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Infrastructure construction sector: Navigating headwinds, capturing growth.
12/06/2026 - 1:57:27 CH- The public investment sector has faced short-term challenges, with 5M2026 disbursement reaching only 24% of the annual plan, primarily due to rising construction material costs, slower-than-expected land clearance, and delays in investment procedures. Nevertheless, we believe the medium- to long-term outlook remains positive and disbursement progress will improve in the following months thanks to: (1) Healthy fiscal position: Vietnam’s fiscal capacity remains strong, with public debt declining to approximately 35.5% of GDP by end-2025, government debt maintained at 33–34% of GDP, debt servicing obligations at a manageable 19–20% of state budget revenue, and stable government bond yields. (2) Improving regulatory framework: Ongoing legal reforms are gradually addressing bottlenecks related to project approvals, land clearance, and bond funding channels. (3) Enhanced risk management measures: Mechanisms such as price-adjustment clauses, risk-sharing arrangements, open-book contracting models, centralized procurement, and proactive material inventory planning are helping mitigate the impact of volatile input costs.
- Resilient corporate performance: Construction and building materials companies delivered solid 1Q2026 earnings growth, supported by sizeable backlog carried forward from previous years. However, earnings in subsequent quarters may face pressure from elevated material costs and project execution risks arising from geopolitical tensions in the Middle East.
- Overall, we expect 2026 earnings across the construction and building materials sectors to remain on a growth trajectory (with the exception of VCG), albeit at a slower pace than in 2025. Large-scale infrastructure projects are expected to provide sufficient workload to offset headwinds from material shortages and cost inflation, supporting sector growth through 2026–2027.
- Our top picks are HPG, CTD, DPG, and HT1, given their strong competitive positioning, solid balance sheets, and relatively low legal and execution risks. These companies are well positioned to capitalize on Vietnam’s accelerating public investment cycle, supporting sustainable earnings growth over the medium term.
