Will the Q1 revenue growth and earnings decline reverse in FY2027-H1?

First-quarter revenue was ¥23,970 million, up 8.5% year on year, while operating profit was ¥596 million, down 15.0%, ordinary profit was ¥613 million, down 13.4%, and net profit attributable to owners of the parent was ¥402 million, down 16.3%. Revenue growth did not translate directly into higher profit, resulting in higher revenue but lower earnings. The company cited deeper sales to existing customers, new customer acquisition and higher sales volumes as factors behind the revenue increase, while identifying the deferral of some large projects to Q2 or later as the main reason for the decline in profit.

The full-year forecast is revenue of ¥100,000 million, operating profit of ¥3,350 million, ordinary profit of ¥3,380 million and net profit of ¥2,210 million. The first-quarter progress rate was 23.97% for revenue but only 17.79% for operating profit, while the operating margin was approximately 2.49%, calculated as ¥596 million ÷ ¥23,970 million. This is below the 3.3% operating margin for FY2026 and the approximately 3.35% implied by the FY2027 full-year forecast, so H1 will need to demonstrate not only a recovery in revenue but also an improved project mix and a recovery in margins.

In the previous year's FY2026-H1, revenue was ¥43,738 million, operating profit was ¥1,466 million, ordinary profit was ¥1,484 million and net profit was ¥1,012 million. If FY2027-H1 simply achieves 50% of the full-year forecast, the mechanical benchmarks would be revenue of ¥50,000 million, operating profit of ¥1,675 million, ordinary profit of ¥1,690 million and net profit of ¥1,105 million. However, these are benchmarks that do not take seasonality or project acceptance timing into account and are not the company's stated half-year plan. Project recognition timing needs to be checked alongside the comparison with the previous year's H1 results.

The first-quarter disclosure did not specify the number of delayed large projects, order value, scheduled revenue recognition month or contribution to operating profit. As a result, revenue alone makes it difficult to determine whether H1 revenue growth will result from higher sales volumes of ordinary products or the catch-up recognition of previously deferred large projects. In the next earnings release, the presence or absence of project recognition should be confirmed, as should how gross margin and selling expense burden changed as operating profit recovered from ¥596 million to at least ¥1,675 million.