Q1 showed earnings ahead of schedule; H1 will test sustainability

Revenue in Q1 of the fiscal year ending March 2027 was ¥13,822 million, up 9.7% year on year, while operating profit was ¥731 million, up 153.8%. Against full-year forecasts of ¥58,000 million in revenue and ¥2,000 million in operating profit, revenue was 23.8% of the forecast and operating profit was 36.6%. Q1 represents one-quarter of the year. Revenue was broadly in line with the passage of time, while operating profit was ahead of revenue.

The earnings lead was also evident in ordinary profit and net profit, not only operating profit. Ordinary profit of ¥650 million represented 39.4% of the ¥1,650 million full-year forecast, while quarterly net profit attributable to owners of the parent of ¥442 million represented 40.2% of the ¥1,100 million forecast. The Q1 operating margin was approximately 5.3%, up approximately 3.0 percentage points from approximately 2.3% in the same quarter of the previous year and above FY2026's full-year result of 3.6%. However, whether the high quarterly margin can be maintained through the second half cannot be determined without reviewing trends in housing sales volume, prices and inventory turnover.

Simply subtracting Q1 results from the full-year forecast implies that the remaining three quarters would need to generate ¥44,178 million in revenue and ¥1,269 million in operating profit. This is not a revised forecast published by the company, but a mechanical residual based on the current full-year forecast. Using achievement of 50% of the full-year forecast by H1 as an analytical benchmark, ¥29,000 million in revenue and ¥1,000 million in operating profit would be reference thresholds for the cumulative H1 results. Calculated from Q1 results, Q2 alone would need to generate ¥15,178 million in revenue and ¥269 million in operating profit. However, these are not company targets adjusted for seasonality, so failure to reach them alone should not be taken to mean that the full-year forecast will be missed.

As of Q1, the full-year earnings forecast had not been revised. The company attributed the earnings growth primarily to increased new-build housing sales, inventory management and appropriate sales pricing. In the H1 results, it will be necessary to determine how much of the ¥731 million in operating profit came from higher sales volume, whether the margin improvement continued in Q2, and whether lower earnings from the building materials sales business put pressure on overall profit. In particular, whether the cumulative H1 operating margin can be maintained at 3.6% and whether the remaining scope to achieve full-year operating profit of ¥2,000 million can be explained will be key measures of forecast reliability.