HIROSE ELECTRIC CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥102.03B
• Operating Income: ¥20.46B
• Net Income: ¥15.52B
• EPS: ¥459.37

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Hirose Electric (6806) reported FY2026 Q2 (cumulative) results under IFRS with revenue of 1,020.25 (100M JPY), up 7.9% YoY, indicating a modest recovery in demand or mix improvement. Despite higher revenue, operating income declined 7.9% YoY to 204.61, evidencing negative operating leverage and/or cost pressures. Gross profit was 427.88 with a gross margin of 41.9%, while SG&A was 205.55, or 20.2% of sales, resulting in an operating margin of roughly 20.0%. Profit before tax reached 221.01, exceeding operating income, implying positive finance/other income (c. +16–17). Net income was 155.23, down 11.5% YoY, with an effective tax rate of 28.6%, consistent with Japan’s statutory range after adjustments. DuPont analysis shows a net margin of 15.2%, asset turnover of 0.239x, and financial leverage of 1.13x, translating to a low ROE of 4.1% for the period. The low leverage and solid equity base (equity ratio 88.4%) underpin a strong balance sheet but dampen ROE. Total assets stood at 4,269.47, with current assets of 2,487.76 and cash and equivalents of 856.66, indicating a large net cash position and strong liquidity. Working capital data are partly unreported, but accounts receivable of 403.94 and inventories of 250.91 look manageable relative to scale. Total liabilities are only 467.19, reflecting conservative financing; the reported debt-to-equity of 0.12x indicates minimal financial risk. Total comprehensive income of 219.79 significantly exceeded net income, suggesting sizable OCI gains (likely FX translation and/or FVOCI securities), which bolstered equity. Dividend data are not disclosed, but a calculated payout ratio of 112.7% suggests potential mismatch versus interim earnings or reliance on retained earnings/OCI uplift; sustainability will depend on full-year earnings and cash flow. Cash flow statement, capex, and OCF quality are unreported, constraining assessment of cash conversion and FCF. Overall, fundamentals show healthy margins and a fortress balance sheet, but profitability momentum softened and ROE remains subdued given low leverage and slower operating profit. The outlook hinges on demand normalization in end-markets, FX tailwinds, and margin discipline to restore positive operating leverage.

Profitability Analysis

ROE_decomposition: ROE 4.1% = Net margin 15.2% x Asset turnover 0.239x x Financial leverage 1.13x. The primary constraint is low asset turnover and modest leverage; margins remain comparatively strong. margin_quality: Gross margin 41.9% indicates solid pricing/mix and manufacturing efficiency. SG&A ratio 20.2% limits operating leverage, resulting in an operating margin of ~20.0% (204.61/1,020.25). Net margin at 15.2% benefits from positive non-operating items (PBT exceeds operating income by ~16.4). Effective tax rate 28.6% is in line with expectations. operating_leverage: Revenue grew 7.9% YoY, but operating income fell 7.9% YoY, evidencing negative operating leverage due to higher costs, unfavorable mix, or increased SG&A. Restoring leverage will require tighter opex control and/or improved gross margin.

Growth Assessment

revenue_sustainability: Top-line +7.9% YoY suggests stabilization or recovery across key end-markets, but sustainability depends on orders/book-to-bill and regional/segment mix (not disclosed). profit_quality: PBT exceeded operating income, implying reliance on finance/other income to support bottom line. Core profitability softened as operating income declined despite revenue growth. outlook: Margin trajectory and demand visibility will be key. FX (weaker JPY) and product mix upgrades could support revenue/margins, while cost inflation and inventory normalization at customers may cap near-term upside.

Financial Health

liquidity: Cash and equivalents 856.66 (100M JPY) and current assets 2,487.76 provide strong liquidity; current ratio not calculable due to unreported current liabilities. AR 403.94 and inventories 250.91 appear manageable. solvency: Equity ratio 88.4% and total liabilities 467.19 indicate very low balance sheet risk. Debt-to-equity 0.12x (reported) implies limited interest-bearing debt. capital_structure: Total equity 3,773.71 with capital surplus 112.24 and retained earnings 3,489.72 reflect substantial internal capital. Low leverage constrains ROE but enhances resilience.

Cash Flow Quality

earnings_quality: Total comprehensive income (219.79) significantly above net income (155.23) points to material OCI contributions; reliance on OCI introduces volatility not captured in operating earnings. FCF_analysis: Operating CF and capex are unreported; therefore FCF cannot be assessed. Cash balance is sizable, which mitigates near-term funding needs. working_capital: AR 403.94 and inventories 250.91 vs AP 128.96 indicate a net working capital investment consistent with an advanced component manufacturer; turnover metrics cannot be computed without OCF and average balances.

Dividend Sustainability

payout_ratio_assessment: A calculated payout ratio of 112.7% suggests dividends may exceed interim earnings; however, DPS is unreported and the figure may reflect timing/annualization effects for H1. FCF_coverage: Not assessable due to unreported OCF and capex. The sizable cash position supports flexibility, but recurring coverage by FCF remains unverified. policy_outlook: Given the strong equity base and cash, the company can likely maintain a stable dividend policy, but sustainability at elevated payout levels would require recovery in full-year earnings and consistent cash generation.

Risk Assessment

Business Risks:

• Demand cyclicality in key end-markets (industrial, automotive, consumer electronics).
• Product mix and pricing pressure from competitors in high-speed connector segments.
• Supply chain constraints and input cost inflation impacting gross margins.
• Customer inventory adjustments affecting near-term orders and utilization.
• FX volatility (JPY) influencing reported revenue and margins.

Financial Risks:

• Earnings sensitivity to non-operating gains (finance/FX), as PBT > operating income.
• OCI volatility affecting equity and comprehensive income.
• Limited visibility on OCF and capex, creating uncertainty on FCF and dividend coverage.
• Concentration of working capital in AR/inventory if demand softens.

Key Concerns:

• Negative operating leverage despite revenue growth.
• Low ROE (4.1%) driven by low asset turnover and minimal leverage.
• Dividend payout ratio (112.7%) potentially above interim earnings capacity.
• Data limitations on cash flow and liabilities prevent full assessment.

Investment Implications

Key Takeaways:

• Revenue recovery (+7.9% YoY) contrasted with softer operating profit (-7.9% YoY).
• Strong margins (GM 41.9%, OM ~20%) but operating leverage turned negative.
• Very strong balance sheet (equity ratio 88.4%, large cash), implying low financial risk.
• ROE subdued at 4.1% due to low turnover and conservative leverage.
• Total comprehensive income outpaced net income, highlighting OCI tailwinds.

Metrics to Watch:

• Order intake and book-to-bill by segment/region.
• Gross and operating margin trends, including SG&A ratio.
• Operating cash flow, capex, and FCF to assess dividend coverage.
• Inventory and receivable turnover; days on hand.
• FX rates and sensitivity (USD/JPY, CNY/JPY, EUR/JPY).
• Payout policy updates (DPS, buybacks) relative to earnings trajectory.

Relative Positioning: Operationally resilient with high margins and a fortress balance sheet compared to peers, but recent negative operating leverage and low ROE position it as quality/defensive rather than return-optimized in the near term.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis