Revenue growth is not flowing through to operating profit, making margin recovery in the first half essential

Revenue in the first quarter of the fiscal year ending March 2027 was ¥11,497 million, up ¥1,403 million, or 13.9%, from ¥10,094 million in the same period of the previous year. Operating profit, however, was only ¥420 million, down ¥229 million, or 35.2%, from ¥649 million in the same period. The operating margin on revenue fell approximately 2.8 percentage points, from approximately 6.4% in the same period of the previous year to approximately 3.7%, making the failure of revenue growth to flow through to profit the first point to confirm.

The company's full-year plan for the fiscal year ending March 2027 calls for revenue of ¥47,000 million and operating profit of ¥1,800 million, implying an operating margin of approximately 3.8%. First-quarter progress was 24.5% for revenue and 23.3% for operating profit, not materially different from the 25% benchmark based on a calendar-year allocation. However, simply allocating half of the full-year plan to the first half without factoring in seasonality gives revenue of ¥23,500 million and operating profit of ¥900 million as one benchmark. After deducting first-quarter results, the second quarter alone would need to generate revenue of ¥12,003 million and operating profit of ¥480 million.

First-quarter revenue growth was driven by module products for mobility applications, expanded sales in new fields, and demand for data centers associated with the spread of AI. Meanwhile, profit in the Electronic Components segment was ¥728 million, down 22.9% year on year, linking the decline in company-wide profit to deteriorating profitability in the core business. In the first-half results, it will be necessary to confirm not only the rate of revenue growth but also whether the company discloses specific figures for the Electronic Components margin, the impact of higher material costs, and the amount recovered through selling-price negotiations with customers.

If the full-year plan is maintained, the remaining three quarters after the first quarter must generate revenue of ¥35,503 million and operating profit of ¥1,380 million. This is approximately 3.3 times first-quarter operating profit of ¥420 million, making it important to determine whether the operating margin will recover to at least around the full-year plan's 3.8% in the first half, or whether the plan assumes a substantial improvement in profitability in the second half. The company has referred to improvements in production efficiency and selling-price negotiations, but as of the first quarter it has not disclosed the profit contribution of each measure.