Eldan Transportation 2025: the contract book is holding, but cash and profit quality are still on trial

Getting To Know The Company

At first glance Eldan looks like a long-established leasing and car-rental company with a large fleet, a known brand and some real estate on the side. That reading is too narrow. In practice this is an asset-heavy platform that earns from two very different points in a vehicle’s life cycle: the monthly payment during the lease, and the exit price when the vehicle is sold. The 2025 cycle was a reminder that weakness in the second leg can erase a meaningful part of the strength in the first.

Some things are clearly working. Rental revenue rose to NIS 1.159 billion, signed leasing revenue stood at NIS 1.47 billion at year-end and increased to NIS 1.581 billion near the report date, average occupancy held at 84.8%, and management estimates the leasing fleet represented roughly 11% market share at December 31, 2025. In simple terms, core contractual demand did not break.

That is also exactly where a superficial reading can go wrong. Net profit fell 35% to NIS 83.1 million and total gross profit fell 9% to NIS 424.0 million even though total revenue still rose 2% to NIS 1.638 billion. The main reason was not weaker leasing demand. It was weaker exit economics: vehicle-sale profit dropped to NIS 91.1 million from NIS 136.0 million while maintenance, insurance and depreciation continued to rise.

The active bottleneck going into 2026 is not customer acquisition and it is not fleet size. It is Eldan’s ability to keep rolling a large fleet through a more competitive car market without letting vehicle-sale margins, funding cost and collateral requirements overwhelm the thesis. This is no longer mainly a question of how many vehicles the company can lease. It is a question of how much of that profit really survives after fleet turnover, financing and distributions.

There is also a practical screen that matters. As of April 6, 2026 daily equity turnover was only about NIS 215 thousand, while short interest remained negligible. So the market is not signaling aggressive distress here, but it is also not offering the trading depth that would quickly reprice a better result.

What Matters Right Away

• Contracted leasing demand is still strong. Signed leasing revenue rose to NIS 1.47 billion at year-end and to NIS 1.581 billion near the report date.
• The pain in 2025 sat mainly in vehicle disposal economics. Vehicle-sale profit fell by NIS 44.9 million while gross profit from rental activity actually edged up.
• Cash did not validate earnings. Operating cash flow turned negative NIS 166.1 million and funding relief came back through debt markets.
• Headroom looks wider on equity than on collateral. Equity covenants look comfortable, but some secured bond series sit much closer to their LTV ceilings.

Eldan’s Economic Map

Real estate matters, but it has to be placed correctly. According to the investor presentation, the group owns nine properties and land plots with combined fair value of about NIS 497 million. That is material. Yet in ongoing 2025 earnings, investment real estate contributed only NIS 8.3 million of external revenue and NIS 4.0 million of fair-value gain. In other words, real estate is part of the collateral and value backdrop, not the core reason 2025 looked stronger or weaker.

That chart captures the easiest mistake in reading Eldan. Consolidated revenue looks broadly intact, but the quality of that revenue weakened.

Events And Triggers

The first full year as a public company changed the lens

Eldan became a public company in May 2025 through a secondary offering of 21.25 million shares. That is not just a structural footnote. It changes how the company needs to be read. Once the business sits in public debt markets with a rating, quarterly transparency, and a dividend policy, the question is no longer only whether the operating business works. It is whether the business generates enough profit, cash and collateral headroom to support its funding structure.

That shift matters because the Dahan family remained in control, so this was not a change of control or a reinvention of the operating model. The right reading is not “a new company.” It is “a long-established company that entered the public stage exactly as the car market became less comfortable.”

The Ministry of Defense is both an anchor and a concentration point

In 2025 about 12% of group revenue came from the Ministry of Defense. That is not just another large customer. The identity itself matters. On one side, it gives the company a relatively stable, large-scale demand base and better revenue visibility. On the other side, it is a real concentration exposure to one counterparty. The February 2025 win in a tender to supply, maintain and manage thousands of new leased vehicles for the military strengthens the contract book, but it also keeps that concentration very much alive.

The implication runs both ways. It supports signed revenue and visibility, but it also means a meaningful portion of the fleet remains tied to one relationship that can influence volume, timing and commercial conditions.

Ben Gurion Airport remains a tourism anchor, but not for free

At the end of November 2025 the company won the new Israel Airports Authority tender for self-drive car rental at Ben Gurion Airport, and on January 25, 2026 it signed a new 36-month agreement starting January 1, 2026, with an extension option of up to another 36 months. That matters because it secures a foothold in one of the key demand hubs for short-term rental.

But the headline by itself is not enough. The winning bid was 14.21% of gross sales, with minimum annual concession fees of NIS 1.43 million indexed to CPI. So the airport position remains strategically useful, but the economics are not free. In an environment where tourism can weaken suddenly, this is an important asset with a clear cost structure attached to it.

The Direct Finance layer weakened and then ended

The cooperation with Direct Finance was meant to create an additional financing layer around car sales, but in 2025 it contributed only NIS 1.9 million of origination fees versus NIS 5.5 million in 2024. In January 2026 the parties agreed to end the discussions, and Eldan is now evaluating other lending structures for its customers.

This is not a blow to the operating core, but it does mean that an ancillary financing option weakened just as the broader car market became more complicated. Instead of an optional value layer that was deepening, what remains for now is an open question.

February 2026 bought time, not a full thesis reset

On February 9, 2026 the company announced its intention to expand Series Y and or Series Y"א. On the same day S&P Maalot assigned an ilA+ issuance rating for up to NIS 300 million par value to fund ongoing operations and refinance existing financial debt. In practice, on February 12, 2026 Eldan completed a NIS 109.9 million par expansion of Series Y and a NIS 361.6 million par expansion of Series Y"א, for combined gross proceeds of NIS 493.2 million.

This is the central 2026 event in the reading. Not because it proves better operating quality, but because it buys time and lowers immediate liquidity pressure. The conservative interpretation is that capital markets remain open to Eldan. The more important interpretation is that the door stayed open, and the company now has to show why.

Efficiency, Profitability And Competition

Demand did not break, but disposal economics did

The core of 2025 sits in the gap between what happened in rental activity and what happened in vehicle sales. Rental revenue rose 6% to NIS 1.159 billion and gross profit from rental activity edged up to NIS 332.9 million from NIS 328.7 million. That is clear evidence that the contractual engine itself did not collapse.

At the same time, vehicle-sale revenue declined to NIS 478.4 million from NIS 511.8 million, and vehicle-sale profit fell to NIS 91.1 million from NIS 136.0 million. That drop is what made the whole report read less cleanly. It explains why operating profit of NIS 232.4 million could still fall 19% even while the total top line moved up.

What matters is that the group did not lose its ability to place vehicles or renew contracts. It lost part of the favorable exit environment that had helped monetize the fleet.

The car market turned more competitive exactly where Eldan is most sensitive

Management itself describes 2025 as a year of stronger Chinese brands, excess supply and more intense competition in the Israeli car market. In the second half of the year, another pressure layer appeared, especially through larger industry inventories and more aggressive competition in electric vehicles.

Eldan emphasizes that it does not currently hold significant zero-km inventory and that EV exposure in the fleet is not material. That matters, but it does not eliminate the problem. Even if the company is not sitting on excess inventory itself, lower new-car prices can still flow into used-car prices, collateral values, disposal profit, and even the economic attractiveness of leasing relative to direct purchase. So Eldan may be less exposed to inventory, but it is still exposed to price.

Running the fleet also became more expensive

This was not just a year of weaker exit pricing. Fleet maintenance cost rose 17% to NIS 189.0 million, insurance and licensing rose 6% to NIS 120.9 million, and fleet depreciation increased 5% to NIS 469.9 million. That is why anyone looking only at stable occupancy would still miss the point. The issue is not only how many vehicles the company holds or how many days they work. It is how much it costs to carry them and at what price they can be sold at the end.

That chart matters because it shows Eldan grew the fleet without improving utilization. When utilization does not improve, the burden shifts to pricing, exit margins and funding cost. In 2025 the latter two moved in the wrong direction.

Leasing still carries almost the entire economic weight

The segment split leaves little ambiguity. Operating leasing alone generated NIS 276.6 million of segment result in 2025. Car rental generated NIS 12.3 million, trade NIS 0.5 million, and investment real estate NIS 16.5 million. The company may describe several engines, but the real economics still sit overwhelmingly in one dominant engine.

That means both the profit and the risk sit mainly in the same place. If leasing remains stable and profitable, the other segments can support or weigh around the edges. If leasing quality weakens, no real estate layer and no trade activity will truly offset it.

The quarters show that the margin erosion was a process, not a one-off event. Revenue actually rose through the year, while gross margin fell from 28.1% in the first quarter to 23.4% in the fourth.

Cash Flow, Debt And Capital Structure

On an all-in cash flexibility basis, 2025 was a capital-absorption year

This is where framing matters. On an all-in cash flexibility basis, meaning how much cash remained after actual cash uses, 2025 was much weaker than the earnings line suggests. Operating cash flow came in at negative NIS 166.1 million, investing cash flow at negative NIS 9.2 million, and only financing cash flow of positive NIS 250.9 million kept year-end cash at NIS 297.0 million.

The gap between earnings and cash was not random. The company purchased 10,869 vehicles for the leasing and rental activities during the year, increased the net rental fleet to NIS 2.701 billion, and cash outlays for vehicle purchases reached NIS 1.35 billion. Part of the gap was absorbed by a NIS 172.5 million increase in suppliers, and part of it came back through debt issuance and borrowing. This is not the picture of a business with no demand. It is the picture of a business that uses a lot of capital to grow and maintain its fleet.

The working-capital deficit does not mean immediate distress, but it does mean dependence

At year-end 2025 the company had a working-capital deficit of NIS 494.7 million versus NIS 332.5 million a year earlier. Management is right to explain that part of this is a classification mismatch: the vehicle fleet sits in non-current assets, while some of the liabilities funding that fleet sit in the short term, and signed lease receipts are not recognized as current assets.

But that accounting explanation does not remove the practical point. Eldan still depends on its ability to refinance, pledge assets and keep funding markets open. When capital markets are available, the model works. When they tighten, the model becomes crowded much faster than a lighter-asset business.

Headroom is wide on equity, tighter on collateral

On paper, part of the reading looks comfortable. Equity to assets stood at 22.6%, equity to assets excluding cash at 24.5%, and equity amounted to NIS 874 million, far above the NIS 400 million minimum required in Series Y and Y"א. So anyone looking only at the equity tests could conclude that leverage is far from stress.

That conclusion is only partial. Once you look at LTV, the picture becomes tighter. At the end of 2025, Series Y LTV stood at 96.2% and Series Y"א at 94.6%, versus a 98% ceiling for both. Near the report date, after the bond expansions, those ratios improved to 91.8% and 93.4%. That is relief, but not a wide comfort zone.

This is the center of Eldan’s funding story. The company is far from breaching equity covenants, but much closer to the edge on collateral tests. That means a question about used-car values is also a question about funding flexibility, not just gross profit.

February 2026 improved liquidity, but it did not dramatically reduce the price of money

Near the report date the company had about NIS 686 million of cash, NIS 160 million of unused committed bank lines, around NIS 610 million of unencumbered vehicles and NIS 369.4 million of unencumbered real estate. Those numbers explain why management says it does not face an immediate liquidity problem.

But here too, quality matters. The weighted average cost of long-term borrowings stood at 4.66% at the end of 2025 and only moved down to 4.62% near the report date. In other words, the early-2026 refinancing improved liquidity and time horizon, but it did not materially change the average cost of capital overnight. That is why 2026 still needs to be judged through operating profitability as well, not only through a cleaner liquidity snapshot.

Distributions help the tone, but they also reduce the cushion

During 2025 the company paid NIS 46.6 million of dividends, and on March 25, 2026 it approved another NIS 9.0 million dividend. There is a positive side to that. It signals management confidence and a desire to frame Eldan as a public debt-and-equity issuer with distribution discipline.

But the opposite side cannot be ignored. Distributing cash during a year in which operating cash flow is negative and public debt markets are buying time reduces part of the cushion. That does not automatically make the move wrong. It does mean Eldan’s cash buffer should not be read in isolation.

Outlook

Finding one: Eldan’s 2025 issue was not demand. Signed leasing revenue rose to NIS 1.47 billion at year-end, and by early March 2026 it had already reached NIS 1.581 billion. Moreover, actual 2025 revenue came in 3% above the revenue implied by contracts signed at the end of 2024, mainly because of lease extensions.

Finding two: The main damage did not come from the rental core. It came from the vehicle-sale market. Gross profit from rental activity edged up, while vehicle-sale profit fell by NIS 44.9 million. That is the difference between a year that reads as “slow growth” and one that reads as “weaker earnings quality.”

Finding three: Part of the relief in earnings also comes from depreciation accounting, not only operations. A change in depreciation assumptions increased 2025 net profit by about NIS 4.9 million after tax, and management estimates that average accounting depreciation in 2026 will decline by 0.8% versus 2025. So if profit improves in 2026, the market will need to ask how much came from the business and how much came from depreciation assumptions.

Finding four: February 2026 solved the time question, not the economics question. The Series Y and Y"א expansions and the ilA+ rating show Eldan still has good access to debt markets. But the very small move in the weighted average borrowing cost is a reminder that financing will not become a profit engine by itself.

Finding five: 2026 looks like a bridge and proof year, not a breakout year. To improve the reading in a real way, the company has to show that vehicle-sale economics stabilize, that reported earnings are not leaning mainly on friendlier depreciation, and that capital markets become support rather than crutches.

What has to happen over the next 2 to 4 quarters

First, vehicle-sale profit needs to stop eroding. It does not necessarily have to return immediately to 2024 levels, but it has to stabilize at a level that allows group gross profitability to stop drifting lower despite competition in the car market.

Second, the longer-dated contract book for 2027 through 2029 has to keep growing or at least hold. That is the point that separates temporary weakness in disposals from a deeper issue in demand.

Third, the post-February 2026 liquidity improvement needs to let the company reduce its dependence on aggressive vehicle sales or tight collateral management. The coming-quarter test is not only how much cash sits on the balance sheet, but how quickly the need to refinance again starts to reappear.

And fourth, the more sensitive activities still need to be watched through the security backdrop. Management said that in March 2026 and up to near the report date there was no material effect on business results, except for about a 35% decline in vehicle sales activity and about a 40% decline in short-term rental activity for private customers, mainly tourists. That is not the core thesis, but it is a real short-term market trigger.

That chart is probably the strongest support for the bridge-year thesis. The longer part of the contract book actually improved. So if 2026 looks weak, the issue may be disposal pricing, funding, or the security backdrop, not a lack of work.

Risks

Risk one: the used-car market may still tighten further

The central risk is that 2025 weakness in vehicle sales was not a one-off event but the beginning of a less favorable normalization. If new-car prices keep declining or competition in EV inventory and Chinese brands remains aggressive, pressure on first-owner and used-car prices can continue.

This is a model-wide risk. It hits disposal profit, collateral values, and in some cases even the relative economics of leasing versus direct ownership.

Risk two: collateral headroom remains sensitive

Even after the February 2026 debt deals, part of the bond stack remains fairly close to its LTV ceilings. In addition, most of the funding package contains cross-default and acceleration clauses. That means the system does not need a broad covenant breach to tighten. Sometimes one lender moving is enough to make the whole structure feel more crowded.

Risk three: the Ministry of Defense is a moat and a dependence at the same time

The Ministry of Defense brings stability, large contracts and visibility. That is the advantage. The risk is that this type of concentration creates dependence on one customer, its timing and its ordering behavior. Because the customer is a state counterparty, the identity improves credit quality. It also sharpens concentration.

Risk four: accounting improvement may look like economic improvement

The depreciation change is not a problem by itself. It may even reflect fleet economics more accurately. But for readers it requires caution. If 2026 shows better bottom-line numbers without corresponding improvement in vehicle-sale profit, cash flow and funding cost, the market will have to ask how much of the move is truly economic.

Risk five: short-term rental remains sensitive to security conditions and tourism

Management already disclosed a roughly 40% decline in short-term rental to private customers in March 2026, mainly tourists. That does not break the group, but it does remind investors that short-term rental is a secondary engine with higher volatility, and the airport concession does not remove that sensitivity.

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Conclusions

Eldan ends 2025 as a large leasing company with a strong customer base, a rising contract book, relatively open access to debt markets, and a real-estate layer that adds collateral support. That is the part that supports the thesis. The reason the reading is still not clean is profit quality: vehicle-sale margins weakened, operating cash flow turned negative, and the real margin of safety in the capital structure sits more in collateral values and refinancing ability than in the equity line alone.

Over the short to medium term, the market is unlikely to judge Eldan through another fleet number or another signed-contract figure by itself. It will judge the company through three axes: vehicle-sale profit, funding cost after the refinancing, and whether the February 2026 relief also translates into a calmer cash picture. If those three improve, 2025 will read as a bridge year. If not, it may read as the start of a more structural squeeze on earnings quality.

Current thesis: Eldan’s contracts and fleet are still holding demand, but profitability and funding flexibility still have to prove they are strong enough in a less favorable vehicle market.

What changed: Up to 2024 it was easier to read Eldan as a story of fleet growth, customer loyalty and market access. The 2025 cycle moved the center of gravity to another question: how much of that growth survives after disposal pricing, depreciation and debt cost.

Counter-thesis: The market may be too harsh on 2025 because leasing demand remained strong, the signed contract book rose, February 2026 already repaired the liquidity layer, and the weakness in vehicle sales may prove cyclical rather than structural.

What could change the market’s interpretation over the short to medium term: a stop in the erosion of vehicle-sale profit, a more meaningful decline in average funding cost, and continued growth in the 2027 to 2029 signed contract base without similar pressure building on collateral.

Why this matters: because Eldan is no longer being judged on whether it can lease a lot of vehicles, but on whether a large fleet and a loyal customer base can still translate into profit and cash after fleet turnover and financing.

What must happen next: over the next 2 to 4 quarters the company has to stabilize vehicle-sale profit, show operating cash flow that is less dependent on new debt, and keep a more comfortable margin in collateral tests. What would weaken the thesis is more erosion in disposal prices, renewed LTV pressure, or signs that 2026 improvement is coming mostly from depreciation accounting rather than stronger economics.