F3/27 1Q Results: Solid Construction Margins; Focus Shifts to Further Earnings Growth Including Overseas

研报英文原文证据摘录

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M

Update

August 7, 2026 03:20 PM GMT

Morgan Stanley MUFG Securities Co., Ltd.+

Penta-Ocean Construction (1893) | Japan

Ryo Yagi

Equity Analyst

F3/27 1Q Results: Solid

Construction Margins; Focus

Shifts to Further Earnings

Growth Including Overseas

Penta-Ocean Construction (1893.T, 1893 JT)

Construction | Japan

AlphaSignals Earnings Reaction

Unchanged

In-line

Modest revision higher

Impact to our thesis

Financial results versus consensus

Direction of next 12-month

consensus EPS

Stock Rating

Industry View

Price target

Shr price, close (Aug 7, 2026)

Mkt cap, curr, basic (bn)

Avg daily trading value (bn)

Overweight

Attractive

¥2,500

¥1,500

¥407.4

¥3.8

Source: Company data, Morgan Stanley Research

Key Takeaways

OP ¥11.1bn (+8.1% YoY), on par with ¥11.2bn consensus and our ¥10.6bn forecast

Orders totaled ¥203.0bn (-35.2% YoY), with domestic civil engineering up 51.5%,

domestic building construction down 27.9%, and overseas down 82.0%. The decline

overseas reflected the absence of large projects that contributed a year ago.

Margins (parent gross margin) were 16.3% in domestic civil engineering (15.1% a year

ago), 10.1% in domestic building construction (8.4%), and -0.6% overseas (-1.3%).

The improvement in domestic building margins was not driven by one-offs, but

rather by a greater contribution from higher-profitability projects. With completed

projects expected to contribute from 2Q onward, margins should remain solid.

The overseas op loss in 1Q reflected the delayed start-up of a large vessel, which

began operating in 2Q rather than 1Q as originally planned. From 2Q onward, vessel

operations, progress on existing projects, and claims settlements should support

earnings. Management indicated that these claims settlements could contribute

several billion yen of profit, with most of the benefit expected in 2H, enabling

earnings to catch back up versus the company's plan.

Share price implications: Slightly positive. While 1Q OP was in line with consensus,

construction margins remain strong and the operating environment suggests further

improvement from 2Q onward.…