Israeli Infrastructure Firms Rally on Metro Project While Residential Builders Struggle

The Israeli construction sector is experiencing a clear split between infrastructure companies and those focused on residential and office buildings. Since the start of the year, the Tel Aviv 125 index rose by 10%, but infrastructure-focused firms saw much stronger gains. Oron Group's stock surged 129%, while Shapir, Rimon, and Menarv increased by 37%, 34%, and 17% respectively. Conversely, companies heavily reliant on residential and office construction, such as Danya Cebus and Ashtrom, saw their shares drop by 26% and 21%.

Investor optimism in infrastructure stems from anticipated massive state investments to support population growth and economic recovery following recent conflicts. The flagship project driving this enthusiasm is the metro system, expected to require investments of approximately 180-200 billion shekels. Many contractors are preparing to secure significant portions of this project.

Oron, managed by brothers Yoel and Gili Azaria, derives 56% of its revenue from infrastructure and construction, including roads, tunnels, and public buildings. The company recently won two initial metro project tenders, boosting its stock by 8% and 17%. Oron reported a 12% sales increase in Q2 2026 to 548 million shekels and turned a previous loss into a 13 million shekel profit, driven by a 25% revenue jump in infrastructure activities.

Shapir, Israel's largest contractor with a market value exceeding 15 billion shekels, also benefits from infrastructure growth. Its main sectors are industry and infrastructure, which accounted for 90% of Q2 revenues. Shapir reported a 28% and 22% revenue increase in these sectors, respectively, and a 53% profit rise in industry.

In contrast, Danya Cebus, controlled by Yaakov Luxenburg, remains more dependent on residential and office construction, which together make up over 70% of its revenue. Despite a 7.4 billion shekel infrastructure backlog, its 11.8 billion shekel residential project portfolio weighs heavily on results. The company’s Q2 gross profit from infrastructure rose to 19 million shekels, but residential profit plummeted to just 250,000 shekels amid cost increases and market slowdown. Its stock has fallen 26% this year amid concerns about office space demand and rising labor costs.

Overall, the metro project and related infrastructure investments are driving strong investor interest and stock gains for companies focused on these areas, while firms with significant exposure to residential and office markets face ongoing challenges.