FY2027-Q1: Operating profit is on plan, but the quality of net income and cash generation is the focus

Revenue for Q1 of the fiscal year ending March 2027 was ¥372.946 billion, operating profit was ¥27.876 billion, and ordinary profit was ¥35.274 billion. Year on year, these increased 1.9%, 21.3%, and 25.0%, respectively. The full-year forecasts are revenue of ¥1.53 trillion, operating profit of ¥108.0 billion, ordinary profit of ¥124.0 billion, and net income attributable to owners of the parent of ¥95.0 billion. The Q1 progress rates are therefore 24.4% for revenue, 25.8% for operating profit, 28.4% for ordinary profit, and 24.8% for net income. Revenue and operating profit are close to the simple 25% quarterly run rate.

However, net income was ¥23.576 billion, down 48.0% year on year. Special gains in Q1 comprised a ¥4.447 billion gain on the sale of non-current assets and a ¥2 million gain on the sale of investment securities. Special losses comprised a ¥485 million loss on the disposal or sale of non-current assets, ¥318 million in special retirement payments, and ¥247 million in other losses. Because the year-on-year difference has not been sufficiently broken down by item, including gains on the sale of investment securities, in the Q1 disclosure, the next results announcement should confirm normalized net income excluding gains on the sale of investment securities, gains on the sale of non-current assets, and other special items.

For the fiscal year ended March 2026, net income attributable to owners of the parent was ¥103.959 billion, compared with operating profit of ¥101.039 billion. For the fiscal year ending March 2027, operating profit is forecast at ¥108.0 billion, while the net income forecast is ¥95.0 billion, implying simultaneous operating profit growth and an expected decline in net income. At the interim stage, the focus will be not only on whether cumulative operating profit progress approaches 50%, but also on whether net income is improving its probability of achieving the full-year forecast without depending on special gains.

Cash flow also requires attention. Cash flow from operating activities was ¥40.367 billion in the fiscal year ended March 2026, down sharply from ¥132.729 billion the previous year. Cash flow from investing activities was an outflow of ¥73.641 billion, while cash flow from financing activities was an inflow of ¥23.331 billion. The company did not prepare a quarterly consolidated cash flow statement for Q1, and cash flow from operating activities, cash flow from investing activities, and the cash balance were not disclosed. At the interim stage, the focus will be on whether the increase in operating profit is absorbing working capital and investment requirements, and whether it can coexist with share repurchases and capital investment.