Net income guidance revised upward by +30%; management affirms mid-term plan acceleration driven by entry into low-voltage corporate segment and battery storage surpassing 100MW

Summary

Cumulative operating income through Q3 of FY26/7 reached JPY 2,447M (103.5% of full-year plan), prompting upward revisions to full-year guidance across all profit line items. Total contracted capacity hit a record high of 1,367MW (+33.9% YoY), with balanced contributions from the three pillars: Power PF, Renewable Energy PF, and Battery Storage. During the briefing, management outlined concrete progress on mid-term plan initiatives, including the full-scale launch into the low-voltage corporate segment in July, the AS business surpassing 100MW, and DGAM investment decisions reaching 16.2MW. CEO Toyoda characterized the decline in DGP fee unit prices as within mid-term plan assumptions and reiterated the strategy of prioritizing contracted capacity accumulation.

Key Points (Earnings Highlights and Growth Actions)

• Management Strategy and Market Outlook
  • Mitigating LNG price spike risk stemming from Middle East tensions through a pass-through structure and futures hedging offerings to limit customer impact
  • Positioning grid instability arising from expanded renewable energy adoption as a business opportunity, cultivating Battery Storage AS/AM as the third growth pillar
  • Explicitly stated that DGP fee unit price declines are within both initial budget and mid-term plan assumptions; capacity expansion remains the priority
• Near-Term Business Progress and Drivers
  • Q3 revenue of JPY 1,778M, up +34% QoQ, primarily driven by higher settlement amounts with general electricity transmission and distribution utilities
  • DGP fee revenue declined -4% QoQ due to seasonality (spring off-peak period) and unit price adjustments at April contract renewals
  • AS business revenue expanded to JPY 130M with JPY 97M in profit, establishing itself as a recurring revenue stream
  • Consumer contracted capacity reached 888MW at the April contract renewal peak, +16% QoQ
• Strategic Initiatives and Inflection Points
  • Established DG Life in June 2026; began accepting low-voltage corporate customers nationwide from July 1
  • DGAM's first 100% company-owned battery storage facility (Gifu Ogaki, 2.0MW) commenced operations
  • Grid-scale battery storage capacity handled by the AS business reached 102MW in Q3, up +40MW QoQ
  • Considering EBITDA-based disclosure to address rising depreciation expenses associated with expanding proprietary asset holdings

Outlook and Strategy

• Revised full-year guidance: revenue JPY 6,595M (+5%), operating income JPY 2,836M (+20%), net income JPY 1,919M (+30%); achievement probability is high based on cumulative Q3 progress rates
• Against mid-term plan KPIs of "total electricity volume handled CAGR 30%+" and "JPY 10B battery storage investment over three years," battery storage investment progress stands at 40%, tracking well
• Entry into the low-voltage corporate segment opens access to the nationwide electricity demand market of 594,417GWh, broadening the customer base
• RE Bridge membership has reached 96 demand-side members and 141 generator-side members, with plans to add functionality outside matching events to create a permanent platform
• CEO Toyoda emphasized that contracted capacity expansion will continue to directly drive earnings from next fiscal year onward, highlighting the results of April renewals

Positive Factors

• Cumulative Q3 OPM of 47.9% and gross profit margin of 80.6%, maintaining a highly profitable structure
• Renewable Energy PF business renewable capacity handled reached 377MW; long-term PPA contracts of 20+ years are building recurring revenue
• Econohashi membership at 215 companies; cumulative FIT non-fossil certificate volume handled at 2,763GWh, continuing an expansion trajectory
• Battery Storage AS capacity handled at 102MW, with a solid pipeline building toward the FY28/7 plan target of 343MW
• Pass-through structure eliminates P&L impact during JEPX market price spikes; proven track record as a recipient of customers fleeing exiting competitors
• Headcount expanded to 93 (+32.9% YoY) while SG&A progress rate held at 69.5%, demonstrating effective operating leverage

Concerns and Risks

• DGP fee unit prices declined -7.8% QoQ, a persistent downtrend; if not offset by contracted capacity growth, this becomes a drag on profitability
• Power PF contracts are principally renewed annually, making ongoing monitoring of the ~1.95% monthly average churn rate critical
• AM business's company-owned battery storage facilities are scheduled for full-scale revenue contribution from next fiscal year onward, with upfront depreciation burden in the interim
• Revenue recognition for the supply-demand adjustment market lags approximately five months from commercial operation start; investors should note the timing gap between investment and revenue
• Middle East tensions and sharp LNG price spikes could increase JEPX market volatility, posing a risk of temporary customer attrition among 100% JEPX-linked customers
• Revised full-year guidance does not disclose segment-level breakdowns, making it difficult for external analysts to assess upside contribution by business

Performance Highlights

Cumulative revenue through Q3 of FY26/7 was JPY 5,107M (81.3% of full-year plan), with operating income of JPY 2,447M (103.5%). On a standalone Q3 basis, revenue rose +34% QoQ driven by higher settlement amounts with general electricity transmission and distribution utilities and expansion of the AS business. With cumulative net income exceeding the full-year plan (126.8% progress rate), full-year guidance was revised upward across all line items.

*Figures above represent cumulative Q3 results. Segment profit excludes corporate-level adjustment items (JPY -684M). YoY comparisons by segment are not calculable as quarterly consolidated data prior to Q3 of FY25/7 has not been disclosed.

• Total Contracted Capacity: 1,367MW (+33.9% YoY)
• Consumer Contracted Capacity: 888MW (+16.9% QoQ)
• Renewable Generator Contracted Capacity: 377MW (+6.5% QoQ)
• Electricity Volume Handled (Cumulative Q3): 2,233GWh (69.2% of full-year plan)
• AS Business Grid-Scale Battery Storage Capacity Handled: 102MW (+40MW QoQ)
• DGAM Committed Investment Capacity: 16.2MW (~40% progress toward mid-term plan JPY 10B investment)
• Econohashi Membership: 215 companies
• RE Bridge Membership: 141 companies (96 demand-side + 45 generator-side)
• Headcount: 93 (+32.9% YoY)