1Q Results Preview: Confirmation of Growth Outlook Led by Rising Building Margins Can Support Share Prices

Research evidence excerpt

1Q Results Preview: Confirmation of Growth Outlook Led by Rising Building Margins Can Support Share Prices

Idea

July 28, 2026 04:36 AM GMT

Morgan Stanley MUFG Securities Co., Ltd.+MConstruction | Japan Ryo Yagi

Equity Analyst

1Q Results Preview: Ryo.Yagi@morganstanleymufg.com +81 3 6836-8938

Confirmation of Growth

Outlook Led by Rising Building Construction

Japan

Industry View AttractiveMargins Can Support Share

Prices

1Q results begin with Kinden (Jul 29) for subcontractors, Shimizu

(Jul 30) for general contractors. We expect share prices to rise if

results (both general & electrical/HVAC contractors) confirm

order intake margins continue to improve amid tight supply/

demand, with a margin-driven earnings growth outlook intact.

In 1Q results for general & subcontractors we seek to confirm that 1) the earnings

growth outlook driven by improving building construction margins remains intact,

with profitability at order intake continuing to improve; 2) demand remains solid

despite rising costs and interest rates; and 3) tight supply/demand amid supply

constraints continues to allow firms to pass through higher costs into prices.

Construction stocks since 4Q results have struggled. After the mid-June Middle East

ceasefire reports and rotation from AI-related stocks into other sectors around late

June, we saw signs of a gradual shift of funds into construction as well, but share

prices then weakened once Middle East risks resurfaced. Investors in our post-4Q

discussions showed awareness that demand remains solid, supply/demand tight, and

that firms are still able to pass on higher costs due to these tight market conditions.

However, their remaining concerns about cost inflation and the demand outlook