Orders are recovering, but can FY2027-H1 convert orders into revenue and profit?

Revenue in the first quarter of the fiscal year ending March 2027 was ¥4,293 million, down ¥304 million, or 6.6%, from ¥4,597 million in the year-earlier quarter. Operating results turned from a ¥96 million profit in the year-earlier quarter to a ¥199 million loss, ordinary results from a ¥69 million profit to a ¥223 million loss, and net income attributable to owners of the parent from a ¥38 million profit to a ¥165 million loss. Profitability deteriorated more sharply than revenue, making it important to determine whether this was merely a shift in the timing of revenue recognition or whether it also reflects issues with project profitability, production capacity or construction capacity.

Orders, by contrast, rose 3.3% year on year to ¥5,335 million. Orders in the first half of the previous fiscal year were ¥10,135 million, while revenue was ¥10,143 million. Accordingly, the next interim results should show whether the accumulation of orders led to a recovery in revenue. In particular, if orders continue to increase without corresponding revenue growth, the conversion of the order backlog into revenue may be being hindered by project start and construction timing, rescheduling caused by labor shortages, or delays in construction progress. The order backlog was not disclosed in the first-quarter summary results, so whether additional disclosure is made in FY2027-H1 will also be a point to watch.

The full-year plan calls for revenue of ¥22,000 million, operating profit of ¥1,320 million, ordinary profit of ¥1,230 million and net income attributable to owners of the parent of ¥800 million. Simply subtracting first-quarter results means that the company needs to generate ¥17,707 million of revenue and ¥1,519 million of operating profit over the remaining 3 quarters. Since the first quarter posted a ¥199 million operating loss, achieving the full-year plan will require a substantial recovery in cumulative results from the second quarter onward. The focus will be whether the company can return to profitability in the second quarter alone and whether it can provide a reasonable explanation for leaving the full-year forecast unchanged.

The company has a single reportable segment, and disclosure of segment profit and order backlog is limited. Accordingly, in FY2027-H1, the extent to which the company discloses revenue by product and service, orders, construction progress, project profitability and the recovery in production volume will provide a basis for assessing the earnings' repeatability. The annual dividend forecast is ¥43 and has not been changed, together with the full-year forecast, but it will also be necessary to confirm whether this shareholder-return policy will be maintained if the recovery in profit is delayed.