Tsugami Q1 FY2027: Revenue Jumps 35% to Record High on China Demand

Tsugami’s Q1 FY2027 (April–June 2026) saw record-breaking results across all profit lines. Revenue climbed 35.3% year-on-year to ¥43,006 million, operating profit surged 55.2% to ¥13,466 million, and net profit attributable to owners of the parent jumped 55.0% to ¥6,527 million. These figures all represent all-time quarterly highs. Gross margin improved to 38.7% (from 36.9%), while SG&A expenses fell to 8.9% of revenue (from 10.8%), lifting the operating margin to 31.3% (up from 27.3%).

Demand was led by China, where automatic lathe shipments remained strong. Overseas revenue reached ¥41,510 million (+36.9%), accounting for 96.5% of total revenue. China alone contributed ¥35,276 million (+37.5%), representing 82% of the total, driven by capital spending in EVs and smartphones. India grew 38.9% to ¥1,595 million, while South Korea and Europe also posted gains. The U.S., however, fell 40.4% to ¥742 million, though its impact was limited.

China dominated with revenue of ¥35,517 million (+41.4%), making up 82.6% of total revenue, and segment profit of ¥11,553 million (+50.1%). The operating margin remained high at 32.5%, supported by consistent demand for automatic lathes from local EV and electronics makers. Japan, while reporting external sales of ¥5,139 million (+32.4%), saw total revenue including intersegment transactions of ¥8,737 million (+32.4%), with segment profit surging 137.5% to ¥1,316 million, boosted by component supplies to China and domestic grinding and special-purpose machines. India turned profitable at ¥77 million (against a ¥45 million loss a year earlier) on revenue of ¥1,595 million (+38.9%), as automatic lathe adoption expanded. South Korea posted higher revenue of ¥452 million (+13.8%) but profit fell 65.9% to ¥7 million amid intensifying competition. The Others segment doubled revenue to ¥302 million (+200.5%) and broke even.

Total assets at quarter-end stood at ¥164,397 million (up ¥10,341 million from the previous fiscal year-end). Cash and cash equivalents were ¥44,695 million (up ¥2,515 million), and trade receivables rose to ¥56,135 million on higher sales. Interest-bearing debt remained low at ¥8,933 million, while the equity ratio attributable to owners of the parent improved to 53.0% (from 52.0%).

Operating cash flow generated ¥4,808 million, helped by a ¥1,992 million increase in contract liabilities (advance payments), although partly offset by working capital needs. Investing activities used ¥501 million for capital expenditures, and financing activities consumed ¥2,934 million, including ¥2,282 million in dividends and ¥299 million in share buybacks.

Shareholder returns are robust: Tsugami plans an annual dividend of ¥98 per share, up ¥13 from the previous year, with a payout ratio of roughly 26.5%. The company continues to repurchase shares, emphasizing capital efficiency and shareholder value.

While near-term performance is strong, management kept full-year guidance unchanged, citing market uncertainty. Key risks include:

• High dependence on China: About 85% of overseas sales come from China, making the company vulnerable to an economic slowdown or policy shifts.
• Geopolitical risks and supply chain disruptions: Renewed U.S.-China trade tensions or instability over Taiwan could chill machine-tool demand.
• Forex volatility: A stronger yen would erode export competitiveness and the value of overseas earnings.
• Intensifying competition: Price pressures in South Korea, India, and other markets could compress margins.
• Shifts in capital spending: Reliance on EV and smartphone demand means that changes in technology cycles could impact results.

However, first-quarter progress against the full-year forecast was 29.7% for revenue and 36.9% for operating profit, leaving clear room for upside.

Tsugami left its FY2027 forecast unchanged from the initial May 2026 guidance: revenue of ¥145,000 million (+12.3% YoY), operating profit of ¥36,500 million (+1.1%), and net profit of ¥17,000 million (+1.5%). The first-half plan calls for revenue of ¥75,000 million, operating profit of ¥19,500 million, and net profit of ¥9,000 million.

Management remains cautious amid economic uncertainties, but with Q1 alone already achieving 36.9% of the full-year operating profit target, an upward revision is widely expected. Sustained China demand could trigger a guidance hike as early as the first-half results. The annual dividend forecast is held at ¥98, though a larger payout may materialize if earnings exceed the conservative estimates.