Cost growth outpacing revenue growth is the key issue for FY2027-H1 despite higher sales

Revenue in the first quarter of the fiscal year ending March 2027 was ¥15.904 billion, up 8.8% year on year. Sales increased in both existing and new business areas, securing higher revenue, while operating profit fell 9.4% to ¥2.965 billion and the operating margin declined 3.8 percentage points from 22.4% a year earlier to 18.6%. Ordinary profit was ¥3.281 billion and net income attributable to owners of the parent was ¥2.309 billion, keeping both figures in positive territory. However, at the operating-profit level, revenue growth has not translated into profit growth.

In its explanation of the results, the company cited accelerated R&D activities related to new product development and the global optimization of in-house products, higher personnel expenses resulting from increased salary levels, and higher outsourced service expenses associated with exploring new businesses as factors behind the decline in operating profit. These are investments aimed at future growth, but as of the first quarter, the increase in revenue was not sufficient to absorb the increase in costs. In the next results announcement, it will be important to check at least the year-on-year changes in, or execution rates against the full-year plan for, R&D expenses, personnel expenses, selling-related expenses and outsourced service expenses.

The full-year forecasts remain unchanged at revenue of ¥63.2 billion and operating profit of ¥10.7 billion. First-quarter progress rates were 25.2% for revenue and 27.7% for operating profit, with operating profit slightly ahead of the simple quarterly elapsed-time ratio. However, the full-year operating profit forecast is 15.1% below the previous fiscal year's actual result of ¥12.606 billion, leaving the forecast full-year operating margin at approximately 16.9%. Although the first-quarter operating margin of 18.6% exceeded the full-year forecast, it deteriorated substantially year on year. The key issue is whether this gap narrows in the first half or the investment burden continues.

For the cumulative second quarter, simply dividing the full-year forecast in half gives revenue of ¥31.6 billion and operating profit of ¥5.350 billion as reference points. Because of seasonality, performance cannot be assessed mechanically against these figures, but the key question is whether revenue growth and a recovery in the operating margin can be confirmed at the same time. In addition, the next results announcement will need to provide a more specific explanation of whether R&D investment is translating into higher new-product sales volumes, more adopting facilities and a higher in-house product ratio, and whether the increases in salaries and outsourcing costs are temporary or structural.