Obayashi (1802) AI Stock Analysis

• Market Cap: ¥2.87T
• Dividend Yield: 2.47%
• Average Volume (3M): 3.01M
• Price to Earnings (P/E): 16.1
• Beta (1Y): 0.66
• Revenue Growth: 2.27%
• EPS Growth: 70.36%
• Country: JP
• Employees: 16,986
• Sector: Industrials
• Sector Strength: 72
• Industry: Engineering & Construction
• EPS (TTM): 77.55
• Shares Outstanding: 691,811,340
• 10 Day Avg. Volume: 2,598,730
• 30 Day Avg. Volume: 3,014,840
• PEG Ratio: 0.10
• Price to Book (P/B): 1.23
• Price to Sales (P/S): 0.54
• P/FCF Ratio: 40.10
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: ¥4,242.09
• Price Target Upside: 0.26% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 5
• EPS Forecast (FY): 221.97
• Revenue Forecast (FY): ¥2.57T

• Rating: 75 Outperform
• Price Target: ¥4,826.00 ▲(14.06% Upside)
• Action: Reiterated Date: 02/10/26
• Date: Action: Reiterated 02/10/26

The score is driven primarily by strong financial performance (growth, profitability, conservative balance sheet, and improved free cash flow). Technicals remain bullish but are heavily overextended (very high RSI/Stoch), which reduces the score. Valuation is reasonable with a mid-teens P/E and a moderate dividend yield.

Positive Factors

Consistent revenue growth

Revenue growth of 12.69% year-over-year indicates durable demand and effective project execution across segments. Sustained top-line expansion supports scale economics, backlog replenishment and reinvestment in capabilities, which strengthens long-term competitive positioning in public and private construction.

Strengthened free cash flow

Free cash flow turning positive to ¥35.45bn materially improves liquidity and financial flexibility. This durability in cash generation enables funding of capex and working capital, supports shareholder returns and reduces dependence on external financing for multi-year projects and strategic investments.

Conservative balance sheet with solid ROE

A low debt-to-equity ratio and a 12.6% ROE reflect conservative leverage alongside effective capital use. This balance sheet strength provides resilience to project delays, funds bidding on large contracts, and lowers refinancing risk, supporting steady operational investment and strategic flexibility over the medium term.

Negative Factors

Moderate cash conversion

Despite FCF improvement, operating cash flow to net income of 0.59 and FCF-to-net income of 0.24 show earnings are not fully converted to free cash. Persistent weak conversion can constrain sustainable dividend capacity, limit internal funding for growth, and leave the company exposed to working-capital swings on large projects.

Modest profit margins

Margins are modest for 2025, leaving limited buffer against rising input costs or adverse contract outcomes. In construction, tight margins magnify the impact of material and labor inflation or aggressive bidding, increasing the risk that cost overruns or schedule slips materially reduce profitability over multiple quarters.

Execution and contract risk inherent to model

The firm’s contract-based revenue model imposes structural execution risk: cost overruns, subcontractor failures or schedule delays can persistently affect margins and cash flow. These operational vulnerabilities are endemic to large construction projects and can cause recurring earnings volatility across reporting periods.

Obayashi Business Overview & Revenue Model

Company Description

Obayashi Corporation engages in the construction business in Japan, North America, Asia, the Middle East, Europe, and Oceania. The company constructs buildings, including offices, condominiums, commercial facilities, factories, hospitals, and schools; and civil engineering projects, such as tunnels, bridges, dams, riverbanks, railroads, and expressways. It is also involved in the development and leasing of real estate properties in various locations, primarily in metropolitan areas, as well as property management activities; solar, biomass, hydropower, geothermal, and wind power generation business; and PPP and agriculture business. In addition, the company sells materials and equipment for construction; develops and sells computer software; sells and leases electronic equipment; offers finance-related services; and operates golf clubs. Further, it engages in the provision of urban development, contracted engineering, management, consultancy services, etc.; and is involved in the M&E design and construction activities. The company was founded in 1892 and is headquartered in Tokyo, Japan.

How the Company Makes Money

Obayashi generates revenue primarily through its construction and engineering services, which include the design and execution of infrastructure projects such as roads, bridges, tunnels, and buildings. The company's revenue model is based on winning contracts from both public and private sector clients, which often involves competitive bidding processes. Key revenue streams include project management fees, construction contracts, and maintenance services. Additionally, Obayashi benefits from strategic partnerships with government agencies and private developers, enabling it to secure significant projects. Factors contributing to its earnings include the company's strong reputation for quality and reliability, its ability to innovate in construction technology, and an increasing demand for infrastructure development in urban areas.

Obayashi Financial Statement Overview

Summary

Strong financial profile supported by robust revenue growth (12.69% from 2024 to 2025), solid profitability (net margin 5.57%; EBITDA margin 9.48%), conservative leverage (debt-to-equity 0.32), and improved free cash flow turning positive in 2025 (35.45B Yen). Cash conversion is moderate (OCF/net income 0.59; FCF/net income 0.24), slightly tempering the score.

Income Statement

The company has shown robust revenue growth of 12.69% from 2024 to 2025. Gross profit margin remains stable at 11.36% for 2025, with a net profit margin of 5.57%. EBIT and EBITDA margins are healthy at 5.47% and 9.48% respectively, indicating strong operational efficiency and profitability. The consistent upward trend in revenue and profitability metrics suggests solid performance in the income statement.

Balance Sheet

The debt-to-equity ratio is 0.32, indicating a conservative leverage strategy. The return on equity (ROE) stands at 12.61%, reflecting good profitability relative to equity. The equity ratio is 38.05%, suggesting a balanced capital structure. Overall, the balance sheet portrays financial stability with efficient leverage usage and solid equity returns.

Cash Flow

The company achieved significant improvement in free cash flow from a deficit in 2024 to a positive 35.45 billion Yen in 2025. The operating cash flow to net income ratio is 0.59, indicating adequate cash generation relative to net income. The free cash flow to net income ratio is 0.24, reflecting moderate conversion of profits to free cash flow. This positive trend in cash flow metrics shows improved liquidity and cash management.

Breakdown	TTM	Mar 2026	Mar 2025	Mar 2024	Mar 2023	Mar 2022
Income Statement
Total Revenue	2.57T	2.62T	2.33T	1.98T	1.92T	1.77T
Gross Profit	300.37B	297.83B	219.60B	216.57B	154.34B	225.78B
EBITDA	220.73B	248.22B	138.49B	140.30B	78.61B	156.60B
Net Income	138.28B	146.05B	75.06B	77.67B	39.13B	98.78B
Balance Sheet
Total Assets	2.88T	3.04T	3.02T	2.61T	2.42T	2.27T
Cash, Cash Equivalents and Short-Term Investments	468.11B	406.14B	347.62B	426.69B	271.03B	262.95B
Total Debt	367.47B	376.34B	332.90B	344.36B	280.87B	266.99B
Total Liabilities	1.71T	1.83T	1.82T	1.57T	1.43T	1.31T
Stockholders Equity	1.12T	1.16T	1.15T	997.11B	955.69B	931.01B
Cash Flow
Free Cash Flow	0.00	35.45B	-27.99B	131.87B	11.67B	-32.63B
Operating Cash Flow	0.00	85.63B	50.40B	228.46B	69.70B	24.80B
Investing Cash Flow	0.00	9.60B	-84.47B	-101.61B	-49.83B	-79.08B
Financing Cash Flow	0.00	-50.59B	-51.92B	22.12B	-12.46B	-8.48B

Obayashi Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 4231.00
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:1802, the sentiment is Positive. The current price of 4231 is above the 20-day moving average (MA) of 4043.65, above the 50-day MA of 3673.38, and above the 200-day MA of 2750.06, indicating a bullish trend. The MACD of 159.58 indicates Positive momentum. The RSI at 69.21 is Neutral, neither overbought nor oversold. The STOCH value of 72.99 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for JP:1802.

Obayashi Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
1719	79 Outperform	¥376.66B	12.71	16.55%	4.26%	9.49%	64.79%
1802	75 Outperform	¥2.87T	16.10	14.23%	2.47%	2.27%	70.36%
1803	75 Outperform	¥2.33T	22.34	11.22%	1.48%	5.14%	773.86%
1861	74 Outperform	¥345.53B	16.55	7.62%	3.44%	7.54%	115.47%
1812	71 Outperform	¥3.39T	18.78	13.03%	1.96%	10.52%	71.09%
1801	67 Neutral	$3.11T	22.66	15.61%	1.83%	6.60%	114.38%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%

Obayashi Corporate Events

Obayashi to Cancel 2.1% of Outstanding Shares to Tighten Capital Base

Obayashi Corporation’s board has approved the cancellation of 15,139,700 common treasury shares, representing 2.1% of its issued shares, which were previously repurchased under an earlier board resolution. Following the planned cancellation on January 30, 2026, the company’s total number of issued shares will be reduced to 691,811,346, a move that effectively tightens its share supply and may enhance capital efficiency and shareholder value by increasing the relative ownership stake of remaining shareholders.

The most recent analyst rating on (JP:1802) stock is a Buy with a Yen4037.00 price target. To see the full list of analyst forecasts on Obayashi stock, see the JP:1802 Stock Forecast page.

Obayashi Nears ¥40 Billion Ceiling as It Completes Share Buyback Program

Obayashi Corporation has completed a share buyback program authorized by its board on August 8, 2025, acquiring 2,297,000 common shares on the Tokyo Stock Exchange between December 1 and December 23, 2025 at a total cost of approximately ¥7.36 billion. Cumulatively under the August authorization, the company repurchased 15,139,700 shares for about ¥40.0 billion, close to the approved ceiling, and plans to cancel all acquired shares, a move expected to enhance capital efficiency and shareholder value by reducing the total number of shares outstanding.

The most recent analyst rating on (JP:1802) stock is a Buy with a Yen3500.00 price target. To see the full list of analyst forecasts on Obayashi stock, see the JP:1802 Stock Forecast page.

Obayashi Corporation Advances Share Buyback Strategy

Obayashi Corporation has announced the acquisition of 2,668,600 of its own shares, amounting to ¥7.78 billion, as part of a broader strategy to repurchase up to 25 million shares by the end of December 2025. This move is part of a strategic initiative to enhance shareholder value and optimize capital structure, reflecting the company’s commitment to maintaining a robust financial position.

The most recent analyst rating on (JP:1802) stock is a Buy with a Yen3484.00 price target. To see the full list of analyst forecasts on Obayashi stock, see the JP:1802 Stock Forecast page.