Penta-Ocean Construction Co (1893) AI Stock Analysis

• Market Cap: ¥540.93B
• Dividend Yield: 1.88%
• Average Volume (3M): 1.66M
• Price to Earnings (P/E): 9.1
• Beta (1Y): 0.96
• Revenue Growth: 16.67%
• EPS Growth: 5.82%
• Country: JP
• Employees: 3,824
• Sector: Industrials
• Sector Strength: 72
• Industry: Engineering & Construction
• EPS (TTM): 43.10
• Shares Outstanding: 286,013,920
• 10 Day Avg. Volume: 1,976,700
• 30 Day Avg. Volume: 1,658,796
• PEG Ratio: -0.54
• Price to Book (P/B): 1.17
• Price to Sales (P/S): 0.28
• P/FCF Ratio: -3.27
• 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: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): 116.14
• Revenue Forecast (FY): ¥756.20B

• Rating: 64 Neutral
• Price Target: ¥2,030.00 ▲(24.20% Upside)
• Action: Reiterated Date: 02/11/26
• Date: Action: Reiterated 02/11/26

The score is driven primarily by mixed fundamentals: strong revenue growth is outweighed by declining margins, rising leverage, and especially severe negative free cash flow. Technicals are supportive due to a strong uptrend above key moving averages, but momentum is very stretched (high RSI/Stoch), which tempers the technical score. Valuation is reasonable on earnings but the dividend yield is modest.

Positive Factors

Revenue Growth

Sustained double-digit revenue growth (+17.76% in 2025) indicates the company is consistently winning and executing large, multi‑year contracts. Over 2–6 months this trend supports backlog replenishment and revenue visibility given project-based progress recognition and diversified contract streams.

Specialized Marine/Port Expertise

A clear niche in marine, port and dredging projects gives Penta-Ocean structural competitive advantage: specialized equipment, engineering know‑how and reputation reduce competition from generalists and support premium bidding power on complex infrastructure tenders domestically and overseas.

Equity Base Provides Stability

A 26.06% equity ratio provides a meaningful capital buffer for large project work and absorbs construction cycle volatility. This durable balance sheet strength supports ability to bid on capital‑intensive jobs and access financing when needed, aiding operational continuity over months.

Negative Factors

Severe Negative Free Cash Flow

Material negative free cash flow (¥61.48B) signals the business is not generating sufficient cash from operations to fund capex and working capital. Over the medium term this increases reliance on external financing, elevates liquidity and refinancing risk for multi‑year projects.

Declining Profitability Margins

Sequential margin erosion points to rising input or execution costs and weaker project economics. Persistently falling gross and net margins compress operating leverage and reduce internal funds for reinvestment, making the business more vulnerable to bidding pressure and cost shocks.

Rising Leverage and Falling ROE

Increasing leverage (debt/equity ~0.97) alongside declining ROE raises financial risk: higher interest burden and reduced returns to shareholders. Over a multi‑month horizon this constrains strategic flexibility, increases sensitivity to rate moves, and may pressure credit metrics.

Penta-Ocean Construction Co Business Overview & Revenue Model

Company Description

Penta-Ocean Construction Co., Ltd. engages in the civil engineering and building construction activities in Japan, Southeast Asia, and internationally. The company operates through three segments: Domestic Civil Engineering, Domestic Building Construction, and Overseas. It constructs ports and harbors, airports, power stations, bridges, offices, commercial buildings and lodges, and residential and education buildings, as well as undertakes water supply and sewerage, railway, environmental facility, recreational, and dam and river work projects. The company is also involved in the development of real estate properties; and shipbuilding, leasing, insurance, and environment businesses. Penta-Ocean Construction Co., Ltd. was founded in 1896 and is headquartered in Tokyo, Japan.

How the Company Makes Money

Penta-Ocean Construction Co. generates revenue primarily through the bidding and execution of construction contracts in both public and private sectors. The company earns money by providing comprehensive services that include planning, design, and construction management for large infrastructure projects. Key revenue streams include government contracts for public works, private sector projects, and international assignments, particularly in Asia and the Pacific regions. The firm also benefits from strategic partnerships with local and international firms, which can enhance its capabilities and expand its market reach. Additionally, Penta-Ocean invests in technology and innovation to improve efficiency and reduce costs, ultimately contributing to its profitability.

Penta-Ocean Construction Co Financial Statement Overview

Summary

Revenue growth is strong (notably +17.76% in 2025), but profitability is weakening with declining gross and net margins. Balance sheet remains supported by a solid equity ratio (26.06%), yet leverage is rising (debt-to-equity 0.97) and ROE is declining. Cash flow is the biggest drag, with materially negative free cash flow (¥61.48B) and weak operating cash conversion.

Income Statement

Penta-Ocean Construction Co has shown a consistent revenue growth trend over the past years, with a significant increase of 17.76% in 2025. However, the gross profit margin has decreased from 2024 to 2025, indicating rising costs. The net profit margin also declined, suggesting profitability challenges. Despite these issues, the company maintains positive EBIT and EBITDA margins, although both have seen a downward trend.

Balance Sheet

The company maintains a solid equity base with an equity ratio of 26.06% in 2025, showing a strong reliance on equity financing. However, the increasing debt-to-equity ratio, which reached 0.97 in 2025, points to a rising leverage risk. Return on equity has declined, reflecting reduced profitability relative to equity. Overall, the balance sheet shows solid equity but increasing leverage concerns.

Cash Flow

Penta-Ocean Construction Co faced severe cash flow challenges in 2025, with a negative free cash flow of ¥61.48 billion. The operating cash flow to net income ratio is negative, indicating that the company's operations are not generating enough cash to cover the costs, exacerbated by high capital expenditures. Free cash flow to net income ratio also indicates cash flow strain.

Breakdown	TTM	Mar 2025	Mar 2024	Mar 2023	Mar 2022	Mar 2021
Income Statement
Total Revenue	747.28B	727.49B	617.71B	502.20B	458.23B	471.06B
Gross Profit	50.90B	47.58B	53.33B	26.42B	37.23B	50.04B
EBITDA	42.49B	30.52B	37.30B	10.16B	23.46B	38.12B
Net Income	14.14B	12.46B	17.88B	684.00M	10.75B	20.99B
Balance Sheet
Total Assets	683.11B	660.13B	566.03B	508.18B	467.36B	452.25B
Cash, Cash Equivalents and Short-Term Investments	53.03B	57.27B	60.19B	50.50B	44.86B	59.79B
Total Debt	219.32B	166.47B	110.32B	93.69B	92.56B	82.21B
Total Liabilities	511.15B	488.00B	392.97B	351.23B	307.58B	293.85B
Stockholders Equity	171.90B	172.06B	173.01B	156.84B	159.60B	158.28B
Cash Flow
Free Cash Flow	0.00	-61.48B	-1.75B	9.57B	-16.34B	19.65B
Operating Cash Flow	0.00	-23.33B	9.14B	19.69B	-7.69B	30.69B
Investing Cash Flow	0.00	-23.22B	-6.41B	-11.70B	-11.82B	-12.80B
Financing Cash Flow	0.00	43.88B	6.71B	-6.96B	1.36B	-3.11B

Penta-Ocean Construction Co Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 1634.50
• 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:1893, the sentiment is Neutral. The current price of 1634.5 is below the 20-day moving average (MA) of 2056.80, below the 50-day MA of 1821.01, and above the 200-day MA of 1326.29, indicating a neutral trend. The MACD of 39.69 indicates Positive momentum. The RSI at 44.78 is Neutral, neither overbought nor oversold. The STOCH value of 20.34 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for JP:1893.

Penta-Ocean Construction Co Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
1802	75 Outperform	¥2.75T	10.54	14.23%	2.47%	2.27%	70.36%
1803	75 Outperform	¥2.19T	12.97	11.22%	1.48%	5.14%	773.86%
1861	74 Outperform	¥301.95B	9.47	7.62%	3.44%	7.54%	115.47%
1812	71 Outperform	¥3.13T	15.14	13.56%	1.96%	10.52%	71.09%
1801	67 Neutral	¥2.98T	15.64	16.64%	1.83%	6.60%	114.38%
1893	64 Neutral	¥540.93B	9.14	10.95%	1.88%	16.67%	5.82%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%