Kaneshita Construction Co., Ltd. (1897) AI Stock Analysis

• Market Cap: ¥6.97B
• Dividend Yield: 1.72%
• Average Volume (3M): 1.69K
• Price to Earnings (P/E): 36.9
• Beta (1Y): 0.21
• Revenue Growth: -28.06%
• EPS Growth: -43.82%
• Country: JP
• Employees: 179
• Sector: Industrials
• Sector Strength: 72
• Industry: Engineering & Construction
• EPS (TTM): 3.11
• Shares Outstanding: 3,806,660
• 10 Day Avg. Volume: 3,050
• 30 Day Avg. Volume: 1,693
• PEG Ratio: 0.94
• Price to Book (P/B): 0.31
• Price to Sales (P/S): 0.59
• P/FCF Ratio: 9.46
• 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): N/A
• Revenue Forecast (FY): N/A

• Rating: 71 Outperform
• Price Target: ¥3,576.00 ▲(23.95% Upside)

The stock is supported by strong technical momentum and a robust balance sheet, but is limited by high valuation and declining revenue and cash flow.

Positive Factors

Low leverage / strong equity base

An equity ratio ~84.5% and minimal debt provide durable financial flexibility, lowering default risk and enabling disciplined capital allocation. This balance sheet strength supports bidding on projects, surviving revenue cycles, and funding strategic investments without heavy refinancing.

Improving profitability metrics

A rising net profit margin signals operational improvements and cost control, implying the company can extract more profit from revenues even as top line weakens. Sustained margin expansion enhances long-term earnings durability and supports reinvestment or shareholder returns.

Strong cash generation quality

Operating cash flow about twice reported net income indicates high earnings quality and real cash conversion. This durable cash-generating ability helps fund working capital, capex and distributions, providing a buffer against cyclical revenue declines and short-term liquidity stress.

Negative Factors

Sharp revenue contraction

A ~28% revenue decline is a structural concern: reduced scale can erode pricing power, supplier terms and fixed-cost absorption. If persistent, shrinking top line undermines long-term growth prospects, backlog replenishment and the ability to invest in competitive capabilities.

Material free cash flow decline

Significant FCF deterioration weakens funding for capex, dividends and working capital needs despite decent operating cash conversion. Persistent FCF declines suggest structural issues in cash management or project timing that could constrain investment and increase reliance on external financing.

Earnings contraction / volatile EPS

A ~44% drop in EPS signals earnings volatility and potential demand or margin pressures. Large EPS contractions reduce retained earnings capacity, limit strategic reinvestment, and indicate the company may struggle to deliver consistent shareholder returns if underlying drivers aren't stabilized.

Kaneshita Construction Co., Ltd. Business Overview & Revenue Model

Company Description

Kaneshita Construction Co., Ltd., established in 1897, is a prominent player in the construction industry, specializing in civil engineering, building construction, and infrastructure development. The company operates across various sectors, including residential, commercial, and industrial construction, providing high-quality services and innovative solutions tailored to meet the diverse needs of its clients. With a rich history and a commitment to excellence, Kaneshita Construction has built a reputation for reliability and quality in the construction market.

How the Company Makes Money

Kaneshita Construction Co., Ltd. generates revenue primarily through its construction projects, which include public works, private sector developments, and large-scale infrastructure projects. The company bids on government contracts as well as private contracts, providing services ranging from project planning and design to execution and management. Key revenue streams include construction fees, project management services, and maintenance contracts. Additionally, Kaneshita may engage in partnerships with local governments and private entities to undertake joint ventures, enhancing its capability to secure larger projects and expand its market reach. Factors contributing to its earnings include a strong reputation, a skilled workforce, and a strategic focus on sustainable building practices, allowing it to capitalize on the growing demand for environmentally friendly construction solutions.

Kaneshita Construction Co., Ltd. Financial Statement Overview

Summary

The company has a strong balance sheet with low leverage and improved net profit margin, but faces challenges with declining revenue and free cash flow.

Income Statement

The company has shown a stable gross profit margin around 12.5% to 14.5% over the years, indicating consistent cost control relative to revenue. The net profit margin improved in 2024 to 3.3% from 2.5% in 2023, reflecting operational efficiency. However, the revenue growth rate has been negative in recent years, indicating a decline in top-line performance.

Balance Sheet

The balance sheet is strong, with a very low debt-to-equity ratio due to minimal debt levels, and a high equity ratio of approximately 84.5% in 2024, reflecting financial stability and low leverage risk. Return on equity improved to 1.7% in 2024 from 1.5% in 2023, which suggests better utilization of equity.

Cash Flow

Free cash flow decreased significantly from 2023 to 2024, indicating potential challenges in cash generation. The operating cash flow to net income ratio is robust at around 2.0 in 2024, showing strong cash flow relative to profitability. However, the decline in free cash flow growth rate indicates a need for better cash management.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	7.93B	9.74B	10.66B	9.90B	7.63B	10.96B
Gross Profit	941.00M	1.22B	1.19B	1.07B	833.00M	1.69B
EBITDA	289.00M	350.00M	485.00M	216.00M	134.00M	839.00M
Net Income	158.00M	321.00M	270.00M	190.00M	45.00M	503.00M
Balance Sheet
Total Assets	22.49B	21.84B	22.20B	19.99B	19.98B	19.99B
Cash, Cash Equivalents and Short-Term Investments	11.40B	9.13B	8.64B	7.02B	9.33B	9.18B
Total Debt	7.00M	8.00M	10.00M	12.00M	14.00M	0.00
Total Liabilities	3.52B	3.03B	4.05B	2.74B	2.88B	2.79B
Stockholders Equity	18.59B	18.46B	17.81B	16.92B	16.77B	16.86B
Cash Flow
Free Cash Flow	0.00	604.00M	1.43B	-1.29B	-816.00M	3.04B
Operating Cash Flow	0.00	650.00M	1.55B	-1.25B	-573.00M	3.11B
Investing Cash Flow	0.00	-252.00M	679.00M	-454.00M	434.00M	145.00M
Financing Cash Flow	0.00	-111.00M	-110.00M	-111.00M	-108.00M	-3.01B

Kaneshita Construction Co., Ltd. Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 2885.00
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:1897, the sentiment is Positive. The current price of 2885 is below the 20-day moving average (MA) of 3080.90, below the 50-day MA of 2962.77, and above the 200-day MA of 2811.35, indicating a bullish trend. The MACD of 70.72 indicates Negative momentum. The RSI at 69.88 is Neutral, neither overbought nor oversold. The STOCH value of 64.82 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for JP:1897.

Kaneshita Construction Co., Ltd. Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
1841	82 Outperform	¥5.68B	10.32	―	1.88%	-16.60%	-19.91%
1718	77 Outperform	¥9.37B	6.98	―	2.87%	19.10%	78.61%
1768	74 Outperform	¥10.45B	10.83	―	2.16%	24.11%	1644.12%
1897	71 Outperform	¥6.97B	36.94	―	1.72%	-28.06%	-43.82%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%
1844	61 Neutral	¥11.49B	23.17	―	2.74%	4.36%	17.63%