Summary
In 1Q, cardiovascular consumables drove revenue up +8.5%. However, management attributed the profit decline mainly to large deals slipping into 2Q or later, and left its 1H plan (recurring profit of JPY 1,730M) unchanged. By our estimate, 2Q standalone recurring profit must exceed the prior-year level by just over 40% for the 1H plan to be met. The key focus of 2Q results is therefore how much of the deferred medical equipment business was booked. 2Q is also the first full quarter after the medical fee revision that took effect in June 2026. We will track consumables volume growth alongside gross profit margin trends to judge whether the 1Q profit decline was a one-off timing issue.
Key Points for Next Quarter
| Key Points & Focus | Implications |
|---|---|
1H Plan AchievementCumulative 2Q recurring profit as a percentage of the 1H plan | 1Q recurring profit of JPY 613M represents 35.4% of the 1H plan of JPY 1,730M (our estimate). Meeting the plan requires JPY 1,117M in 2Q standalone, +43.9% vs. 2Q standalone of JPY 776M a year earlier (our estimate). |
Recovery of Deferred DealsMedical equipment-related revenue and booking of large deals | 1Q medical equipment-related revenue was JPY 1,625M (-17.9%). If the deals are booked in 2Q, it would confirm that the 1Q profit decline was a timing issue. |
Consumables Volume GrowthYoY revenue by product category | 1Q revenue excluding medical equipment rose +11.1% (our estimate). Whether this growth holds after the medical fee revision underpins the full-year revenue plan of JPY 100,000M. |
Gross Profit MarginYoY trend in gross profit margin | 1Q gross profit margin was 11.0%, below 11.7% a year earlier (our estimate). We will check whether the gap vs. 11.8% in the prior-year 1H narrows on a cumulative 2Q basis. |
SG&A AbsorptionSG&A growth rate and operating income margin | 1Q SG&A rose +9.2%, outpacing revenue growth of +8.5%. 1Q operating income margin was only 2.5%, vs. 3.4% implied by the 1H plan (our estimate). |
Key Issues from Previous Results (FY3/27 1Q)
FY3/27 1Q delivered higher revenue but lower profit. Revenue reached JPY 23,970M (+8.5%), while recurring profit fell to JPY 613M (-13.4%). Management attributed the decline to some large deals slipping into 2Q or later, and kept both 1H and full-year guidance unchanged. The earnings release made no reference to the medium-term management plan. Whether the 1H plan is achieved will therefore be the key yardstick for 2Q results.
1. 2Q Standalone Profit Needed to Meet the 1H Plan
- Previous Quarter: 1Q recurring profit of JPY 613M represents 35.4% of the 1H plan of JPY 1,730M (our estimate). A year earlier, 1Q recurring profit accounted for 47.7% of the 1H actual. This year's plan is therefore more heavily weighted toward 2Q (our estimate).
- Points to Verify: Meeting the 1H plan requires 2Q standalone revenue of JPY 25,930M and recurring profit of JPY 1,117M (our estimate). In the full-year plan, net income grows +4.3%, below recurring profit growth of +10.4%. We will also review the breakdown of extraordinary gains/losses and income taxes.
- Key Metrics: Cumulative 2Q revenue, operating income and recurring profit vs. the 1H plan (JPY 49,900M/1,710M/1,730M), and any revision to guidance.
2. Timing of Large Medical Equipment Deals
- Previous Quarter: Medical equipment-related revenue was JPY 1,625M (-17.9%). Its share of revenue fell from 9.0% to 6.8%.
- Points to Verify: Management commentary should clarify whether the deferred deals were booked in 2Q or slipped further into 3Q or later. Merchandise inventory at end-1Q stood at JPY 4,464M, up JPY 542M from the prior fiscal year-end. Whether this is linked to the deferred deals is a point to confirm (hypothesis).
- Key Metrics: YoY change in cumulative 2Q medical equipment-related revenue, and merchandise inventory at end-2Q.
3. Sustainability of Cardiovascular Consumables Volume Growth
- Previous Quarter: In 1Q, Cardiac Rhythm Management rose to JPY 7,012M (+14.4%), and Peripheral Vascular Disease & Neurosurgery rose to JPY 2,644M (+18.8%). Ischemic Heart Disease (+6.0%), Cardiovascular Surgery (+8.6%) and Other (+10.5%) also grew.
- Points to Verify: 2Q is the first full quarter after the medical fee revision effective June 2026. We will check whether sales volumes of EP ablation-related products, TAVI and similar items keep growing.
- Key Metrics: Cumulative 2Q YoY revenue by product category, and revenue growth excluding medical equipment (1Q: +11.1%, our estimate).
4. Gross Profit Margin Trend
- Previous Quarter: 1Q gross profit margin was 11.0%, down 0.6pt from 11.7% a year earlier (our estimate). The decline came even as the share of medical equipment, which typically has a different margin structure, fell.
- Points to Verify: The earnings release did not explain the decline. We would like management to address the impact of product mix, pricing and the medical fee revision.
- Key Metrics: Cumulative 2Q gross profit margin (prior year: 11.8%) and 2Q standalone gross profit margin (prior year: 11.8%, our estimate).
5. Absorbing SG&A and Amortization Costs
- Previous Quarter: 1Q SG&A rose to JPY 2,047M (+9.2%), outpacing revenue growth. Operating income margin fell to 2.5% (prior year: 3.2%) (our estimate). Goodwill amortization rose to JPY 22.6M (prior year: JPY 8.979M), and depreciation rose to JPY 85.212M (prior year: JPY 62.179M).
- Points to Verify: We will assess whether 2Q revenue growth can absorb the higher SG&A and amortization costs and restore operating income margin to the level implied by the 1H plan.
- Key Metrics: YoY change in cumulative 2Q SG&A (prior year: JPY 3,673M), and cumulative 2Q operating income margin (1H plan: 3.4%, our estimate).
Key Timely Disclosures This Period
Previous Quarter Results (FY3/27 1Q Actual)
The company operates in a single segment, medical equipment sales. Its core business is consumables such as catheters for the cardiovascular field, including ischemic heart disease and cardiac rhythm management. It also sells medical equipment to radiology departments and operating rooms. The company deepens relationships with existing customers and wins new ones through high value-added proposals, such as supporting hospitals in solving operational issues and promoting appropriate product use. The FY3/27 plan calls for revenue of JPY 100,000M (+10.6%) and recurring profit of JPY 3,380M (+10.4%). 1Q came in with higher revenue but lower profit.
| Item | Amount | YoY | vs. Company Plan | Remarks |
|---|---|---|---|---|
| Revenue | JPY 23,970M | +8.5% | - | Cardiac Rhythm Management +14.4%; Peripheral Vascular Disease & Neurosurgery +18.8%. 48.0% of the 1H plan (our estimate) |
| Operating Income | JPY 596M | -15.0% | - | Gross profit margin 11.0% (prior year: 11.7%); SG&A +9.2% |
| Recurring Profit | JPY 613M | -13.4% | - | 35.4% of the 1H plan (our estimate) |
| Quarterly Net Income Attributable to Owners of Parent Company | JPY 402M | -16.3% | - | Extraordinary gains consisted of a JPY 2M gain on sale of fixed assets; no extraordinary losses |
| EPS | JPY 14.64 | -13.8% | - | Average shares outstanding of 27,498,171 (prior year: 28,320,694) |
Guidance Achievement Rate vs. Full-Year Plan (Recurring Profit Basis): 18.1% (prior year: 23.1%). The prior-year figure is calculated against the full-year actual of JPY 3,060M (our estimate).
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