Penta-Ocean Construction Co (1893) AI Stock Analysis

• Market Cap: ¥510.29B
• 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): 117.2
• Revenue Forecast (FY): ¥755.75B

• Rating: 64 Neutral
• Price Target: ¥1,915.00 ▲(17.16% 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

Strong revenue growth & marine/port niche

Double-digit revenue growth (17.76% in 2025) combined with a focused marine and port construction franchise signals durable demand and specialized execution capabilities. This niche supports backlog visibility, pricing leverage on complex projects and geographic diversification benefits.

Solid equity base (equity ratio 26.06%)

An equity ratio around 26% provides a tangible capital buffer to absorb project-cycle volatility and supports bonding and credit facilities required for large infrastructure contracts. That equity base improves resilience to overruns and underpins access to financing for necessary capex.

Positive EBIT/EBITDA margins

Sustained positive EBIT and EBITDA margins indicate underlying project-level profitability and operational capability in complex civil and marine engineering. Even with margin compression, remaining positive margins sustain core operations and provide scope for margin recovery via efficiency and pricing improvements.

Negative Factors

Severely negative free cash flow

A ¥61.48B negative free cash flow position shows cash generation is materially lagging reported earnings. Persistent negative FCF forces reliance on external financing, raises liquidity and refinancing risk, and constrains capacity to fund capex, bid bonds and working capital for multi-year projects.

Declining gross and net margins

Declining gross and net margins suggest rising input costs or pricing pressure on contracts. Structural margin erosion reduces profitability on long-term projects, weakens cushions for cost overruns and lowers the company's ability to convert revenue growth into sustainable cash flow and shareholder returns.

Rising leverage and falling ROE

Debt-to-equity near 1.0 alongside declining ROE indicates leverage is increasing while returns on shareholders' capital worsen. That mix raises interest-service and solvency risks on long-duration projects and limits strategic flexibility to invest or bid on capital-intensive marine contracts without higher financing costs.

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 primarily makes money by contracting to plan, engineer, and build construction and civil engineering projects for customers such as government entities and private-sector developers. Revenue is recognized from construction contracts (typically based on project progress) and is driven by the value of work performed on large, multi-year projects. Key revenue streams include (1) domestic and overseas civil engineering works—where marine construction, dredging, and port/coastal infrastructure projects are a notable specialty—(2) building construction and related engineering services, and (3) ancillary project-related services tied to delivering those contracts (e.g., design/engineering, procurement management, and construction management as part of a contracted scope). Earnings are influenced by the company’s ability to win bids, execute projects efficiently (labor, materials, equipment utilization, and subcontractor management), manage cost overruns and schedule risks, and maintain a steady order backlog. Information on specific major partnerships or customer concentration is null.

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	502.21B	458.23B	471.06B
Gross Profit	50.90B	47.58B	53.33B	26.42B	37.23B	50.04B
EBITDA	20.41B	30.52B	37.29B	10.16B	23.46B	38.35B
Net Income	14.14B	12.46B	17.88B	684.00M	10.75B	20.99B
Balance Sheet
Total Assets	683.11B	665.06B	571.01B	511.66B	470.02B	455.40B
Cash, Cash Equivalents and Short-Term Investments	53.03B	57.27B	60.19B	50.50B	44.86B	59.79B
Total Debt	219.32B	166.66B	110.46B	93.84B	92.65B	82.33B
Total Liabilities	511.15B	492.93B	397.94B	354.70B	310.23B	296.99B
Stockholders Equity	171.90B	172.06B	173.01B	156.85B	159.60B	158.29B
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: Negative
• Last Price: 1634.50
• 50DMA: Negative
• 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 Negative. The current price of 1634.5 is below the 20-day moving average (MA) of 1931.10, below the 50-day MA of 1860.58, and above the 200-day MA of 1369.03, indicating a neutral trend. The MACD of -30.73 indicates Positive momentum. The RSI at 41.60 is Neutral, neither overbought nor oversold. The STOCH value of 57.74 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative 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	¥2.64T	10.54	14.23%	2.47%	2.27%	70.36%
1803	75 Outperform	¥1.94T	12.97	11.22%	1.48%	5.14%	773.86%
1861	74 Outperform	¥287.07B	9.47	7.62%	3.44%	7.54%	115.47%
1812	71 Outperform	¥2.96T	15.14	13.56%	1.96%	10.52%	71.09%
1801	67 Neutral	¥2.74T	15.64	16.64%	1.83%	6.60%	114.38%
1893	64 Neutral	¥510.29B	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%