest pullback in operating income (100.0 vs 124.6) and revenue (2,530 vs 2,618), likely assuming conservative demand and cost normalization; however, profit attributable to owners is guided slightly up at 80.0, suggesting mix/finance effects. Capex intensity (capex/depreciation ~1.9x) indicates ongoing network and growth investments that can underpin medium-term revenue and margin resilience if executed well.

Financial Health

Liquidity is tight: current ratio 0.94 and quick ratio 0.85, triggering a warning; working capital stands at -73.6. Short-term loans of 460.1 exceed cash and deposits of 234.8, pointing to a maturity mismatch that warrants active liquidity management. Leverage is elevated: D/E 2.78x and Debt/EBITDA 6.4x, with debt/capital at 59.4%; while interest coverage is 5.9x at EBIT and 13.4x at EBITDA, the absolute leverage constrains flexibility. Total interest-bearing debt is 1,801.9 against equity of 1,233.3. The balance sheet is asset-heavy (PPE 2,341.9; investment securities 721.4), providing collateral but also anchoring fixed cost. Notable YoY balance sheet shifts include higher intangibles and goodwill (reflecting small-scale M&A/system investments) and a reduction in accounts payable, which partly pressures working capital.

Notable B/S Changes

Treasury Stock: -23.3 (−573.4%) - Increase in treasury stock balance due to 2.0 of buybacks; modest uplift to EPS and BVPS per share. Goodwill: +1.29 (+75.4%) - Small-scale M&A; immaterial to B/S but adds integration and impairment monitoring. Intangible Assets: +48.21 (+71.6%) - Likely IT/system and rights investments supporting operations; increases amortization run-rate. Accounts Payable: -51.08 (−33.2%) - Tightens working capital and contributes to low current ratio; indicates payment normalization.

Cash Flow Quality

OCF of 253.3 vs net income of 71.5 yields an OCF/NI of 3.54x, a strong quality signal helped by depreciation (156.9) and a favorable working-capital swing in inventories and receivables. Cash conversion (OCF/EBITDA) at 0.90x is solid. FCF was -84.8 due to capex of ~2,975, which is growth-tilted and above depreciation; this negative FCF was funded by net debt inflows (proceeds from long-term loans 4,404 vs repayments 3,481) and modest bond activity. No signs of aggressive working-capital manipulation appear: receivables decreased YoY and payables declined, which actually tightened liquidity rather than artificially boosting OCF. The consistency between ordinary income and OCF supports accruals quality (accruals ratio -3.9%).

Dividend Sustainability

The company paid 70 yen DPS (payout ratio ~36.4%), comfortably covered by net income and strongly by OCF (OCF/total dividends ~9.8x). FCF coverage was -3.26x due to heavy capex, indicating dividends are effectively funded from operating cash while capex is financed with debt—acceptable in the near term but not indefinitely at current leverage. With guidance EPS 222.27 and forecast DPS 35, the indicated payout would be lower on an annual basis if 35 represents full-year DPS, implying a conservative stance amid capex and liquidity constraints. Given leverage (Debt/EBITDA 6.4x) and negative FCF, maintaining a high total shareholder return including buybacks (2.0) may be constrained; priority likely remains on funding network and energy investments.

Risk Assessment

Business risks include Commodity price exposure affecting fuel cost pass-through and margins in GAS and Electric Power, Retail competition and deregulation pressure on pricing and customer retention, Execution risk on elevated capex programs impacting timelines and returns, High work-in-process as a share of inventory (50.9%) creating project delivery and cost overrun risk.

Financial risks include Low liquidity (current ratio 0.94, quick ratio 0.85) with short-term debt exceeding cash, High leverage (D/E 2.78x; Debt/EBITDA 6.4x) constraining financial flexibility, Negative free cash flow driven by capex, implying reliance on external financing, Interest rate risk on a sizeable variable-rate debt component implied by large loans.

Key concerns include Capital efficiency below benchmark (ROIC 2.7%) may dampen valuation and credit profile, High tax burden (tax burden 0.57; effective tax ~40%) suppressing net profitability, Inventory days at 103 exceeding benchmark, tying up working capital.

Investment Implications

Key takeaways include Operational recovery with margin expansion: operating margin +62 bps YoY to 4.8%, Strong cash earnings quality: OCF/NI 3.5x and cash conversion 0.90x, Liquidity and leverage are primary constraints: current ratio 0.94; Debt/EBITDA 6.4x, Capex running at 1.9x depreciation supports medium-term growth but depresses FCF, Core GAS segment remains profit anchor; Electric Power and Other Energy momentum notable from low base.

Metrics to watch include Fuel cost adjustment pass-through and gross margin trajectory in GAS, Debt/EBITDA trend and refinancing of short-term loans, Working capital metrics: current ratio, cash/short-term debt, and DIO, Capex execution vs budget and ROIC improvement, DPS policy vs FCF and leverage.

Regarding relative positioning, Within Japanese gas and multi-utility peers, profitability and ROE sit below best-in-class due to sub-5% operating margin and high tax burden; cash conversion is strong, but leverage and liquidity are weaker than conservative peers, suggesting a more cautious balance-sheet posture is needed to close the gap.