Verifying Q1’s front-loaded profit through the FY2027-H1 forecast and full-year earnings structure

FY2027-Q1 sales were ¥5,051 million, up 22.4% year on year; operating profit was ¥618 million, up 252.4%; ordinary profit was ¥632 million, up 284.0%; and net profit attributable to owners of the parent was ¥442 million, up 260.2%. Operating profit grew faster than sales, and the standalone Q1 operating margin rose 8.0 percentage points year on year to 12.3%. The results were strong on their face, but the key issue in the next reporting period, FY2027-H1, will be whether this high margin was temporary or can be maintained throughout the first half.

Q1 progress against the full-year forecast was 20.7% for sales, 73.7% for operating profit, 68.8% for ordinary profit and 71.4% for net profit attributable to owners of the parent. Given that one quarter represents 25% of the year, sales progress is below the passage of time, while profit progress is substantially ahead. In addition, the cumulative second-quarter forecast is ¥11,200 million in sales, ¥930 million in operating profit, ¥960 million in ordinary profit and ¥670 million in net profit. Based on the Q1 results, this implies that Q2 alone must generate ¥6,149 million in sales, ¥312 million in operating profit, ¥328 million in ordinary profit and ¥228 million in net profit.

The key point is that the cumulative second-quarter profit forecasts exceed the full-year forecasts. The full-year forecasts are ¥24,400 million in sales, ¥840 million in operating profit, ¥920 million in ordinary profit and ¥620 million in net profit attributable to owners of the parent. The first-half forecast exceeds the full-year forecast by ¥90 million for operating profit, ¥40 million for ordinary profit and ¥50 million for net profit. This suggests that profit may be recognized earlier in the first half, while the company may be assuming pressure in the second half from higher tungsten prices, delays in passing through price increases and lower sales volumes. However, the detailed amounts underlying the second-half cost assumptions and earnings plan have not been disclosed.

FY2026 full-year results were ¥17,446 million in sales and ¥822 million in operating profit. The FY2027 full-year forecast calls for sales to increase 39.9% year on year, while operating profit is expected to rise only 2.1% to ¥840 million. Since the plan anticipates only modest profit growth despite substantial sales growth, FY2027-H1 should be used to assess not only whether the ¥11,200 million sales target is achieved, but also whether the ¥840 million full-year operating profit forecast can be maintained after achieving the ¥930 million first-half plan. The Q1 summary results did not include a quarterly cash flow statement, and operating cash flow was not disclosed, so H1 should also be used to check whether higher profit is accompanied by increases in working capital or inventories.