How far can the substantial revenue and profit growth forecast for the fiscal year ending June 2027 be driven by existing operations and finalized M&A?

For the fiscal year ended June 2026, revenue was ¥6.15598 billion, operating profit was ¥1.12706 billion, ordinary profit was ¥1.13171 billion, and net income attributable to owners of the parent was ¥939.40 million. Revenue increased 12.7% year on year and operating profit rose 23.9%, while the operating margin improved by 1.7 percentage points, from 16.6% to 18.3%. In addition to organic growth at existing hospitals, the company attributed the increase in revenue to Bahati's full-year contribution and the consolidated contributions of Asuka Medical, See and Caltech.

The company's forecast for the fiscal year ending June 2027 is revenue of ¥7.535 billion, operating profit of ¥1.569 billion, ordinary profit of ¥1.569 billion, and net income attributable to owners of the parent of ¥1.005 billion. The forecast operating profit growth rate of 39.3% is substantially higher than the 22.4% revenue growth rate. Operating profit margin calculated simply from the forecast revenue and operating profit is approximately 20.8%, implying a further 2.5-point increase from 18.3% in the fiscal year ended June 2026. At the next earnings release, it will be necessary to determine whether this margin improvement is due to price revisions and cost synergies or to a reversal of one-time expenses.

The earnings presentation states that the forecast for the fiscal year ending June 2027 includes revenue growth from existing operations and only finalized M&A, excluding new M&A and new hospital openings whose timing remains uncertain. Accordingly, when assessing whether first-quarter results are tracking the forecast, the focus should be on patient visits, revenue per visit, staff productivity at existing hospitals, and earnings contributions from existing consolidated subsidiaries, without assuming any new transactions. An important test will be whether existing operations alone can outperform the year-earlier period even without news of new transactions.

In the first quarter of the fiscal year ended June 2026, revenue was ¥1.365 billion, operating profit was ¥239 million, ordinary profit was ¥243 million, and quarterly net income attributable to owners of the parent was ¥165 million. For the first quarter of the fiscal year ending June 2027, these figures should be treated as a simple floor, and we will check whether both revenue and operating profit are increasing year on year. Although the company has provided a full-year forecast, it has not disclosed a standalone first-quarter forecast or a target first-quarter progress rate against the full-year forecast. Investors will therefore need to calculate the year-on-year comparison and the amount required to meet the full-year forecast.

The net income forecast is ¥1.005 billion, only 7.0% above actual net income for the fiscal year ended June 2026. The large gap from the 39.3% operating profit growth rate may reflect extraordinary gains and losses, including a gain on negative goodwill recognized in the fiscal year ended June 2026, as well as the potential impact of future M&A-related costs and amortization. Accordingly, in the first quarter it will be necessary to assess not only operating profit growth but also the conversion into bottom-line profit after extraordinary gains and losses, goodwill amortization and taxes.