First-half revenue and operating profit are both roughly one-quarter of the full-year forecasts, but the focus is on gross margin recovery

Revenue for the first quarter of the fiscal year ending March 2027 was ¥1,977.585 million, representing approximately 24.2% progress against the full-year forecast of ¥8,172 million. Operating profit was ¥31.769 million, or approximately 21.5% of the ¥148 million full-year forecast. Based on the first quarter alone, revenue was almost one-quarter of the full-year plan, while operating profit was somewhat lower, but progress was not materially behind the full-year plan. In FY2027-H1, the first benchmark will be whether revenue reaches ¥4,086 million and operating profit reaches ¥74 million, representing simple 50% progress.

However, margins remain weak. The first-quarter gross profit margin was 22.2%, down 1.7 percentage points from 23.9% a year earlier, while the operating margin was 1.6%, down 0.7 percentage points from 2.3%. Selling, general and administrative expenses were ¥407.407 million, and SG&A as a percentage of revenue was 20.6%, indicating that the increase in revenue did not translate directly into operating profit. The company explained that expenses had increased for preparations to ramp up mass production of newly ordered products and for investment in equipment and personnel to strengthen its production structure, but it did not provide a breakdown by expense item or distinguish one-off costs from recurring costs.

The full-year forecasts are revenue of ¥8,172 million, gross profit of ¥1,903 million, operating profit of ¥148 million, ordinary profit of ¥122 million and net income of ¥167 million. The forecast operating margin is approximately 1.8% and the forecast gross profit margin approximately 23.3%, implying some improvement in the second half from the first-quarter operating margin of 1.6% and gross profit margin of 22.2%. Revenue in the fiscal year ended March 2026 was ¥7,852 million and operating profit was ¥197 million. Accordingly, the plan for the fiscal year ending March 2027 calls for a 4.1% increase in revenue but a 25.2% decline in operating profit, indicating that revenue growth and margin trends are diverging.

In FY2027-H1, we will want to confirm not only revenue and operating profit but also the gross profit margin, SG&A ratio and actual costs related to the mass-production ramp-up. The likelihood of achieving full-year operating profit of ¥148 million will differ substantially depending on whether the first-quarter decline in profit reflects a recurring cost burden that continued into the second quarter or temporary upfront costs associated with launching new products. The reference materials do not show progress against the full-year forecasts or the company’s assessment of its performance against plan, so it will be important to see whether the next disclosure also provides the revenue and profit amounts required for the remainder of the year.