Operating profit leads in Q1; testing the sustainability of earnings growth in H1

Operating revenue for the first quarter of the fiscal year ending March 2027 was ¥772.7 billion and operating profit was ¥125.5 billion, up 8.0% and 9.4% year on year, respectively. The full-year forecasts are ¥3.295 trillion for operating revenue and ¥429.0 billion for operating profit, resulting in Q1 progress rates of approximately 23.5% for revenue and 29.3% for operating profit. Compared with a simple even quarterly allocation, profit is progressing ahead of revenue.

However, railway companies' results are seasonal, so the simple 50% first-half benchmark should not be treated as a mechanical target. In FY2027-H1, it will be necessary to check whether operating revenue reaches approximately ¥1.6475 trillion and operating profit approximately ¥214.5 billion as one reference point, while also examining management's own assessment of the full-year plan, the extent to which fare revision benefits have materialized, and when higher expenses emerge. The company did not revise its full-year earnings or dividend forecasts in the Q1 results, making it important to assess whether the assumptions underlying the plan change in H1.

By segment, Q1 operating profit was ¥83.8 billion in transportation, ¥15.3 billion in distribution and services, ¥19.0 billion in real estate and hotels, and ¥6.5 billion in other businesses. Transportation, distribution and services, and other businesses exceeded the previous year, while real estate and hotels declined from ¥28.4 billion in the same period of the previous year. Accordingly, the H1 results should determine not only the progress of consolidated operating profit but also whether higher profit in transportation can continue to offset lower profit in real estate and hotels.

Although operating profit increased in Q1, quarterly net profit attributable to owners of the parent fell 13.6% year on year to ¥68.0 billion. In the H1 results, it will be necessary to check how much the increase in operating profit flowed through to ordinary profit and net profit, whether earnings power excluding the impact of extraordinary gains and losses such as gains on sales of investment securities has been maintained, and whether progress toward the full-year net profit forecast of ¥329.5 billion is excessively dependent on temporary factors.