Q1's sharp profit growth appears to bring forward the full-year plan, but progress excluding one-off gains is the focus

FY2027-Q1 revenue was ¥238,847 million, up 17.5% year on year, operating profit was ¥11,696 million, up 96.0%, and quarterly profit attributable to owners of the parent was ¥9,478 million, up 159.5%. The full-year forecasts are ¥24,500 million for operating profit and ¥16,500 million for profit attributable to owners of the parent, putting simple progress rates at 47.7% and 57.4%, respectively. However, no full-year revenue forecast has been disclosed, so progress based on revenue cannot be calculated.

The factors behind the profit growth include one-off gains from the sale of CS assets in the Car Life business and an affiliate in the Industrial Business. Although the company cites these sales as profit-growth factors, it has not disclosed the amount of the gains, their comparative impact against the same period of the previous year, or operating profit excluding the gains. Accordingly, Q1 operating profit of ¥11,696 million cannot be treated as the full-year underlying earnings capacity. In FY2026, operating profit was ¥24,146 million and profit attributable to owners of the parent was ¥16,058 million, down 10.2% and 6.1%, respectively, from the previous year. As a result, the increase projected for FY2027 is only 1.5% for operating profit and 2.8% for net profit.

In FY2027-H1, the first point to confirm is whether operating profit of ¥12,250 million and profit attributable to owners of the parent of ¥8,250 million exceed 50% of the full-year forecasts. However, this test alone could misstate the contribution from one-off gains. It will be important to determine whether first-half cumulative profit excluding gains on sales exceeds the same period of the previous year, and whether profit excluding gains on sales is maintained in the Car Life, Industrial Business and Home Life businesses.

On the cash-flow side, Q1 cash flow from operating activities was ¥4,069 million, down from ¥10,205 million in the same period of the previous year. Despite a substantial increase in profit, operating cash flow was weak, so it is necessary to separate non-cash, one-off factors such as gains on sales from the impact of working capital, including inventories and receivables. In the H1 results, the focus will be on the amounts attributable to each profit factor, the reversal of gains on sales and the recovery of operating cash flow.