Will profit growth continue to outpace revenue growth in FY2027 H1?

FY2027 Q1 revenue was ¥2,907.316 million and operating profit was ¥408.229 million, up 11.4% and 24.7%, respectively, from the same quarter of the previous year. Operating profit growth exceeded revenue growth by 13.3 percentage points, and the operating margin rose 1.5 percentage points from approximately 12.5% to approximately 14.0%. Ordinary profit also increased 32.5% to ¥569.031 million, while profit attributable to owners of the parent increased 35.9% to ¥413.024 million, with earnings growth extending from the operating level through to net income.

In FY2026, revenue increased only 5.1% year on year to ¥10,343.559 million, while operating profit rose approximately 23.5% to ¥1,320.425 million from ¥1,068.873 million. The operating margin increased from approximately 10.9% to approximately 12.8%, and Q1's 14.0% is above the improved full-year level. Accordingly, in FY2027 H1 the key issue will be not only whether revenue increases, but whether the margin can remain near 14% or decline as revenue expands.

The company cites production efficiency gains, reduced labor hours and cost reductions as factors behind the increase in profit, but has not disclosed the amount of improvement by factor, such as product-level profitability gains, lower material costs or reductions in labor and SG&A expenses. Since the effect of revenue growth from yen depreciation or strong sales cannot be separated from margin improvements attributable to internal efforts, the sustainability of earnings cannot be fully assessed from the Q1 operating margin of 14.0% alone. The first-half earnings summary will be reviewed for year-on-year changes in cost of sales, gross profit and SG&A expenses, or at least a specific contribution from cost reductions.

The full-year FY2027 operating profit forecast in the financial summary is ¥1,520.000 million, half of which is ¥760.000 million. If first-half operating profit exceeds this level and profit growth outpaces revenue growth, it will be easier to assess whether the operating leverage seen in Q1 is continuing. Conversely, if revenue grows but the operating margin falls significantly below 14%, the effects of the fading benefit of yen depreciation, raw material costs and the limits of cost reductions will require further analysis.