Can the sharp increase in Q1 profit be repeated in FY2027-H1?

FY2027-Q1 revenue was ¥21,361 million, up 16.2% year on year, while operating profit was ¥1,175 million, up 164.0%. Ordinary profit was ¥1,528 million and net profit attributable to owners of the parent was ¥1,022 million, both well above the year-earlier levels. The full-year forecasts are revenue of ¥82,500 million, operating profit of ¥2,200 million, ordinary profit of ¥2,000 million and net profit attributable to owners of the parent of ¥2,200 million.

Looking only at operating profit, the Q1 result represents 53.4% of the full-year forecast and has already exceeded the simple half-year benchmark of ¥1,100 million. Revenue, however, was 25.9% of the forecast and remains well below the simple half-year benchmark of ¥41,250 million. Since profit progress is substantially ahead of revenue progress, the next results announcement will need to confirm not only the strength of demand but also whether cost reductions and an improved product mix continue into the second quarter. The results summary does not explicitly state the progress rate against the full-year forecast or whether the company considers performance to be in line with or ahead of plan.

The ¥730 million year-on-year increase in Q1 operating profit is explained by ¥651 million from higher gross profit due to increased sales, ¥131 million from an improved gross margin and a ¥52 million increase in SG&A expenses. Ordinary profit also benefited from a ¥201 million foreign-exchange gain resulting from the weaker yen and ¥80 million in dividend income, so the increase from operating profit to ordinary profit cannot be treated as a sustained improvement in core operations. In FY2027-H1, it will be important to disclose gross margin, operating margin, foreign-exchange gains and losses, and dividend income separately.

The results summary cites the expected recognition of a gain on the sale of investment securities as the reason for raising the forecast for net profit attributable to owners of the parent from ¥1,300 million to ¥2,200 million, an upward revision of ¥900 million. Accordingly, even if H1 net profit increases, we will need to confirm how much includes extraordinary gains such as gains on the sale of investment securities and assess this separately from the likelihood of achieving operating profit of ¥2,200 million. The Q1 financial results report did not include a cash flow statement, and operating cash flow was not disclosed, so cash conversion of profit will be an additional point to confirm in H1.