Israel's Infrastructure Stocks Surge on Massive Metro Project Bids

Urban and Transport Networks (UTN) is advancing tender processes for the Gush Dan metro system, collectively valued at approximately 100 billion shekels. This includes about 65 billion shekels for Phase 1, covering tunnel boring and station construction, and an additional 35 billion shekels for Phase 2, focusing on systems. Nineteen consortia have already passed the preliminary qualification stage, with companies like Tidhar and Rimmon forming joint ventures in anticipation.

The planned metro network will span roughly 150 kilometers, featuring 109 stations across 24 local authorities, marking it as one of the largest construction projects in Israel. This scale is a significant driver behind the recent gains in infrastructure stocks on the Tel Aviv Stock Exchange, though the financial benefits will be realized gradually over many years.

Shapir Engineering, the sector's largest company with a market capitalization of around 15 billion shekels, has seen its stock rise over 30% year-to-date. The company reported revenues of approximately 3.2 billion shekels and a net profit exceeding 160 million shekels for January-June 2026. Shikun & Binui, valued at about 11 billion shekels, has experienced a different trend with its stock largely unchanged this year, following a significant rise in 2025. Electra's stock has also seen modest growth of about 2% year-to-date.

Despite varied stock performance, Shikun & Binui's net profit in the second quarter increased to approximately 240 million shekels. Investor enthusiasm appears concentrated on specific companies, particularly those in energy and concessions, with Generation Capital up over 80% and Ashdod Oil Refinery (ORL) up around 152% year-to-date. Rimmon, involved in tunneling and water, trades at a high price-to-earnings ratio, reflecting expectations of rapid growth.

Shapir Engineering holds about 10% of ORL, with options that could lead to control. To address a regulatory hurdle, Shapir sold its gas distribution business to Elad for 230 million shekels, anticipating a profit of 50 to 100 million shekels. However, a significant obstacle remains: the Committee for the Reduction of Centralization recommended against Shapir gaining control of ORL, a decision the Ministry of Energy opposes, with a resolution likely post-election.

The surge has created substantial paper wealth for Shapir's controlling shareholders, the Shapira brothers, who collectively own about 56% of the company, valued at over 8 billion shekels. They have also sold shares worth over a billion shekels since the 2016 IPO.

Private infrastructure group Y.D. Barzani is considering an IPO valuing it at approximately 3 billion shekels pre-offering, aiming to raise about 1 billion shekels. This offering is seen as a test of institutional investor appetite for such ventures. Analysts note that while the metro tenders promise long-term revenue, actual execution depends on state budgets, and infrastructure contracting margins are relatively thin. Shapir's high P/E ratio suggests that much of the anticipated work is already priced into its stock.