Can the sharp increase in 1Q profit be sustained through the first half and full year?

In 1Q of the fiscal year ending March 2027, revenue was ¥97.0 billion, up 3.1% year on year, while operating profit was ¥11.0 billion, an increase of ¥8.7 billion year on year, resulting in an operating margin of 11.3%. Operating profit growth reached 378.3%, far outpacing revenue growth. It is therefore necessary to distinguish the sustainability of the factors that lifted margins, including price variance, inventory effects and the effect of the DPE shutdown, rather than attributing the improvement simply to volume growth.

The company raised its first-half operating profit forecast by ¥5.0 billion, from ¥12.0 billion to ¥17.0 billion, but left its full-year operating profit forecast unchanged at ¥30.0 billion. Achieving the first-half forecast of ¥17.0 billion against 1Q operating profit of ¥11.0 billion requires operating profit of ¥6.0 billion in 2Q on a simple calculation. Although 1Q has already accounted for 64.7% of the first-half plan, progress against the full-year plan is only 36.7%, so full-year achievement cannot be judged on the strength of the first half alone.

Assuming full-year operating profit of ¥30.0 billion, the company will need operating profit of ¥13.0 billion in the second half after achieving ¥17.0 billion in the first half. At the next earnings release, we will look for 2Q operating profit on a standalone basis, as well as first-half revenue, the first-half operating margin and the outlook for second-half demand. At present, no specific first-half revenue forecast or progress rate against the full-year forecast has been disclosed. It is therefore important to determine why only the profit forecast was raised and whether the improvement is accompanied by revenue growth.