1Q profit progress is ahead of plan; FY2027-H1 will show whether revenue catches up and high margins are sustained

For the first quarter of the fiscal year ending March 2027, revenue was ¥1,194.2 billion, business profit was ¥159.6 billion and profit attributable to owners of the parent was ¥134.7 billion. Year on year, revenue increased 15.5%, business profit rose 65.1% and profit attributable to the parent increased 97.4%, securing profit growth above the rate of revenue growth.

Calculated against the full-year forecasts, 1Q progress was 22.1% for revenue, based on ¥1,194.2 billion divided by ¥5.4 trillion, and 29.6% for business profit, based on ¥159.6 billion divided by ¥540.0 billion. The 1Q business profit margin was approximately 13.4%, up approximately 4.0 percentage points from approximately 9.3% a year earlier. Whether first-half revenue approaches ¥2.7 trillion and business profit approaches ¥270.0 billion, and whether the margin remains in the 13% range, will indicate whether 1Q's high profitability was temporary.

The earnings presentation attributes ¥55.0 billion of the increase in profit to factors including higher revenue and margin improvement, ¥5.0 billion to foreign-exchange effects and ¥9.0 billion to asset management. Wage increases and related factors reduced profit by ¥6.0 billion, while the deduction for ML reduced profit by ¥7.5 billion. In the first-half results, it will be necessary to examine in greater detail whether the margin improvement shown in 1Q came from better profitability across the segments, or whether foreign-exchange effects and temporary revenue made a significant contribution.

The full-year forecasts of ¥5.4 trillion in revenue, ¥540.0 billion in business profit, ¥530.0 billion in profit before tax and ¥380.0 billion in profit attributable to the parent had not changed as of 1Q. However, the full-year order forecast was revised from ¥6.8 trillion to ¥7.0 trillion, and the free cash flow forecast was raised from ¥300.0 billion to ¥600.0 billion, so the overall outlook was not left entirely unchanged. The first-half results should clarify whether the assumptions behind raising the order and cash forecasts while maintaining the profit forecasts remain reasonable.

The earnings summary alone does not provide sufficient detail on the contribution of individual segments to revenue growth or margin improvement, the revenue and profit levels required in the first half, or management's own assessment of progress against the plan. Accordingly, the next results should be assessed not only on cumulative 2Q performance, but also on how much visibility there is on securing the remaining ¥4,205.8 billion of revenue and ¥380.4 billion of business profit required to meet the full-year forecasts, including seasonality and the conversion of the order backlog.