First-quarter performance is strong, but the full-year forecast remains for lower operating profit

FY2027 Q1 revenue was ¥11,395 million, up 6.6% year on year; operating profit was ¥663 million, up 11.1%; ordinary profit was ¥619 million, up 7.8%; and net profit attributable to owners of the parent was ¥424 million, up 10.6%. Revenue represented 26.8% of the full-year forecast of ¥42,600 million, exceeding the simple quarterly elapsed-period benchmark of 25%. Operating profit had reached 56.4% of the full-year forecast, so based on the first quarter alone, profit progress was well ahead of revenue progress.

However, the company's FY2027 full-year forecasts are revenue of ¥42,600 million, operating profit of ¥1,175 million, ordinary profit of ¥1,083 million and net profit attributable to owners of the parent of ¥700 million. These assumptions call for revenue growth of only 1.6% from the previous fiscal year, while operating profit, ordinary profit and net profit are expected to decline by 14.2%, 13.6% and 11.8%, respectively. The difference from FY2026 actual operating profit of ¥1,368 million is ¥193 million, and as of the end of Q1, the remaining operating profit required to meet the full-year forecast is ¥512 million. Rather than judging the potential for an upside to the full-year results based solely on the strong first quarter, it is necessary to confirm why the company is still maintaining its forecast for lower profit.

The company attributed the first-quarter profit increase to higher gross profit accompanying increased sales of its core products, while also stating that personnel and logistics expenses increased. The first-quarter financial results do not provide sufficient quantitative disclosure of the amount of these cost increases or their impact on the gross margin. In FY2027-H1, it will therefore be important to distinguish between a temporary increase in selling, general and administrative expenses and a fixed burden that will continue into the second half. In particular, the breakdown of the ¥44 million difference between operating profit of ¥663 million and ordinary profit of ¥619 million, including foreign exchange losses and interest expense, will also be a point to monitor.

In the next earnings release, it will be important to assess not only whether revenue can continue to exceed the simple elapsed-period benchmark, but also whether cumulative operating profit can maintain its lead from the first quarter. Even if the full-year forecast is maintained, clearly disclosing the operating profit required in the second half, the assumptions for logistics and personnel expenses, and the effects of product mix and the scope of consolidation would make it easier to assess the validity of the lower-profit forecast. Conversely, if no additional explanation is provided for costs or second-half assumptions despite the high profit progress, uncertainty will remain regarding both the conservatism of the forecast and the sustainability of performance.