HOKURIKU ELECTRIC INDUSTRY CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥20.63B
• Operating Income: ¥1.32B
• Net Income: ¥780M
• EPS: ¥133.98

Income Statement

Balance Sheet

Cash Flow Statement

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 Integrated Analysis

Analysis integrating XBRL data (GPT-5) and PDF earnings presentation (Claude)

Executive Summary

Hokuriku Electric Industry Co., Ltd. reported FY2026 Q2 (cumulative) consolidated results under JGAAP showing resilience in profitability despite a soft top line. Revenue declined 3.7% YoY to ¥20.633bn, but operating income rose 5.7% YoY to ¥1.318bn and net income grew 34.9% YoY to ¥1.051bn, indicating effective cost control and improved non-operating/tax dynamics. Gross profit was ¥4.158bn, implying a gross margin of 20.2%, a reasonable level for a mid-tier electronic components supplier. EBITDA was ¥1.809bn, with an EBITDA margin of 8.8%, highlighting stable operating efficiency. Ordinary income of ¥1.373bn exceeded operating income, suggesting a modest positive contribution from non-operating items net of interest expense (¥34m). Using income tax expense of ¥238m, the implied effective tax rate is roughly 17% on ordinary income—lower than Japan’s statutory rate, aiding bottom-line expansion. DuPont metrics indicate a net profit margin of 5.09%, asset turnover of 0.487x, and financial leverage of 1.86x, yielding an ROE of 4.62% for the period. Liquidity is strong with a current ratio of 271.5% and quick ratio of 255.7%, supported by ¥30.625bn in current assets versus ¥11.279bn in current liabilities. The balance sheet remains conservative with total equity of ¥22.763bn and total liabilities of ¥20.482bn (debt-to-equity 0.90x on a broad definition), affording financial flexibility. Operating cash flow was robust at ¥2.363bn, equating to 2.25x net income, which signals good earnings quality and healthy cash conversion. Financing cash flow was an outflow of ¥1.28bn, likely reflecting debt reduction or other financing movements; dividends are not disclosed in the dataset. Reported cash and equivalents and investing cash flow show as zero, which we treat as unreported rather than actual zeros; consequently, free cash flow cannot be reliably assessed. Working capital is ample at ¥19.346bn, with inventories of ¥1.788bn appearing lean relative to current assets. On an EPS of ¥133.98 and net income of ¥1.051bn, the implied average share count is about 7.85 million shares, offering a cross-check on per-share metrics in the absence of reported share count. Overall, the company exhibits improving profitability on a slightly lower revenue base, strong liquidity, conservative leverage, and high cash conversion, though the absence of disclosed investing cash flows and equity ratio limits a full assessment of capital allocation and solvency ratios. Outlook-wise, sustaining margin discipline and managing input costs appear central to maintaining earnings momentum if revenue softness persists. Key areas to monitor include demand trends in end markets, FX impacts, and capital expenditure intensity once disclosed.

From Earnings Presentation: Hokuriku Electric Industry's first half results for FY2025 showed revenue of 20.63 billion yen (down 3.7% year-over-year), operating profit of 1.32 billion yen (up 5.7%), operating margin of 6.4%, and net profit of 1.05 billion yen (up 34.9%), achieving increased profit despite decreased revenue. By product, modules struggled with a decline of 940 million yen (down 8.0%) due to decreases in EV and display panel applications, while electronic component devices (resistors, piezo, sensors, etc.) remained steady with an increase of 70 million yen. By market, mobility decreased by 420 million yen due to declines in EV and displays despite growth in new markets and customers, while information and communication equipment for data centers grew by 110 million yen. The exchange rate at period end was 148.88 yen, showing yen depreciation. Full-year forecasts were revised upward to revenue of 42.3 billion yen (down 2.1%), operating profit of 2.1 billion yen (down 19.3%), and net profit of 1.6 billion yen (down 27.1%) with the assumed exchange rate changed from 140 yen to 147 yen per dollar. To improve PBR to 0.7x, the company targets ROE of 10% or higher and PER of 10x or higher, promoting core business evolution, new product creation, and strengthened shareholder returns (DOE 3% or higher, dividend payout ratio around 35%, flexible share buybacks). Capital expenditure of 1.4 billion yen (ASEAN expansion and production facility enhancement) and R&D of 1.7 billion yen (new sensors, products addressing social issues) are planned. Business expansion into growth markets (GX/DX, mobility, industry/infrastructure, smart appliances/medical, next-generation areas) is specified.

Financial Analysis

Profitability

ROE_decomposition:

• net_profit_margin: 5.09%
• asset_turnover: 0.487x
• financial_leverage: 1.86x
• calculated_ROE: 4.62%
• commentary: ROE is driven primarily by margin improvement and stable leverage; asset turnover below 0.5x suggests a capital-intensive or inventory/receivables-heavy model typical for components makers. margin_quality: Gross margin at 20.2% supports an 8.8% EBITDA margin and 6.4% operating margin (¥1.318bn / ¥20.633bn). The expansion in operating income despite lower revenue implies effective cost management or product mix improvement. The implied effective tax rate (~17%) aided net margin expansion to 5.1%. operating_leverage: Positive operating leverage is evident: operating income grew +5.7% YoY on a -3.7% revenue decline, indicating fixed-cost absorption improvements and SG&A discipline. Continued leverage is contingent on maintaining volumes/mix and avoiding input cost inflation.

Growth

revenue_sustainability: Revenue declined 3.7% YoY to ¥20.633bn, suggesting soft demand or pricing pressure in certain end markets. Sustainability will depend on order intake in automotive/industrial electronics and supply chain normalization. profit_quality: Net income up 34.9% YoY to ¥1.051bn alongside an OCF/NI ratio of 2.25 signals high-quality earnings. Ordinary income exceeding operating income indicates small positive non-operating contributions net of low interest burden (38.8x coverage). outlook: With stable gross margins and tight cost control, the company can defend earnings even amid modest top-line pressure. Near-term growth hinges on demand recovery, FX tailwinds for exports, and the cadence of capex from key customers; disclosure of capex plans will clarify trajectory.

Financial Health

liquidity: Current ratio 271.5% and quick ratio 255.7% reflect strong short-term solvency. Working capital totals ¥19.346bn, providing a cushion against demand variability. solvency: Total liabilities of ¥20.482bn vs equity of ¥22.763bn yield a broad debt-to-equity ratio of 0.90x, indicating moderate leverage. Interest expense of ¥34m and coverage of 38.8x suggest low financial risk from debt service. capital_structure: Equity ratio is shown as 0% in the dataset (treated as undisclosed). Based on totals, equity comprises roughly 53.7% of assets, indicating a solid capital base, though precise interest-bearing debt levels are not disclosed.

Cash Flow

earnings_quality: OCF of ¥2.363bn vs net income of ¥1.051bn (2.25x) points to strong cash conversion and limited accrual risk in the period. FCF_analysis: Investing cash flow is undisclosed (shown as zero), so free cash flow cannot be reliably computed. Using depreciation of ¥491m as a proxy for maintenance capex would be speculative; therefore, no FCF estimate is provided. working_capital: Inventories of ¥1.788bn appear conservative relative to current assets of ¥30.625bn, suggesting limited build-up. Full analysis of receivables/payables changes is constrained by disclosure limits.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are shown as zero, indicating non-disclosure rather than actual zeros. EPS is ¥133.98 and net income is ¥1.051bn; without DPS, payout cannot be assessed. FCF_coverage: FCF coverage is not meaningful because investing cash flows are undisclosed; OCF is strong, which is supportive, but capex intensity is unknown. policy_outlook: Dividend policy cannot be inferred from the provided data. Once DPS and capex are disclosed, assess payout relative to normalized FCF and balance sheet capacity.

Business Outlook

While the business environment remains uncertain due to US tariff policies, geopolitical risks, and Chinese economic slowdown, the full-year forecast was revised upward due to the shift to a weaker yen. In the mobility sector, while EVs have slowed, xEV overall is performing steadily; industrial and consumer equipment shows AI-related expansion but overall recovery remains gradual. Currently, each product is generally on track, but focus for the second half is on order recovery, inventory adjustment progress, and foreign exchange/raw material prices. Full-year forecast: revenue of 42.3 billion yen (down 2.1%), operating profit of 2.1 billion yen (down 19.3%), operating margin of 5.0%, ROE of 7.0%, net profit of 1.6 billion yen (down 27.1%). Through FY2027, operating cash flow of 9.6 billion yen and capital investment of 5.8 billion yen are expected, emphasizing balance between growth investment and shareholder returns. Expanding business domains in four areas (GX/DX, mobility, industry/infrastructure, smart appliances/medical) and Next Frontier (SDV, renewable energy, data centers, hydrogen, etc.), concentrating management resources on core business evolution and new product creation.

Management Guidance

Management has specified goals of ROE of 10% or higher and PER of 10x or higher to achieve PBR of 1x or higher, with: (1) revenue expansion through core business evolution and new product creation, (2) strengthening shareholder returns and improving capital efficiency through dividend increases and share buybacks, (3) promoting sustainable growth and medium-to-long-term corporate value enhancement, and (4) governance enhancement, sustainability management, and IR strengthening. Dividend policy sets DOE at 3% or higher and payout ratio around 35%; for FY2025, maintaining 90 yen per share as initially planned, acquiring 127 million yen of treasury stock, with total return ratio expected at 44% (dividend payout ratio) plus share buyback bringing it to 52%. The FY2025-2027 medium-term plan allocates operating cash flow of 9.6 billion yen to capital investment of 5.8 billion yen, shareholder returns of 3.0 billion yen, and financial foundation strengthening of 800 million yen, demonstrating balance between growth investment and returns. The first half progressed as expected, and the full-year forecast was revised upward to reflect exchange rate changes, but given continued market uncertainty, the company maintains a stance of monitoring order trends, costs, and exchange rate movements.

Strategic Initiatives

• Achieving PBR of 1x or higher: Promoting revenue expansion and capital efficiency improvement in tandem, targeting ROE of 10% or higher and PER of 10x or higher
• Business domain expansion into four domains (GX/DX, mobility, industry/infrastructure, smart appliances/medical) and Next Frontier (SDV, renewable energy, data centers, hydrogen, next-generation agriculture, drones, etc.)
• Core business evolution: Deepening and adding value to existing products (EV, ADAS, wearables, white goods, industrial robots, etc.)
• New product creation: Investing 1.7 billion yen in R&D for new sensor development and products addressing social issues (environmentally conscious, IoT-related)
• Capital investment: Planning 1.4 billion yen for ASEAN expansion, production capacity enhancement, DX/IT investment, and sustainability-related initiatives (energy-saving facilities)
• Strengthened shareholder returns: Improving capital efficiency through dividend policy of DOE 3% or higher and payout ratio around 35%, flexible share buybacks (127 million yen in FY2025)
• Governance enhancement: Further strengthening corporate governance, promoting sustainability management, enhancing IR activities (website renewal, integrated report publication)
• HOKURIoT (forklift IoT service) deployment: Supporting customer safety, security, and operational efficiency through operational visualization and safety management
• Capital allocation: For FY2025-2027, allocating operating cash flow of 9.6 billion yen to capital investment of 5.8 billion yen, shareholder returns of 3.0 billion yen, and financial foundation strengthening of 800 million yen

Risk Assessment

Business Risks:

• Cyclical demand in automotive and industrial electronics end markets
• Product mix and pricing pressure in competitive components segments
• Raw material cost volatility (e.g., copper, resins) impacting margins
• FX fluctuations affecting export competitiveness and translation
• Supply chain disruptions and lead-time variability

Financial Risks:

• Potential capex upcycles increasing cash needs (investing CF undisclosed)
• Customer concentration risk typical for component suppliers
• Inventory obsolescence risk if demand softens
• Limited visibility into interest-bearing debt profile due to disclosure gaps

Key Concerns:

• Revenue contraction (-3.7% YoY) despite profit growth
• Lack of disclosed investing cash flows and cash balance, limiting FCF assessment
• Equity ratio not disclosed, though inferred equity is ~54% of assets

Risk Factors from Presentation:

• Global economy: Strong uncertainty ahead due to US tariff policy implementation and geopolitical tensions
• Electronics market: EV slowdown and sluggish component demand in mobility sector; industrial and consumer equipment weak due to Chinese economic downturn
• Foreign exchange fluctuations: Impact on revenue, costs, and inventory valuation from yen depreciation/appreciation (assumed at 147 yen but volatility risk continues)
• Raw material prices: Possibility of gross margin pressure from rising prices of copper, resin, energy, etc.
• Supply chain: Delivery delays and cost increases due to procurement lead times and logistics constraints
• Delayed demand recovery: Risk of downward revision to second-half growth expectations due to gradual recovery in industrial and consumer equipment
• Business domain expansion: Technology and market risks that investments in new markets and products may not be recovered as planned

Investment Implications

Key Takeaways:

• Resilient profitability with operating income +5.7% YoY on -3.7% revenue
• Healthy gross margin (20.2%) and EBITDA margin (8.8%) support earnings quality
• Strong liquidity (current ratio 271.5%) and ample working capital (¥19.3bn)
• Low interest burden with 38.8x coverage reduces financial risk
• High cash conversion (OCF/NI 2.25x) enhances balance sheet flexibility
• Data gaps on investing cash flow and dividends constrain capital allocation analysis

Metrics to Watch:

• Order backlog and book-to-bill for automotive/industrial segments
• Gross margin trajectory and input cost pass-through
• Capex disclosures and investing cash flows
• FX rates (USD/JPY, EUR/JPY) and their impact on margins
• Inventory days and receivables collection to sustain cash conversion
• DPS/payout policy updates and any share repurchase activity

Relative Positioning: Within Japan’s mid-cap electronic components cohort, the company exhibits above-average liquidity and solid balance sheet strength with moderate leverage, but operates at lower margins than top-tier peers; earnings quality is a relative positive, while revenue momentum and disclosure depth are areas to improve.

Supplementary Insights (Key Highlights)

• Revised full-year forecast upward by changing assumed exchange rate from 140 yen to 147 yen per dollar (foreign exchange effect contributed)
• Increased in new mobility markets and customers, with information and communication equipment for data centers growing significantly by 19.9%
• Operating profit variance factors: foreign exchange impact of negative 70 million yen, revenue decline of negative 50 million yen, product mix of negative 140 million yen, others positive 320 million yen, with cost control and mix improvement supporting profit
• Aiming for PBR of 1x or higher, targeting ROE of 10% or higher (current forecast 7.0%), dividend policy of DOE 3% or higher and payout ratio around 35%, flexible share buybacks specified (127 million yen acquired in FY2025)
• Capital investment focused on ASEAN expansion, production capacity enhancement, DX/IT investment, and energy-saving facilities; allocation plan for FY2025-2027 medium-term plan includes operating cash flow of 9.6 billion yen, capital investment of 5.8 billion yen, shareholder returns of 3.0 billion yen, and financial foundation strengthening of 800 million yen
• Growth areas specified include SDV, renewable energy, data centers, hydrogen society, smart factories, next-generation agriculture, drones, etc.
• Launching new product HOKURIoT (forklift IoT service) to support customer DX through safety management and operational visualization
• Website renewal (July), publication of Integrated Report 2025, promoting IR activities and governance enhancement

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