Q1 was broadly on track against the full-year plan, but the sustainability of profit improvement is the focus

Revenue in Q1 of the fiscal year ending March 2027 was ¥62.590 billion, up 1.9% year on year, while operating profit was ¥2.099 billion, up 141.1%. The full-year forecasts are revenue of ¥256.0 billion and operating profit of ¥9.0 billion, resulting in progress rates of 24.4% and 23.3%, respectively. Simply annualising Q1 results by multiplying them by four gives revenue of ¥250.36 billion and operating profit of ¥8.396 billion, indicating that both revenue and operating profit are broadly in line with the full-year plan. However, the testing and related services business and the healthcare-related services business are affected by seasonality and the timing of project recognition, so it is too early to judge full-year achievement based solely on a simple annualisation.

On the earnings side, the Q1 operating margin was 3.35%, an improvement of approximately 1.94 percentage points from approximately 1.42% in the same quarter of the previous year. The company cites growth in the clinical laboratory reagents business, higher contribution profit led by appropriate pricing in the testing and related services business, improved profitability from fixed-cost reductions, and an improvement in equity-method investment losses as factors behind the increase in profit. However, it has not disclosed the monetary contribution of each factor or the breakdown of selling prices, volumes and customer mix resulting from price revisions. At the next results announcement, it will be necessary to confirm not only whether cumulative Q2 operating profit reaches at least ¥4.5 billion, but also whether the improvement reflects temporary cost controls or a sustainable increase in the contribution margin driven by better pricing and structural reform.

Ordinary profit was ¥2.137 billion in Q1, while profit attributable to owners of the parent was ¥1.574 billion. The full-year forecasts are ordinary profit of ¥8.0 billion and profit attributable to owners of the parent of ¥5.0 billion, representing progress rates of 26.7% and 31.5%, respectively. The extent to which downstream earnings, including equity-method investment gains or losses, foreign-exchange gains or losses, extraordinary gains or losses and the tax burden, can be reproduced will be important, not only operating profit. Q1 included a ¥238 million gain on the sale of fixed assets and ¥173 million in extraordinary losses. At the next results announcement, we will also look to confirm the build-up in ordinary profit excluding such non-operating items.