Focus is on assessing the plan for FY2027, when revenue is expected to rise but operating profit to decline

In FY2026, revenue was ¥37,815 million, operating profit was ¥1,928 million, ordinary profit was ¥1,984 million and net income attributable to owners of the parent was ¥1,258 million, while the operating margin rose to 5.1%. By contrast, the company forecasts revenue of ¥39,300 million, operating profit of ¥1,614 million, ordinary profit of ¥2,217 million and net income of ¥1,604 million for FY2027. Revenue is expected to rise 3.9% year on year and ordinary profit 11.7%, while operating profit is expected to decline 16.3% and net income to rise 27.5%, creating a divergence across profit levels.

On an operating-profit basis, the plan calls for revenue to increase by ¥1,485 million but operating profit to decline by ¥314 million. The company cites substantial spending on the recruitment and training of engineers, as well as the reversal of the ¥99.598 million decline in retirement benefit expenses in the previous fiscal year, which resulted from actuarial differences, as factors behind the decline. Accordingly, in FY2027-Q1 it will be necessary to compare not only the scale of revenue but also selling, general and administrative expenses, recruitment costs, training costs and retirement benefit expenses with the year-earlier period.

Meanwhile, the forecasts for higher ordinary profit of ¥2,217 million and net income of ¥1,604 million may include non-operating and extraordinary factors, so it would be premature to regard the decline in operating profit as an outright deterioration in earnings power. In FY2027-Q1, the bridge from operating profit to ordinary profit, profit before tax and net income should be reviewed to determine how much reflects equity-method investment income and one-off gains. As detailed full-year forecasts for the company and for each segment have not been disclosed, the explanation of the cost structure and earnings quality in Q1 will be important.