1Q returned to profitability, but profit progress toward the FY2027/3 full-year target remains low, requiring acceleration in H1

Revenue in 1Q of FY2027/3 was ¥17,562 million, up 9.1% from ¥16,100 million in the same period of the previous fiscal year. Operating income also turned from a loss of ¥172 million in the same period of the previous fiscal year to a profit of ¥63 million. The operating margin improved by approximately 1.43 percentage points, from approximately negative 1.07% to approximately 0.36%. However, ordinary income was a loss of ¥19 million, and profit attributable to owners of the parent was a loss of ¥236 million, indicating that the return to operating profitability has not yet flowed through to bottom-line profit.

The company's full-year forecasts for FY2027/3 are revenue of ¥72,000 million, operating profit of ¥1,500 million, ordinary profit of ¥1,000 million, and profit attributable to owners of the parent of ¥200 million. Progress in 1Q was 24.4% for revenue and 4.2% for operating profit, while net profit was negative ¥236 million. Assuming, simply, that half of the full-year forecast is earned in H1, H1 operating profit of ¥750 million and H1 net profit of ¥100 million would provide reference points. In practice, however, seasonality arising from automotive-parts production plans and new-vehicle launches means that the key issue is whether profit accelerates in 2Q, rather than a simple comparison.

To achieve the full-year operating profit forecast after 1Q, the company must accumulate ¥1,437 million over the remaining 9 months. Revenue also needs to reach ¥54,438 million over the remainder of the year, so the increase in 1Q revenue alone is insufficient to determine whether the full-year plan will be achieved. In FY2026/3, revenue was ¥73,202 million and operating profit was ¥1,591 million, meaning that the FY2027/3 forecasts call for revenue to decline 1.6% and operating profit to decline 5.8% year on year. At the next earnings announcement, a key point will be whether the 1Q revenue increase reflects a temporary recovery in customer production or an improvement exceeding the demand level incorporated into the full-year plan.

The company cites higher sales of automotive-related equipment in Japan, a recovery in sales in China, and increases in customers' production and sales volumes as factors behind the 1Q revenue increase. It also explains that higher raw-material and purchase prices, together with lower sales in Thailand, held down profit. In the next FY2027/3 H1 results, we will need to assess whether the company can provide at least amount-based additional disclosure on standalone 2Q operating profit, cumulative H1 progress against the full-year forecast, the pass-through of higher raw-material prices, and the extent of recovery at overseas locations, including Thailand.