Strong start in the first quarter, but second-half cost increases are key to achieving the full-year targets

Revenue for the first quarter of the fiscal year ending March 2027 was ¥12,764 million, up 9.3% year on year. Operating profit was ¥1,945 million, up 31.5%, ordinary profit was ¥2,006 million, up 32.6%, and net profit attributable to owners of the parent was ¥1,379 million, up 33.5%. First-quarter revenue of ¥12,764 million represented 26.3% of the full-year forecast of ¥48,530 million, while operating profit of ¥1,945 million represented 31.2% of the full-year forecast of ¥6,232 million, indicating that profit progress is outpacing revenue progress. The operating margin calculated from year-earlier revenue of ¥11,677 million and operating profit of ¥1,479 million was approximately 12.7%, compared with approximately 15.2% in the current quarter.

The company cited price revisions for some products, as well as demand related to self-defense amid heightened risks in the Middle East, as factors behind the revenue increase. On the profit side, it explained that the effect of higher revenue outweighed increases in freight, depreciation and raw material unit costs. However, the full-year forecasts are revenue of ¥48,530 million, operating profit of ¥6,232 million, ordinary profit of ¥6,398 million and net profit of ¥4,342 million. Operating profit is planned to decline 7.3% and net profit 7.5% from the previous fiscal year. In addition to the strong first quarter, attention should be paid to the fact that the forecasts incorporate the assumption that costs, including raw materials and logistics, will rise further in the second half.

The first-quarter earnings forecast revision is marked as “Yes,” but the financial data provided do not disclose the pre-revision revenue and profit forecasts or the revision amounts. It is therefore impossible to determine whether the current operating profit forecast of ¥6,232 million exceeds market expectations, and the next results announcement will need to clarify whether the full-year forecasts were maintained and the reasons for any revisions. In addition, no cash flow statement was prepared for the first quarter, so it has not been confirmed whether the strong profit performance is translating into cash generation, including working capital and capital investment.

At the next interim results announcement, the key checks will be whether year-on-year revenue growth continues, whether the operating margin remains above the year-earlier level, and whether the revenue effect of price revisions can absorb higher raw material and logistics costs. In particular, whether operating profit exceeds the mechanically calculated halfway mark of ¥3,116 million against the full-year forecast, and whether operating cash flow and capital investment are disclosed together, will be concrete checkpoints for assessing the reliability of the full-year forecasts.