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IEHC: Duopoly Leader Riding the U.S. Missile Inventory Buildout

What you need to know:
• IEHC designs and manufactures highly critical components for the defense and aerospace industry, mainly hyperboloid connectors. The market operates as a duopoly between Molex (prev. Smiths) and IEHC.
• Based on the massive buildout happening in missiles and missile defense, amongst other secular trends in the industry, IEHC has seen its backlog double over the LTM and grow 50% since January.
• IEHC has seen margin compression from the increased gold price, but has been implementing price increases to compensate for the higher costs.
• IEHC trades at a large discount to public defense firms and the takeout valuation of Smiths Interconnect from October 2025.

IEH Corporation (IEHC:OTCQX) has been around for 85 years as a family-run company, designing, developing, and manufacturing custom interconnects, contacts, and printed circuit boards for the defense and aerospace industry. Given the massive growth in these end markets (particularly for missiles), IEHC is expected to post accelerating growth. The Company provides direct exposure to this theme and is largely undervalued compared to its public peers and takeout price of its closest competitor. We are initiating coverage on IEHC with a BUY rating and a $26.00/share target price.

Investment Thesis Summary
Duopoly on a Critical Component. Hyperboloid connectors are necessary for high-reliability applications in defense, aerospace, and medical fields, ensuring vibration resistance, low insertion force, and performance under extreme conditions. The market is a niche duopoly with high barriers to entry, dominated by Smiths Interconnect (~70%) and IEHC (~30%).

Record Backlog and Anticipating Future Growth. In March 2026, IEHC reported that its backlog had reached an all-time high of >$28M, more than doubling over the LTM and up 50% YTD. This comes on the back of the buildout of missile inventories for the U.S. across PAC-3 (+230% ramp) and THAAD (+317% ramp), amongst others. We believe this will be a 3-6+ year cycle, exacerbated by the war in Iran, where the U.S. and Israel are running low on munitions.

Margins are Hurting from Gold Exposure. Gold makes up a major input cost for IEHC, with its rising price harming profitability over the last two years. IEHC has exhibited strong profitability in the past, and we believe has pricing power given its niche focus. The Company has begun implementing pricing increases to catch up to this and we expect EBITDA margins to be back to 10% by FY28 (Ending March 31).

All Markets are in a Bull Cycle. IEHC’s exposure to defense, commercial aerospace, and space positions it at the front end of multi-year growth, underpinned by increased global defense spending (2-3x for missiles by 2030), a 15,461-jet backlog at Boeing/Airbus, and a soaring LEO satellite market.

Management & Ownership. The Company has been owned and operated by the Offerman family for four generations, owning 37% of the shares outstanding. As such, we believe the team is long-term thinking and shareholder-centric.

Valuation. IEHC trades at 18.9x/10.5x FY27E/FY28E EBITDA compared to its public peers at 21.1x/16.7x and Smiths Interconnect, which was acquired in late 2025 for 15.1x EBITDA. We believe that the discount will reduce as IEHC executes on its growth strategy and upcoming margin expansion.