IRISO ELECTRONICS CO.,LTD. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥15.16B
• Operating Income: ¥1.07B
• Net Income: ¥407M
• EPS: ¥23.90

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Iriso Electronics (TSE: 6908) reported a solid FY2026 Q1 with revenue of ¥15.163bn, up 21.0% YoY, indicating demand recovery and/or favorable pricing/mix. Operating income surged to ¥1.069bn (+462.0% YoY), pointing to significant operating leverage and improved cost control. Net income rose 37.4% YoY to ¥0.51bn, a slower pace than operating profit due to below-the-line items and taxes. Gross margin is indicated at 21.6%, consistent with a recovering but not peak margin profile for a connector manufacturer with automotive/industrial exposure. Operating margin reached approximately 7.1% (¥1.069bn/¥15.163bn), a meaningful step-up from the weak prior-year base. Ordinary income of ¥1.181bn exceeded operating income, implying net positive non-operating contributions (e.g., financial income or FX) of roughly ¥0.112bn against ¥0.041bn in interest expense. Interest coverage is strong at 26.1x, underscoring manageable financial costs and improved earnings capacity. The balance sheet remains conservative with total assets of ¥90.882bn and total equity of ¥67.736bn, implying an equity ratio near 74.6% despite the reported equity ratio field being unreported. Liquidity is robust: current ratio 366.6% and quick ratio 303.9%, supported by ¥52.209bn in current assets and ¥14.241bn in current liabilities. Working capital stands at ¥37.968bn, providing ample flexibility to navigate supply chain or demand swings. Inventory of ¥8.935bn appears reasonable relative to quarterly cost of sales, suggesting inventory days around the high-60s on indicative assumptions. DuPont analysis indicates ROE of roughly 0.75% for the quarter based on a net margin of 3.36%, asset turnover of 0.167, and financial leverage of 1.34; quarterly ROE is inherently depressed versus full-year due to seasonality and denominator effects. Cash flow statements and EBITDA are unreported, limiting assessment of earnings-to-cash conversion and capex intensity this quarter. Dividend data are also unreported this quarter, so payout policy execution cannot be evaluated from the provided figures. Overall, the results reflect a sharp rebound in operating performance with healthy financial resilience, though bottom-line growth lagged operating momentum. Key data limitations (unreported cash flows, EBITDA, and equity ratio field) constrain cash flow and dividend sustainability analysis. The outlook hinges on the durability of demand in auto and industrial end-markets, the trajectory of gross margin recovery, and FX movements.

Profitability Analysis

ROE decomposition (DuPont) for the quarter shows: net profit margin 3.36%, asset turnover 0.167x, and financial leverage 1.34x, yielding an implied ROE of about 0.75%. Operating margin is approximately 7.1% (¥1.069bn OI / ¥15.163bn revenue), evidencing substantial operating leverage versus the prior-year quarter. Ordinary margin is about 7.8% (¥1.181bn / ¥15.163bn), reflecting net positive non-operating items that more than offset interest expense of ¥41m. Gross margin is indicated at 21.6%, suggesting improved but not peak margin; continued improvement likely depends on product mix, scale utilization, and input cost normalization. The spread between gross margin (21.6%) and operating margin (7.1%) implies SG&A plus R&D at roughly 14–15% of sales for the quarter on the reported gross profit basis. Interest coverage of 26.1x demonstrates low financial burden, reinforcing that profitability is principally driven by operating performance rather than leverage. The gap between strong operating income growth (+462% YoY) and more modest net income growth (+37.4% YoY) highlights below-the-line drags and taxes; without a disclosed pre-tax figure, the effective tax rate cannot be reliably computed from the dataset. Margin quality appears to be recovering with scale and mix, but confirmation will require cash flow evidence and consistency over subsequent quarters.

Growth Assessment

Revenue grew 21.0% YoY to ¥15.163bn, indicating cyclical recovery and/or share gains in core automotive/industrial connector markets. Operating income growth of +462% YoY suggests a very low base last year and strong operating leverage on better volumes and cost discipline. Net income growth of +37.4% YoY trails operating growth, pointing to higher tax burden and/or extraordinary/non-operating effects in the quarter. The sequential sustainability of revenue growth will depend on auto production schedules, inventory normalization at customers, and industrial capex trends. Pricing/mix improvements may be contributing to margin recovery, but this needs confirmation from backlog, ASP trends, and product mix disclosures. Ordinary income outpacing operating income implies some support from non-operating income (including FX), which may be less predictable. Asset turnover at 0.167x for the quarter is modest, consistent with a capital-intensive footprint; improving turnover would bolster ROE if sustained revenue growth continues. Outlook hinges on the auto supply chain normalization, EV-related connector content growth, and geographic demand (notably China and North America). Given limited disclosure this quarter on orders/backlog, we view growth sustainability as improving but not yet fully evidenced by cash conversion or order metrics.

Financial Health

Liquidity is strong: current ratio 366.6% and quick ratio 303.9% supported by ¥52.209bn in current assets (including ¥8.935bn inventories) versus ¥14.241bn in current liabilities. Working capital is ¥37.968bn, providing a sizable buffer for operating needs and supply chain volatility. Solvency is robust with total liabilities of ¥20.173bn and total equity of ¥67.736bn; liabilities-to-equity is 0.30x. Implied equity ratio is approximately 74.6% (¥67.736bn/¥90.882bn), despite the reported equity ratio field being unreported. Interest expense is modest at ¥41m with interest coverage of 26.1x, indicating low refinancing risk under current earnings power. Capital structure is conservative with ample equity, positioning the company to fund capex and R&D without excessive leverage. Absence of reported cash and cash flow statements limits a detailed view of liquidity in cash terms, but balance-sheet strength mitigates near-term concerns.

Cash Flow Quality

Operating cash flow (OCF), investing cash flow (ICF), and financing cash flow (FCF) are unreported this quarter, so earnings-to-cash conversion cannot be assessed. The OCF/Net Income ratio is shown as 0.00 due to non-disclosure rather than true zero. With EBITDA and depreciation unreported, we cannot evaluate non-cash components of earnings or maintenance vs. growth capex. Working capital composition shows inventories at ¥8.935bn; using indicated cost of sales, inventory days appear roughly in the high-60s on a quarterly basis, which is reasonable for the sector but should be monitored for build-ups as demand normalizes. Free cash flow cannot be calculated; therefore, we cannot judge cash-based return generation or dividend cover this quarter. Overall, earnings quality appears improved at the operating level, but confirmation via positive OCF and disciplined capex will be necessary in subsequent disclosures.

Dividend Sustainability

Dividend data (annual DPS, payout ratio, and FCF coverage) are unreported for the quarter, preventing a direct assessment of payout sustainability. With net income at ¥0.51bn for Q1 and a conservative balance sheet, capacity for distributions exists, but cash flow disclosure is needed to confirm coverage. In the absence of OCF and capex data, FCF-based coverage cannot be evaluated. Historically for the sector, stable or progressive dividends are supported by mid-cycle cash generation; however, current-quarter data are insufficient to infer policy execution. We will revisit sustainability once full-year guidance, interim dividends, and cash flow data are available.

Risk Assessment

Business Risks:

• End-market cyclicality in automotive and industrial connectors affecting volumes and mix
• Supply chain constraints and component/input cost volatility impacting gross margins
• Customer inventory adjustments and order visibility uncertainties
• FX fluctuations (JPY vs. USD/CNY/EUR) influencing both revenue translation and non-operating income
• Competitive pricing pressure and technology shifts (e.g., EV/high-speed/miniaturization requirements)

Financial Risks:

• Limited visibility on cash generation due to unreported OCF/FCF this quarter
• Potential working capital swings (inventory and receivables) during recovery phases
• Exposure to extraordinary or non-operating items that can widen the gap between operating and net income
• Interest rate and credit conditions, albeit mitigated by low leverage

Key Concerns:

• Sustainability of the 21% YoY revenue growth as macro and auto cycles evolve
• Persistence of margin recovery given cost inflation and product mix dynamics
• Lack of reported cash flow and dividend data in the quarter limits assessment of earnings quality and shareholder returns

Investment Implications

Key Takeaways:

• Strong top-line recovery (+21% YoY) with sharp operating leverage (+462% YoY OI) indicates improving fundamentals
• Net income growth (+37% YoY) lags operating momentum due to below-the-line factors and taxes
• Balance sheet is very conservative (implied equity ratio ~74.6%, liabilities/equity 0.30x) with robust liquidity (current ratio 3.7x)
• Gross margin at 21.6% and operating margin ~7.1% show recovery but leave room for further improvement
• Cash flow and dividend metrics are unreported, leaving earnings quality and payout sustainability unverified this quarter

Metrics to Watch:

• Order trends and book-to-bill in automotive and industrial segments
• Gross margin trajectory and SG&A efficiency
• Operating cash flow, capex, and resulting free cash flow
• Inventory days and working-capital turns
• FX sensitivity and non-operating income/expense items
• Ordinary-to-operating income gap as a signal of recurring vs. non-recurring drivers

Relative Positioning: Within Japanese electronic component peers, Iriso appears to be in a recovery phase with strengthening operating leverage and a notably strong balance sheet, positioning it defensively versus more leveraged peers while providing upside if end-market demand normalization persists.

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