Will Q1’s operating profit growth despite lower revenue continue through FY2027-H1?

FY2027-Q1 revenue was ¥98,130 million, down 15.7% from ¥116,340 million in the same period of the previous year. Operating profit, however, rose 84.9% to ¥4,422 million from ¥2,391 million, so revenue and operating profit moved in opposite directions. The operating margin was approximately 4.5% in the current period versus approximately 2.1% in the same period of the previous year, an improvement of approximately 2.4 percentage points.

By market, sales to the automotive-related sector increased, but sales to the amusement-related and mobile telecommunications-related sectors declined. Accordingly, the improvement in Q1 profit should be viewed as multifaceted, reflecting not only volume growth but also product mix, costs and foreign exchange effects. In the next H1 results, the key questions will be how much of the operating margin can be maintained while revenue remains below the previous year’s level, and whether growth in automotive-related sales is offsetting the decline in amusement-related sales.

The company’s FY2027 full-year forecasts are revenue of ¥436,000 million, operating profit of ¥18,000 million and net income attributable to owners of the parent of ¥12,500 million. Operating profit is expected to decline 6.4% from the previous fiscal year. Q1 operating profit represented 24.6% of the full-year forecast, close to the simple 25% quarterly run-rate. In H1, the main issue will be whether the Q1 margin improvement is sustained as a fundamental improvement supporting cumulative H1 operating profit and the likelihood of achieving the full-year forecast, rather than being a temporary rebound.