Orad 2025: backlog and solar improved, but cash is still tied up in receivables

Getting To Know The Company

Orad is classified on the exchange under investment and holdings, but that label is misleading from the first line. In practice this is an execution and service company with two clear engines: a low-voltage activity built around security, safety, fire detection and suppression, control systems and maintenance, and a solar activity focused on building and servicing PV systems. In 2025 low voltage still accounted for 79.6% of revenue, but solar was the main reason profit improved.

What is working right now is fairly clear. Revenue rose 11.1% to NIS 202.5 million, operating profit rose 17.3% to NIS 16.6 million, net profit rose 72.9% to NIS 15.1 million, backlog increased to NIS 210.5 million, and bank debt fell to just NIS 12.5 million from NIS 19.5 million a year earlier. Those are better numbers, and they point to an organization that executed more work while relying less on bank debt.

But the active bottleneck is not demand. It is working capital. At year-end Orad had NIS 102.8 million in customers and accrued revenue, average customer credit days of 164, cash and cash equivalents of only NIS 2.7 million, and heavy annual lease payments. So the key question is not whether Orad can win projects. It is how quickly it can turn backlog and accounting profit into real cash.

There is another trap in a superficial read. The jump in net profit does not reflect a broad-based change across every engine in the business. A large part of the improvement came from solar, and another part came from the tax line, while the low-voltage core stayed stable but did not expand in profitability. The fourth quarter was also weaker than the second and third quarters on margins. That is why 2026 looks less like a clean breakout year and more like a proof year.

There is also a practical actionability constraint. Based on the latest trading data, the stock traded around 140 agorot on 93.3 million shares outstanding, which implies a market value of about NIS 130.6 million. But daily trading turnover was only about NIS 20 thousand. Even if the thesis improves, very low liquidity limits how quickly the market can express that view.

Orad's Economic Map

In economic terms, low voltage is what keeps Orad anchored as a service platform with a broad and sticky client base. Solar is what can move profitability year to year, but it also adds execution pressure, guarantees and working-capital strain. That is the heart of the story.

Events And Triggers

The first trigger: solar is no longer marginal. Segment revenue rose 50.8% to NIS 41.3 million and segment gross profit rose to NIS 5.6 million from NIS 1.8 million a year earlier. This is no longer a side activity in the report. It is the engine that changed the year.

The second trigger: the merger of SolarPower into the company, registered in February 2025 after being completed for accounting purposes at the end of 2024, pulled the solar activity directly into Orad. Management language around savings, efficiency and unified operations does not automatically create value, but there is a clear economic logic here: less corporate layering, tighter operating integration, and less distance between the listed company and the solar business.

The third trigger: the change of control. In February 2025 Udi Dor bought an additional 35% stake and reached 44.97% ownership. That is not an immediate P&L event, but it changes the read. There is now a clear controlling shareholder after a period of ownership transition and the death of Moti Yungreiz, so the question is no longer who controls the company, but what he intends to do with it.

The fourth trigger: backlog grew faster than revenue. At period end total backlog reached NIS 210.5 million versus NIS 185.6 million at the end of the prior cycle, a 13.4% increase. The split matters: NIS 168.8 million in low voltage and NIS 41.8 million in solar. Both the mature base business and the growth engine contributed to better visibility.

But the most interesting trigger is hidden in the quarterly pattern, not in the annual headline. In the fourth quarter Orad posted revenue of NIS 53.3 million, the highest quarter of the year, but operating profit of only NIS 3.1 million versus NIS 5.9 million in the second quarter and NIS 4.3 million in the third. Net profit in the fourth quarter was just NIS 2.6 million. Anyone who looks only at the annual NIS 15.1 million headline may miss that underlying operating momentum was not linear.

In other words, the year ended better than the prior year, but it does not yet confirm a new stable run-rate of profitability. That is a point the market may miss on first read.

Efficiency, Profitability And Competition

Low voltage, a stable core that did not expand margin

Low voltage remains the core activity. Revenue rose 4.1% to NIS 161.3 million, but segment gross profit slipped slightly to NIS 32.6 million from NIS 32.8 million. So this is revenue growth without margin expansion. Segment gross margin fell to 20.2% from 21.2% in 2024.

That matters because low voltage is also the higher-quality part of the story. In 2025, 51% of segment revenue came from maintenance services, and 91.4% of segment revenue came from customers with more than five years of tenure. That is strong evidence of an installed base, some repeatability and real switching friction. When a company installs fire detection, control and safety systems across government sites, healthcare facilities, defense-related organizations or multi-site campuses, it usually does not disappear after the first contract. It stays for maintenance, extensions and upgrades.

Customer identity matters here as well. The company names customers in low voltage such as the Prime Minister's Office, the Ministry of Defense, the Ministry of Health, Israel Aerospace Industries, Elbit, Rafael, the diamond exchange and Teva. That is not cosmetic disclosure. It points to procurement environments where clearance, track record, nationwide service and integration capability matter at least as much as price.

The problem is that competition did not go away. The company itself describes a crowded market, the entry of smaller competitors in simpler projects, and price pressure from low-end Chinese products. That helps explain why the core business continues to work, but does not convert every additional shekel of revenue into better margin.

There is also an important nuance on the procurement side. Siemens Building Technologies was a major supplier in 2025, representing about 39% of total low-voltage product purchases. The company says it is not dependent on Siemens, and that may be true in the broad technical sense, but the commercial meaning still matters: a relationship of more than 25 years, exclusivity in part of the fire systems field, and installed systems that reduce switching at the customer level create both a moat and some exposure on pricing and availability at the supplier level.

Solar, the earnings engine of 2025

The solar activity delivered what low voltage did not: a sharp profitability jump. Revenue rose to NIS 41.3 million from NIS 27.4 million, and segment gross profit rose to NIS 5.6 million from NIS 1.8 million. Segment gross margin nearly doubled, from 6.6% to 13.6%.

The mix matters here too. 77% of segment revenue came from project execution and 23% from maintenance services. So this is still בעיקר a project business, not a pure service model. Even so, 94.2% of segment revenue in 2025 came from customers with more than five years of tenure, so growth was not driven only by new logos. It also came from deepening existing relationships.

That is the positive side. The other side is that solar remains more execution-sensitive. The company works through tenders, collects milestone payments based on progress, posts guarantees equal to 5% to 10% of contract value, and in some contracts pays compensation for delays. In other words, solar profit does not automatically mean higher-quality profit. It still depends on milestones, delivery, collections and subcontractor management.

The external signal worth paying attention to

The auditor flagged estimated future contract costs as a key audit matter. That is not throwaway technical language. When a project company recognizes revenue over time, earnings quality also depends on whether remaining completion costs are estimated correctly. As long as Orad is growing through projects, especially in solar, this is a useful warning signal: margin improvement still has to be backed by execution discipline and estimate discipline, not only by accounting recognition.

Cash Flow, Debt And Capital Structure

The bottleneck is working capital

This is the key section in the report. Operating cash flow remained positive at NIS 18.0 million, but declined from NIS 23.4 million in 2024. Why? Mainly because the company financed more activity through its own balance sheet and less through suppliers.

Customers and accrued revenue rose to NIS 102.8 million from NIS 92.0 million, an 11.7% increase, almost in line with revenue growth. Average customer credit days stayed high at 164, after 164 in 2024 and 156 in 2023. At the same time, average supplier credit days fell to 87 from 102 in 2024. That is the real point. Orad is not just financing projects. It is doing so on a credit gap that became less comfortable.

The company does provide one partial relief point: only NIS 7.7 million of customer balances were older than 180 days, and the expected credit-loss allowance stayed at NIS 1.8 million. This does not look like a collection crisis. But it is not a reason to relax either. When a company carries more than NIS 100 million in customers and accrued revenue against only NIS 2.7 million of cash, even small slippage in collection timing becomes material.

Two cash bridges

When the thesis centers on funding and flexibility, it is important to separate the cash the business can generate from the cash that really remains after commitments.

The gap between the two bridges is exactly why the report looks better in profit than in cash. The business can generate cash at the operating level, but after leases, interest and basic investment, the cushion that remains is relatively small. After roughly NIS 7.0 million of net repayment on short and long bank debt, year-end cash fell to NIS 2.7 million.

Debt is down, but the banks are still part of the story

On the positive side, the balance sheet improved. Bank debt fell to NIS 12.5 million, there is no remaining long-term bank loan balance, equity rose to NIS 65.3 million, working capital rose to NIS 52.2 million, and the company meets its financial covenants. In addition, it has total credit facilities of about NIS 37 million, of which only about NIS 12.5 million were utilized at year-end.

On the other hand, this is not full independence from the banking system. There is a floating lien over assets in favor of the banks, and bank guarantees amount to about NIS 12.9 million, including about NIS 5.4 million tied to solar projects. So Orad is not in classic debt stress, but it still relies on facilities, guarantees and collection discipline to keep executing the current backlog.

Outlook

Finding one: the bottom line looks stronger than the operating improvement. Net profit rose 72.9%, but operating profit rose only 17.3%, and much of the gap comes from the tax line flipping from a NIS 2.4 million expense in 2024 to a NIS 1.3 million income in 2025.

Finding two: the fourth quarter was weaker than the annual framing suggests. Despite record quarterly revenue, gross margin fell to 16.9% and operating profit dropped to NIS 3.1 million. That does not cancel the annual improvement, but it does require caution when thinking about the new earnings run-rate.

Finding three: backlog gives visibility, but it does not solve the bottleneck. 2025 ended with backlog above annual revenue, yet that backlog enters 2026 with receivables already elevated, supplier credit shorter, and cash thin.

Finding four: Orad is still driven by two very different engines. Low voltage is the service base, the customer relationship platform and the operating moat. Solar is the 2025 accelerator. If solar keeps improving without hurting cash conversion, the picture gets better. If solar wobbles, the core alone does not yet support a sharp re-rating in profitability.

The 2026 backlog map

The split within backlog sharpens the task for the coming year. Low voltage carries NIS 168.8 million of backlog, including NIS 28.4 million scheduled for 2027 and beyond. That is the relatively stable engine. Solar carries NIS 41.8 million, and almost all of it is expected to be recognized in 2026. So the coming year will be judged largely on solar execution, but also on whether low voltage stops leaking margin.

What kind of year comes next

2026 looks like a cash-conversion proof year. Not a reset year, because the business is not in distress. But also not a clean breakout year, because there is still no proof that higher profitability has turned into free cash that really belongs to shareholders.

What has to happen for the read to improve? First, solar has to sustain double-digit gross margin as execution spreads across the year. Second, low voltage has to return at least to margin stability rather than mild erosion. Third, customer balances have to stop growing as fast as revenue. And fourth, cash has to start rising without leaning again on bank facilities.

Management says inflation, interest-rate changes and the security situation did not materially affect 2025. That matters, because it means the current Orad story is not macro. It is execution, pricing, collections and funding structure. FX exposure to the dollar and euro was also described as not material in 2025, so the thesis is hard to outsource to an external tailwind.

Risks

Risk one, working capital is already heavy

NIS 102.8 million in customers and accrued revenue against NIS 2.7 million of cash is not a structure that leaves much room for error. Even if most of the balance is collectible, timing is what matters. Any small slippage in collections, any delay in project delivery, or any need to extend more financing to customers immediately hits flexibility.

Risk two, profitability also depends on estimates

Revenue recognition in projects relies on future cost estimates. That is a classic accounting risk in execution businesses. It does not mean the numbers are wrong, but it does mean margin improvement has to be checked against delivery, cost overruns and project completion.

Risk three, low voltage still faces a competitive market

The company itself describes pressure from cheaper products, mainly from China, and the entry of smaller players into simpler projects. If low voltage, which is Orad's base business, keeps growing without generating better margin, solar will remain alone in front of the improvement story, and that is too narrow a base for a strong thesis.

Risk four, operational reliance on banks and guarantees

Orad meets its covenants, which is positive. But it still needs credit lines, guarantees and liens to keep executing. This is not a default risk. It is a flexibility risk. If backlog grows without a parallel improvement in collections, that pressure can return.

Risk five, very low stock liquidity

At the shareholder level, the market itself is a constraint. A daily turnover of roughly NIS 20 thousand means even a good report may not immediately roll into the share price. That does not change the economics of the business, but it does change how accessible value is to common shareholders.

Conclusions

Orad exits 2025 as a stronger operating company, with a larger backlog, a solar segment that finally generates profit, and lower bank debt. But the main yellow flag remains in exactly the same place: cash still gets trapped in the balance sheet too quickly relative to how fast it comes back to the company. That is why the market may respond less to the annual profit number itself and more to whether 2026 delivers a real improvement in collections and flexibility.

The current thesis is simple: Orad no longer looks like a low-voltage contractor with a small solar option attached. It looks like a company where solar became a meaningful profit engine. The problem is that the transition still has not proved it can produce free cash rather than only profit and visibility.

Current thesis in one line: Orad improved profit and reduced debt, but the quality of the thesis still depends on converting backlog and earnings into cash.

What changed versus the prior read of the company: solar no longer looks like a side option. It became a meaningful earnings engine, while low voltage remains the stable but non-expanding base.

Strong counter thesis: the cash-flow concern may be overstated, because Orad operates in sectors where long customer-credit cycles are normal, it has no disclosed major-problem customers, it meets its covenants, and it still has material unused bank capacity.

What could change the market reading over the short to medium term: better collections, a cash balance that starts to rise rather than fall, and two consecutive quarters in which solar keeps its margin without deterioration in low voltage.

Why this matters: if Orad proves that growth and backlog also leave real cash behind, it can move from being read as “a contractor that executes a lot” to “a services and projects platform that can create durable value.”

What must happen in the next 2-4 quarters: customer balances need to stabilize or decline relative to revenue, solar needs to keep double-digit gross profitability, low voltage needs to stop leaking margin, and cash needs to expand without a renewed build in bank debt.