Hirose Electric Benefits from Revenue but Valuation Tightens

Japan's technology investment cycle is accelerating, and Hirose is a clear beneficiary. The challenge is whether fundamentals can keep pace with optimism.

The global demand for connectivity is surging, putting Japan in the center of this boom.

Japan's electronic connector exports jumped 12.2% from the previous year, hitting an 81.6 Japanese Yen billion in March 2026, as reported by the Japan Electronics and IT Industries Association (JEITA) while April passive component shipments climbed 18% y/y to reach JPY 231.4bn. This growth is a structural tailwind fueled by the simultaneous expansion of AI infrastructure, EVs, and semiconductor investments.

The automotive shift is a massive driver. Global EV sales topped 20 million units in 2025, pushing public charging infrastructure up 28% y/y, to 6.7 million charging connectors worldwide. In turn, the Japan External Trade Organization (JETRO) is backing the microchip ecosystem, hoping to scale its domestic semiconductor revenue to JPY 15tn by FY 30, locking in long-term demand for automotive and charging component suppliers.

Hirose Electric, a Japanese manufacturer of high-performance connectors used in smartphones, industrial equipment, automotive systems and telecom infrastructure, is leading the pack. A closer look at the data reveals a single segment spearheaded this advancement.

Sales outpace profits

FY 26 (ending March 26) revenue increased 11.5% y/y to JPY 211.3bn from 189.4bn last year. This was possible due to the General Industrial segment, which grew 32% y/y to JPY 62bn from JPY 47bn. The General Industrial business overall contributed 29.3% of revenue.

However, FY 26 operating profit increased only marginally by 0.8% y/y, rising to JPY 43bn from JPY 42.7bn in the previous year. Consequently, the operating profit margin declined by 220 bp to 20.3%, compared to 22.5% last year, primarily due to higher raw material costs, driven by the sharp increase in gold and copper prices. Alongside, escalating Middle East tensions created uncertainty in the manufacturing sector's operating environment.

For the same reason, FY 26 net profit only increased by 0.3% y/y to JPY 33.14bn from JPY 33.03bn, broadly in line with the previous year's level.

Operating cash flow declined to JPY 45.9bn from JPY 55.7bn, primarily due to a JPY 7.2bn increase in trade receivables, which absorbed part of the cash generated from operations.

Optimism priced in

The market has already bought into the Hirose Electric story, with the stock rocketing 67.8% in the past 12 months. The stock currently trades at JPY 28,470, which is 11.5% below its 52-week high of JPY 32,210.

More importantly, the current share price stays 1.6% above the consensus target price of JPY 28,013. That gap tells its own story: investors appear more optimistic than analysts.

Valuation is where the tension sits now. Hirose Electric trades at 26.6x FY 27 forward earnings, well above its three-year average P/E ratio of 19.3x. While the premium reflects confidence in the company's earnings, it also means there is little valuation cushion left at current levels.

Interestingly, 10 of the 14 covering analysts still recommend a “Buy”, with the remaining four have given the stock a “Hold” rating.

The pressure is on

Rising raw material costs remain a key challenge, with higher gold prices significantly weighing on profitability. Margins have continued to come under pressure despite record revenue growth, while softer demand in the mid-range smartphone market presents an additional headwind. The business also remains exposed to currency fluctuations, particularly around the JPY/USD exchange rate. Pricing pressure from customers could continue to affect earnings.