First-quarter operating profit exceeded the full-year forecast, but seasonal factors need to be assessed for sales progress

Revenue for the first quarter of the fiscal year ending March 2027 was ¥1,075.9 million, up 41.6% year on year. Operating profit was ¥31.5 million, up from ¥5.9 million in the same quarter of the previous year, an increase of 435.1%. Ordinary profit was ¥49.6 million, and net profit attributable to owners of the parent was ¥27.2 million, turning profitable from an ordinary loss and net loss in the same quarter of the previous year.

The full-year forecasts remain ¥5,300 million in revenue, ¥10 million in operating profit, ¥10 million in ordinary profit and ¥1,000 million in net profit, with no revisions announced as of the earnings release. First-quarter revenue progress was 20.3% of the full-year forecast, approximately 4.7 percentage points below the 25% implied by an even quarterly distribution. Operating profit, by contrast, had reached 315% of the full-year forecast, making it appear significantly ahead of plan based on operating profit alone. However, railway rolling-stock manufacturers can experience substantial quarter-to-quarter fluctuations depending on the timing of project revenue recognition and factory utilization.

The company cited electric trains for West Japan Railway Company, electric trains for Kintetsu Railway, trains for the Cairo Metro and LRV refurbishment work for the Los Angeles County Metropolitan Transportation Authority as factors behind the increases in revenue and profit. However, revenue, gross profit, progress rates and scheduled future revenue recognition have not been disclosed for each project. It is therefore not currently possible to determine whether the first-quarter operating profit of ¥31.5 million resulted from temporary project concentration or structural improvements in manufacturing efficiency and project profitability.

At the next first-half results announcement, we will look for revenue to reach at least ¥2,650 million, the simple benchmark for full-year progress, and for operating profit to maintain the first-quarter level of ¥31.5 million. In addition, whether cumulative first-half net profit has progressed to around ¥500 million, the reasons for maintaining the full-year forecasts, and whether the assumptions for second-half project revenue recognition and profitability are explained in specific terms will be key to assessing the reliability of the earnings forecasts.