SEED Co., Ltd. (7743) Q1 FY2027 Earnings Deep Dive: A Growth Roadmap Driven by Value-Added Products and Optimized Production

In the first quarter (Q1) of the fiscal year ending March 31, 2027, SEED Co., Ltd. maintained a trend of increased revenue and profit compared to the same period last year , supported by the shift toward higher value-added core products and the expansion of overseas operations. While operating profit saw a slight decline due to increased R&D expenses for clinical trials and investments in human capital (personnel costs and improved compensation) aimed at future growth, progress against the full-year plan remains on track.

This report provides a comprehensive analysis of the Q1 performance, covering detailed trends by product category, the progress and optimization of production capacity expansion plans, overseas market strategies, and long-term growth initiatives.

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1. Q1 FY2027 Earnings Highlights

Consolidated results for the first quarter were as follows: Net Sales of 8,848 million yen (+3.5% YoY) , Gross Profit of 4,151 million yen (+7.9% YoY) , Operating Profit of 618 million yen (-2.0% YoY) , Ordinary Profit of 517 million yen (-14.9% YoY) , and Quarterly Net Profit attributable to owners of the parent of 336 million yen (-11.9% YoY) .

As shown in the highlight slide above, a notable achievement is the Gross Profit Margin, which improved by 1.9 percentage points year-on-year to 46.9% . This improvement was largely driven by the recovery in sales of high-value-added specialty lenses, such as toric and multifocal lenses, and the expanded sales of the "AirGrade" series.

Progress against the full-year plan (Net Sales of 37,000 million yen, Operating Profit of 2,200 million yen) has reached 23.9% for Net Sales and 28.1% for Operating Profit , indicating that the company is tracking ahead of schedule on an operating profit basis.

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2. Trends by Business and Product: Specialty Lenses and New Products Lead the Way

The core contact lens business drove overall performance with net sales of 8,679 million yen (+294 million yen YoY) .

• 1-Day Lens Category (85.1% of total sales)
  • Multifocal lenses : Significant growth of +28.6% YoY .
  • Toric lenses : Solid recovery of +15.3% YoY (aided by the resolution of previous delivery delays).
  • Spherical lenses (single vision) : Declined by 2.8% YoY due to price competition with rival products.
  • AirGrade 1-Day series : Continued rapid expansion with +37.8% YoY growth.
• 2-Week Lens Category (9.2% of total sales)
  • The "2-Week Pure" series grew by +4.1% YoY , while the "AirGrade 2-Week" series surged by +92.0% YoY .
• Orthokeratology Lenses
  • Sales of orthokeratology lenses, worn overnight to correct vision during the day, reached 255 million yen (+9.5% YoY) , showing steady growth both domestically and internationally.

The company is successfully advancing its product mix by offsetting intensified competition in spherical lenses with high-margin specialty products, including toric and multifocal lenses, as well as high-function products like silicone hydrogel materials.

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3. Analysis of SG&A Expenses and Profit Factors

The 12 million yen year-on-year decline in operating profit is attributed to an increase in SG&A expenses to 3,533 million yen (+315 million yen, +10% YoY) .

• R&D Expenses : 637 million yen (+120 million yen, +23% YoY) . Costs increased due to multiple clinical trials, including those for myopia progression control, and the development of smart contact lenses.
• Personnel Expenses : 1,175 million yen (+58 million yen, +5% YoY) . Investment in human capital through staff expansion and improved wages/benefits.
• Advertising Expenses : 302 million yen (+32 million yen, +12% YoY) . Active deployment of domestic campaigns and events.
• Logistics-related Expenses : 479 million yen (-16 million yen, -3% YoY) . Successfully reduced through the review of domestic ordering/shipping methods and improved efficiency in overseas shipping.

While the increase in SG&A expenses (driven by R&D and personnel) exceeded the increase in gross profit (+303 million yen), these are planned investments aimed at strengthening medium-term competitiveness.

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4. Progress in Production Capacity Expansion and Investment Optimization

At the Konosu Research Institute, the most critical hub for SEED's sustainable growth, capital investment is underway to meet rising demand.

Building No. 4 at the Konosu Research Institute was completed in January 2026, and production capacity is being increased in phases.

• Building No. 4 Phase 1 Plan : Operations began sequentially in March 2026, with maximum monthly production capacity currently being expanded from 65 million to 79 million units .
• Building No. 4 Phase 2 Plan : Construction began in July 2026, with operations scheduled to start sequentially from April 2027. Upon completion, maximum monthly production capacity is expected to reach 82.5 million units (approximately 990 million units annually) .

As announced on July 13, 2026, the Phase 2 plan has been optimized by considering investment efficiency and market trends. The planned investment amount was reduced from the initial 11.59 billion yen to 7.55 billion yen , adjusting the production capacity expansion to a scale of 3.5 million units per month. This ensures a structure that can flexibly adapt to supply-demand balances while maintaining financial health.

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5. Overseas Expansion, ESG, and New Product Topics

• Expansion of Overseas Sales : Overseas sales in Q1 grew to 1.47 billion yen (+19.3% YoY) . The UK/Europe region accounts for 66.5%, and China (including Hong Kong and Macau) accounts for 18.5%, with strong performance in cross-border e-commerce in China and market development in Southeast Asia. The full-year forecast for overseas sales is 6.32 billion yen .
• Launch of New Product "Belleme TORIC" : On August 20, 2026, the company launched two 1-day disposable toric versions of the popular "Belleme" color contact lens series, capturing demand that balances fashion with functionality.
• Sustainability and Circular Economy : The company has launched a pilot project for the chemical recycling of used contact lens cases (BLUE SEED PROJECT), collaborating with Mitsubishi Chemical and Japan Polypropylene to build a resource circulation model.

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6. Full-Year Outlook and Medium-Term Management Plan Financial Targets

The consolidated earnings forecast for the fiscal year ending March 31, 2027, anticipates Net Sales of 37,000 million yen (+9.0% YoY) , Operating Profit of 2,200 million yen (+52.8% YoY) , Ordinary Profit of 1,750 million yen (+24.5% YoY) , and Net Profit of 1,350 million yen (+18.9% YoY) .

The Medium-Term Management Plan (April 2024 – March 2027) positions this period as "laying the groundwork for a 50 billion yen consolidated sales structure," with the fiscal year ending March 2027 serving as the final phase.

• Net Sales Target : 37.0 billion yen (Non-consolidated: 32.0 billion yen)
• Operating Profit Target : 2.2 billion yen (Planned significant increase of approximately 1.5x YoY)
• EBITDA Target : 6.95 billion yen (EBITDA margin of 18.8% )
• ROE Target : 6.9%
• Shareholder Returns : 15 yen annual dividend per share (Basic policy of a 30-40% payout ratio ; the forecast payout ratio for this term is 33.6%, with a dividend yield of approximately 2.9%)

The company is structured to see improved profitability from the second half of the year onward through significant improvements in production capacity, higher value-added products, and the expansion of overseas sales.