FY2027 Q1 is running ahead of the full-year plan, but sustainability will be assessed at the interim stage

Revenue for Q1 of the fiscal year ending March 2027 was ¥2,541.6 million, up 52.7% year on year, while operating profit was ¥130.4 million, up 423.1%. Ordinary profit was ¥148.2 million and quarterly net profit was ¥98.2 million, up 264.9% and 279.7%, respectively, year on year. Revenue reached approximately 25.9% of the full-year forecast of ¥9,800 million, while operating profit reached 31.0% of the ¥420 million forecast, meaning that profit is ahead of revenue on a simple one-quarter comparison.

The Q1 operating margin was approximately 5.1%, calculated as ¥130.4 million divided by ¥2,541.6 million. This is above the approximately 4.3% operating margin forecast for the full fiscal year ending March 2027. The company attributes this to the progress of construction on projects on hand in its building business and the high completed-contract profit margin in its civil engineering business. However, quarterly profits in the construction industry tend to fluctuate depending on project completion dates and the timing of profit recognition, so it is too early to extrapolate Q1's 5.1% margin to the full year.

The progress rate for ordinary profit was approximately 35.3%, calculated as ¥148.2 million divided by ¥420 million, while that for quarterly net profit was approximately 36.4%, calculated as ¥98.2 million divided by ¥270 million. The Q1 results made no changes to the full-year forecasts of revenue of ¥9,800 million, operating profit of ¥420 million, ordinary profit of ¥420 million and net profit of ¥270 million; no revision incorporating upside was made. Accordingly, at the interim results, it will be important to assess not only the strength of actual results but also whether the company changes its assumptions for second-half project profitability or costs.

At the next results announcement, it will be important to determine whether cumulative revenue, operating profit, ordinary profit and net profit for the second quarter are each approaching approximately 50% of their full-year forecasts. Key issues include whether operating profit builds to around ¥210 million, whether the operating margin avoids a significant decline from Q1's approximately 5.1%, and whether the ¥399.1 million of new orders transitions into recognized revenue. In addition, the company did not prepare a quarterly cash flow statement for Q1, and operating cash flow, cash and cash equivalents, and investing and financing cash flows were not disclosed, so disclosure of cash management at the interim stage will also be monitored.