7/3 Q1 results summary for Japanese general contractors - Watching orders as well as gross margins
Kajima stands out for gross margin improvement and order growth
Almost all Japanese general contractors, and majors and second-tier companies in particular, had announced their 17/3 Q1 results by 9 August. Many companies reported gross margins on building construction of over 10%, with rises in these gross margins the largest positive y-y factor for profits. Moreover, some companies also saw marked growth in building construction orders, and the share prices of those companies performed solidly following announcements. Companies with improved gross margins on building construction and growth in building construction orders included Kajima [1812] (Buy), Maeda [1824] (Buy), Penta-Ocean Construction [1893] (Buy), and Okumura [1833]. Stock market participants see growth in orders as well as higher gross margins on building construction as key future profit growth drivers, and we think attention could focus even more on orders. We think Kajima put in the most obviously strong set of results for 17/3 Q1 in terms of absolute operating profits, gross margin levels, and the extent of order growth.