Can the substantial Q1 lead be maintained through FY2027-H1?

FY2027-Q1 consolidated revenue was ¥2,530 million, up 42.3% year on year, while operating profit was ¥253 million, up 126.1%. Ordinary profit was ¥289 million, and net profit attributable to owners of the parent was ¥232 million, with both turning profitable from losses in the year-earlier quarter. The operating margin also rose 3.7 percentage points, from 6.3% in the year-earlier quarter to 10.0%. The important point is that profit growth outpaced revenue growth, rather than the result being driven solely by higher sales.

The full-year forecast is revenue of ¥7,652 million, operating profit of ¥317 million, ordinary profit of ¥232 million and net profit of ¥200 million. The company did not revise its forecast as of Q1. On a simple calculation, the remaining revenue required to meet the full-year forecast is only ¥5,122 million, and the remaining operating profit is ¥64 million. However, these figures are obtained by mechanically subtracting Q1 results and do not represent a guarantee by the company of H1 or second-half profit levels. In H1, Q2 standalone profit needs to be assessed separately from whether Q1’s high profitability is continuing.

Ordinary profit exceeded the full-year forecast of ¥232 million by ¥57 million in Q1 alone, while the company said that foreign exchange gains from translating foreign-currency receivables from overseas subsidiaries contributed to the result. The amount of foreign exchange gains and the bridge from operating profit to ordinary profit have not been sufficiently broken down in the Q1 financial figures provided. In FY2026, foreign exchange gains also had a significant impact on ordinary profit of ¥533.9 million, so in H1 it will be important to assess operating profit and ordinary profit separately and confirm progress in the underlying business excluding foreign exchange effects.

Q1 orders received totaled ¥2,485.5 million and the order backlog was ¥1,113.0 million, up 42.2% and 16.0% year on year, respectively. Going forward, the focus will be on whether the company can specifically disclose the proportion of these orders converted into Q2 revenue, the breakdown of orders outside the watch-related business, and the effects of the weaker yen, raw material prices and subcontracting costs. In addition, because no quarterly cash flow statement was prepared in Q1 and operating cash flow was not disclosed, H1 should also test the conversion of profit into cash.