SAIBU GAS HOLDINGS CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

In Q1 of FY2027, Operating Income declined, while Ordinary Income and Net Income increased significantly due to the boost from non-operating income. Revenue was ¥606.4B (¥675.5B in the same period of the previous year, YoY -10.2%), and Operating Income was ¥40.5B (¥54.8B in the previous year, YoY -26.0%). Ordinary Income was ¥67.8B (¥57.3B in the previous year, YoY +18.3%), while Net Income attributable to owners of the parent was ¥51.6B (¥35.3B in the previous year, YoY +45.9%). The increase in profit at and below the Ordinary Income level was primarily attributable to ¥34.5B in non-operating income, centered on ¥26.6B in dividend income received from ¥790.5B in investment securities. A key feature of these results is that factors separate from operating income drove final profit.

Factors Affecting Results

【Revenue】Revenue of ¥606.4B declined 10.2% YoY, with three of the five segments recording revenue declines. Gas, the core business accounting for 54.1% of the revenue mix, declined to ¥356.6B (-5.8%), while Real Estate fell sharply to ¥96.1B (-38.9%). In contrast, Electricity and Other Energy increased to ¥85.3B (+21.4%), and LPG increased to ¥68.8B (+6.0%). The decline in Gas and Real Estate revenue weighed on the Group’s top line.

【Profit and Loss】Operating Income was ¥40.5B (YoY -26.0%), and the Operating Margin declined to 6.7% from the previous year. Although the gross margin improved to 36.1% from the previous year, declines in Real Estate (Operating Income -69.6%) and Gas (-23.6%) made it difficult to absorb SG&A expenses, resulting in negative operating leverage. Meanwhile, Ordinary Income was lifted to ¥67.8B (+18.3%) by ¥34.5B in non-operating income, primarily comprising ¥26.6B in dividend income received. Following Profit Before Tax of ¥71.4B, which included ¥3.6B in extraordinary income (¥1.8B gain on sale of investment securities and ¥1.7B gain on sale of fixed assets), Net Income attributable to owners of the parent was ¥51.6B (+45.9%). These results represent a decline in revenue but an increase in final profit driven by non-operating factors.

Segment Analysis

Differences in profitability between segments have widened. Gas reported revenue of ¥356.6B (-5.8%) and Operating Income of ¥22.0B (-23.6%), with a margin of 6.2%; although it remains the core business, profitability deteriorated. Real Estate reported revenue of ¥96.1B (-38.9%) and Operating Income of ¥6.7B (-69.6%), with a margin of 7.0%, recording the largest decline in profit among all segments and weighing on operating performance. Electricity and Other Energy reported revenue of ¥85.3B (+21.4%) and Operating Income of ¥12.9B (+288.3%), with a margin of 15.2%, the highest level among all segments, and emerged as a key support for Group-wide profit. LPG recovered, albeit from a low base, with revenue of ¥68.8B (+6.0%) and Operating Income of ¥0.2B (+566.7%). Other segments recorded an operating loss of ¥1.2B. Overall, the stable foundation provided by Gas and the high profitability of Electricity support the portfolio, while the adjustment phase in Real Estate remains a significant drag on overall Operating Income.

Key Financial Indicators

【Profitability】The Operating Margin declined to 6.7% from the previous year, while the Net Profit Margin, based on net income attributable to owners of the parent, improved to 8.5%. The improvement in the gross margin to 36.1% and the expansion of non-operating income contributed to this result.【Cash Flow Quality】Of Ordinary Income of ¥67.8B, ¥34.5B consisted of non-operating income, equivalent to 5.7% of revenue. Most of this comprised ¥26.6B in dividend income received, indicating a structure dependent on returns from investment securities. This is an important consideration when assessing earnings quality.【Investment Efficiency】ROE was 4.0%. Given that the total asset turnover ratio remains low and that this figure was calculated with the benefit of financial leverage, there remains room for improvement in terms of capital efficiency.【Financial Soundness】The Equity Ratio was 28.3%, based on total net assets. The current ratio was 97.3% and the quick ratio was 88.6%, both below 100%. Interest-bearing debt totaled ¥240.98B, comprising short-term borrowings of ¥34.20B, long-term borrowings of ¥139.28B, and bonds of ¥67.50B. Meanwhile, the Interest Coverage Ratio was maintained at 6.51x (Operating Income/interest expense), indicating that near-term interest payment capacity remains reasonably sound.

Cash Flow Analysis

As cash flow statement data has not been disclosed, fund movements are assessed based on changes in the balance sheet. Cash and deposits totaled ¥18.68B, a decline of ¥4.80B (-20.4%) from the previous year, while short-term borrowings were reduced by ¥11.81B (-25.7%) from the previous year to ¥34.20B. This movement can be interpreted as reflecting progress in repaying short-term borrowings using available cash, contributing to lower financial costs and mitigation of short-term refinancing risk. Meanwhile, investment securities increased by ¥6.91B (+9.6%) to ¥79.05B, suggesting that valuation gains accumulated or additional acquisitions were made, which may have contributed to the increase in dividend income received during the period. Working capital was negative ¥2.74B, with current assets of ¥100.62B compared with current liabilities of ¥103.36B, and short-term funding conditions will therefore continue to require monitoring.

Earnings Quality

The current period’s earnings structure clearly separates recurring operating profit and non-recurring factors. Extraordinary income of ¥3.6B (¥1.8B gain on sale of investment securities and ¥1.7B gain on sale of fixed assets) was non-recurring and should be excluded when assessing recurring earnings power. Non-operating income of ¥34.5B was equivalent to 5.7% of revenue, with ¥26.6B in dividend income received accounting for the majority. Because this income represents returns on ¥790.5B in investment securities, it is subject to fluctuations depending on market conditions. The tax burden coefficient, representing the ratio of consolidated Net Income to Profit Before Tax of ¥71.4B, was broadly at an appropriate level, indicating that tax factors did not materially impair earnings stability. Meanwhile, comprehensive income was ¥83.6B, exceeding Net Income attributable to owners of the parent of ¥51.6B. The primary reason for this difference was a ¥32.5B increase in the valuation difference on securities, indicating that the market-value valuation of held shares contributed to the increase in comprehensive income. Given that the divergence between Operating Income and Ordinary Income resulted from an expansion in non-operating gains, the quality of earnings in the current period can be assessed as having a somewhat lower weighting of operating factors.

Earnings Forecast and Guidance

Progress against the full-year forecast was 24.0% for Revenue, 40.5% for Operating Income, 56.5% for Ordinary Income, and 64.5% for Net Income attributable to owners of the parent. While revenue progress was broadly consistent with the benchmark for quarterly progress, progress for Ordinary Income and Net Income was relatively high. This appears to reflect the early recognition of dividend income received at the beginning of the fiscal year and the earlier-than-expected realization of high profitability in Electricity and Other Energy. Neither the earnings forecast nor the dividend forecast was revised. Achieving the full-year plan (Revenue of ¥253.00B, Operating Income of ¥10.00B, and Ordinary Income of ¥12.00B) will continue to depend on building Operating Income in the second half of the fiscal year.

Shareholder Returns

The company’s full-year dividend forecast is ¥70.00 per share, with no revision to the dividend forecast. Based on the company’s forecast EPS of ¥222.28, the Payout Ratio is approximately 31.5% (¥70.00 ÷ ¥222.28). Considered together with an Interest Coverage Ratio of 6.51x, this indicates a certain degree of stability in terms of securing funds for dividends. However, in light of financial indicators such as the current ratio of 97.3% and interest-bearing debt of ¥240.98B, comprehensive monitoring, including funding conditions, would be useful in assessing the sustainability of dividend payments.

Risk Factors

1. Deterioration in Real Estate Segment Profitability: Real Estate recorded revenue of ¥96.1B (-38.9%) and Operating Income of ¥6.7B (-69.6%), the largest decline in profit among all segments. Its contribution to Group-wide Operating Income has declined substantially, and the recovery trend in this segment will have a significant impact on profitability at the operating level.

2. Financial Soundness and Liquidity: The current ratio and quick ratio were 97.3% and 88.6%, respectively, both below 100%. Interest-bearing debt totaled ¥240.98B, including short-term borrowings of ¥34.20B. Short-term borrowings represented approximately 54.6% of cash and deposits of ¥18.68B, indicating limited short-term funding flexibility.

3. Dependence on Non-Operating Income: Of Ordinary Income of ¥67.8B, ¥34.5B came from non-operating income. The primary component, dividend income received of ¥26.6B, was based on returns from ¥790.5B in investment securities. This income may fluctuate due to changes in market conditions, and profit at the Ordinary Income level has more potential sources of volatility than operating profit alone.

Industry Benchmark (Reference; Compiled by the Company)

Profitability was below the industry median, with the gap particularly large for the Operating Margin.

Revenue growth was substantially below the industry median, placing the company among those with the largest revenue declines within its peer group.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. While the Operating Margin declined to 6.7% from the previous year, Ordinary Income and Net Income increased due to the expansion of non-operating income centered on dividend income received. The fact that the factors driving profit growth differed between operating and non-operating income is an important point for understanding earnings quality.

2. Electricity and Other Energy recorded the highest growth among all segments, with a margin of 15.2% and Operating Income growth of +288.3%, indicating that its position within the portfolio is changing. Meanwhile, Real Estate recorded a substantial decline in Operating Income of -69.6%, and the profitability gap between segments has widened.

3. Cash and deposits declined while short-term borrowings were reduced at the same time, indicating that adjustments to the financial structure are underway. As the current ratio remains below 100%, continued monitoring of future funding conditions is considered useful.

Theoretical Share Price (Reference Value)

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

Sensitivity: ¥3,234–¥3,423 at ±1% for the cost of equity, and ¥3,316–¥3,333 at ±0.1 for ω.

Notes:

• Because progress of Net Income against the full-year forecast (64%) exceeds the standard benchmark (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies ahead of schedule tend to outperform their forecasts; the adjustment may be excessive for businesses with strong seasonality).
• 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 from the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest Benchmark Month: 2026-06 / 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. Industry benchmarks are reference information compiled by the company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, and you should consult a professional adviser as necessary.

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