Hikari Tsushin Q1 FY2027: Net income up 30% on higher financial income

Revenue for the first quarter of FY2027 (April to June 2026) was ¥192,563 million, up 15.2% from the same period a year earlier. Operating profit rose 6.1% to ¥29,181 million, and net profit attributable to owners of the parent climbed 30.1% to ¥36,656 million. The company achieved higher sales and higher profits, with net income boosted by an increase in financial income and improved equity-method investment results.

Gross margin was 48.3%, down from 52.1% a year earlier, largely due to higher customer acquisition costs to build future stock-based earnings. Recurring stock profits from telecommunications, beverage, and insurance operations continued to expand steadily as contract numbers grew.

Financial income rose to ¥24,187 million from ¥18,678 million, helped by the weaker yen. Equity-method investment gains improved to ¥6,503 million from ¥4,228 million. Pretax profit jumped 40.5% to ¥49,952 million, despite higher income tax expenses. The tailwind from financial income accelerated profit growth.

Hikari Tsushin operates seven reportable segments. In Q1 FY2027, the finance segment delivered the strongest profit growth, while electricity and gas and insurance saw revenue increase but profits decline on upfront investment.

Electricity & Gas: revenue rose 29.5% to ¥83,290 million, but operating profit fell 17.9% to ¥6,420 million. Customer contract growth and higher selling prices lifted sales, while planned spending on customer acquisition pressured profit. Operating margin narrowed to 7.7% from 12.2%.

Telecommunications: revenue increased 3.0% to ¥32,921 million, and operating profit rose 8.2% to ¥8,338 million, supported by growth in recurring stock profit from a larger contract base. Operating margin was 25.3%.

Beverage: revenue grew 5.1% to ¥21,765 million, and operating profit rose 5.1% to ¥2,743 million, as home-delivery contracts for natural mineral water expanded.

Insurance: revenue climbed 20.6% to ¥9,794 million, but operating profit declined 16.2% to ¥1,679 million, as higher customer acquisition costs outweighed sales growth.

Finance: revenue jumped 42.3% to ¥13,266 million, and operating profit surged 69.3% to ¥7,810 million, the largest profit contributor among all segments. Microfinance operations performed well, delivering a very high operating margin of 58.9%.

Solutions: revenue fell 9.2% to ¥6,156 million, and operating profit decreased 11.8% to ¥1,184 million.

Agency Sales: revenue declined 2.3% to ¥25,368 million, and operating profit fell 2.3% to ¥2,733 million, a relatively weak quarter.

Hikari Tsushin left its full-year consolidated forecasts unchanged from the May 13, 2026 announcement. The company projects revenue of ¥775,000 million (up 5.5% year on year), operating profit of ¥130,000 million (up 11.4%), and net profit attributable to owners of the parent of ¥120,000 million (down 20.5%). The Q1 progress rate was 24.8% for revenue and 22.4% for operating profit, a solid start, but net profit is expected to decline due to the reversal of one-off factors in the previous year.

For the full year, Hikari Tsushin sees double-digit operating profit growth from the accumulation of stock-based earnings, while net profit is projected to fall because last year's financial income and special gains will not repeat.

Total assets at the end of the first quarter stood at ¥2,881,583 million, up ¥27,716 million from the prior fiscal year-end, mainly due to an increase in financial assets including investment securities. Liabilities decreased ¥38,618 million to ¥1,597,598 million, while total equity rose ¥66,335 million to ¥1,283,985 million. The equity attributable to owners of the parent ratio improved to 43.5%.

Operating cash flow was negative ¥18,083 million, compared with positive ¥14,431 million a year earlier, mainly because income tax payments increased to ¥43,985 million. Investing cash flow was negative ¥90,753 million, reflecting continued purchases of investment securities. Financing cash flow was negative ¥1,679 million, including share buybacks.

On capital policy, the company issued two unsecured straight bonds in May 2026 (the 56th and 57th series, totaling ¥20,000 million) to raise long-term funds. It also repurchased ¥3,880 million of its own shares during the quarter. The planned annual dividend for FY2027 is ¥800 per share, up from ¥751 in the previous year, with ¥181 already paid at the end of Q1.

The main risks and challenges cited in the earnings report include:

• External environment risk: US trade policy, Middle East tensions, and financial market volatility could affect business and investment results.
• Currency and interest rate risk: Financial income is susceptible to yen and interest-rate conditions, and sharp swings could weigh on earnings.
• Customer acquisition competition: In electricity and gas and insurance, rising customer acquisition costs are pressuring profit, making cost-effectiveness management important.
• Investment securities price fluctuations: Financial assets account for nearly half of total assets, so market declines could trigger valuation losses.
• Accounting standard changes: IFRS 18 'Presentation and Disclosure in Financial Statements' will be mandatorily applied from FY2028, requiring adjustments to presentation and disclosure.