FY2027 forecast is close to the sales target but falls substantially short of the operating income target

The Seventh Medium-Term Management Plan covers fiscal 2025 through fiscal 2027 and sets final-year targets of revenue of ¥200.0 billion, operating income of ¥18.5 billion and EPS of ¥350. The latest FY2027 company forecast is revenue of ¥198.0 billion, operating income of ¥12.0 billion, net income attributable to owners of the parent of ¥8.2 billion and EPS of ¥209.62. The revenue forecast reaches 99.0% of the plan target, while operating income and EPS are only 64.9% and 59.9%, respectively, making the gap between scale of revenue and earnings levels clear.

Q1 results were revenue of ¥41.2 billion, operating income of ¥1.134 billion, ordinary income of ¥1.081 billion and quarterly net income attributable to owners of the parent of ¥419 million. Simple progress rates against the full-year forecasts were 20.8% for revenue, 9.5% for operating income, 9.7% for ordinary income and 5.1% for net income, indicating that earnings are ramping up more slowly than revenue. Operating income increased only 1.5% year on year, below the 23.2% increase in revenue, so the first half needs to establish whether higher revenue will translate into the planned profit.

One reason for the low earnings progress was that operating income in the bridge business fell 49.0% year on year to ¥367 million. The system construction business and engineering business, meanwhile, recorded operating income of ¥1.024 billion and ¥417 million, respectively, but consolidated operating income was ¥1.134 billion and did not equal the simple total of segment profits. The current earnings release does not explain which businesses are expected to cover the ¥6.5 billion gap from the medium-term plan's ¥18.5 billion operating income target, including the effects of the expanded consolidation scope following the acquisition, intersegment transactions and head-office expenses.

In FY2027-H1, we will confirm not only whether the full-year forecast is maintained, but also how far the operating income progress rate improves from 9.5% in Q1. Disclosure by business of bridge construction profitability, system construction production volume, unprofitable engineering projects and the consolidated contribution from BR Holdings would make it easier to determine whether operating income of ¥12.0 billion is a conservative forecast or whether the shortfall against the plan is structural.