Can the sharp Q1 profit decline and downward revision to the first-half forecast be absorbed while maintaining the full-year operating profit forecast of ¥1,808 million?

In Q1 of FY2027, the fiscal year ending March 2027, revenue was ¥6,538 million, operating profit was ¥187 million, ordinary profit was ¥166 million, and net income attributable to owners of the parent was ¥85 million. Revenue was down just 1.1% year on year, but operating profit fell 43.9%, ordinary profit fell 50.7%, and net income fell 63.5%, meaning the decline in profit was substantially greater than the decline in revenue. The operating margin was approximately 2.9%, below the 5.8% recorded for FY2026.

Q1 revenue represented approximately 24.9% of the full-year forecast of ¥26,268 million, broadly in line with the simple time-based progress rate of 25% after three months. By contrast, operating profit was ¥187 million against a forecast of ¥1,808 million, for a progress rate of approximately 10.3%, while ordinary profit was ¥166 million against ¥1,900 million, or approximately 8.7%. To achieve the full-year forecast from the Q1 profit base, the company must generate an additional ¥1,621 million in operating profit and ¥1,734 million in ordinary profit over the remaining 3 quarters, making the hurdle for profit recovery higher than that for revenue.

In addition, on 27 October, the forecast for cumulative ordinary profit through Q2 was revised down from the previous ¥740 million to ¥480 million. Ordinary profit in the same period of the previous year was ¥790 million, making the revised first-half forecast approximately 39% lower year on year. Based on Q1 ordinary profit of ¥166 million, approximately ¥314 million in ordinary profit is required in Q2 alone. To maintain the full-year ordinary profit forecast of ¥1,900 million, the company must also secure approximately ¥1,420 million in the second half after generating ¥480 million in the first half. The company has attributed the situation to the reduction and completion of automotive-related projects and shifts in the timing of revenue recognition, while leaving its full-year forecast unchanged. Its plan therefore assumes that project recovery and cost improvements will be concentrated in the second half.

At the next results release, it will be necessary to assess not only whether operating profit and ordinary profit remain positive in Q2 alone, but also whether the first-half downward revision reflects a temporary revenue-recognition timing issue or a structural downturn caused by weaker demand. In particular, key points will be how specifically the company explains the profit level required in the second half to achieve full-year operating profit of ¥1,808 million, whether it revises its full-year earnings or dividend forecasts again, and whether it discloses orders received and order backlog supporting a recovery in second-half projects.