Vietnam Construction H1 2026: Order Backlog Grows, Margins Squeezed for CTD, FCN, VCG

Overview

Vietnam’s construction sector entered H1 2026 with a strong order pipeline, driven by public investment disbursement of VND 357,000 billion and a recovery in residential real estate. However, rising material and interest costs eroded profitability, with 16 of 30 listed builders reporting lower gross margins in Q2. The divergence between large contractors such as Coteccons (CTD), Fecon (FCN) and Vinaconex (VCG) and smaller peers is widening.

Key Facts

• Real GDP growth for the construction sector accelerated from 8.5% in Q1 2026 to 10.2% in Q2 2026.
• Public investment disbursement reached VND 357,000 billion in H1 2026, up 12% year-on-year and equal to 35.5% of the annual plan.
• New apartment supply eligible for sale rose 55% in Hà Nội and 78% in Hồ Chí Minh City.
• Steel prices increased 8%–10% and cement prices 3%–4% year-on-year.
• 16 of the 30 largest listed construction companies saw gross margin declines in Q2 2026.
• Interest expenses for the sector jumped 25% despite total debt rising only about 5%.
• The sector’s EBIT/interest coverage ratio fell from 2.7x at end-2025 to nearly 1.9x by end-Q2 2026.
• Large contractors recorded a 50% quarter-on-quarter increase in operating cash flow in Q2 2026 and issued VND 1,525 billion in corporate bonds over six months.

What Happened

According to a recent report by VIS Rating, Vietnam’s construction industry displayed a clear boom in headline numbers during H1 2026. The sector’s real GDP growth jumped to 10.2% in Q2 from 8.5% in Q1, powered by a surge in public investment disbursement of VND 357,000 billion, up 12% year-on-year and meeting 35.5% of the full-year target. Major transport infrastructure and social housing projects accelerated simultaneously. In the residential segment, the number of apartments eligible for sale in Hà Nội and Hồ Chí Minh City increased by 55% and 78% respectively, signaling a strong recovery in real estate demand. Additionally, the 2025 Construction Law, effective from 1 July 2026, introduced streamlined approval procedures, exempted permits for many categories, and applied special mechanisms for public projects, easing administrative bottlenecks.

Despite the robust workload, profitability remains under pressure. Rising material and labor costs are weighing heavily on contractors’ margins. Compared to the same period last year, construction steel prices rose 8%–10% and cement prices 3%–4%. As a result, 16 of the 30 largest listed construction companies saw their gross margins decline in Q2 2026. Financial burdens are also mounting: although total sector debt increased only about 5%, higher borrowing rates pushed interest expenses up 25%. The sector’s interest coverage ratio (EBIT/interest) fell from 2.7x at end-2025 to nearly 1.9x by end-Q2 2026, indicating growing debt repayment pressure. A clear divergence is emerging: large players like Coteccons, Fecon, and Vinaconex benefit from scale, better material procurement, selective project choices, and faster cash conversion, with their operating cash flow rising about 50% quarter-on-quarter in Q2 2026. They also remain among the few able to issue bonds (VND 1,525 billion in H1) to supplement working capital. In contrast, small and medium contractors face thin financial buffers and weak bargaining power, absorbing full input cost increases, with negative operating cash flow and tightening bank credit criteria.

Market Context

CTD trades on the HOSE exchange at VND 57,500 as of 16 September 2026, while FCN and VCG closed at VND 10,850 and VND 14,350 respectively. The construction sector has been a key beneficiary of Vietnam’s public investment push and the recovering property market, but margin compression has tempered enthusiasm. The divergence between large and small contractors mirrors broader market trends where scale and balance sheet strength are increasingly rewarded. The VN-Index has seen mixed performance in 2026, with infrastructure-related stocks often outperforming on policy news but facing headwinds from input cost inflation and global interest rate uncertainty.

Strategic Significance

For long-term investors, the H1 2026 data underscores a structural shift in Vietnam’s construction sector: scale and financial flexibility are becoming decisive competitive advantages. Large contractors like CTD, FCN, and VCG are better positioned to negotiate material prices, select higher-margin projects, and access bond markets, allowing them to maintain profitability despite cost pressures. The new Construction Law should reduce administrative delays and accelerate project execution, potentially boosting revenue recognition for well-capitalized firms. However, the sector’s declining interest coverage ratio signals that leverage remains a risk, especially if interest rates stay elevated. The widening gap between large and small builders may lead to consolidation, with stronger players gaining market share. Investors should focus on companies with healthy backlogs, strong cash flow generation, and manageable debt levels.

What to Watch

• Q3 2026 earnings releases for CTD, FCN, and VCG, expected in October 2026, to assess margin trends.
• Monthly public investment disbursement data from the Ministry of Finance for July and August 2026.
• Any changes in the State Bank of Vietnam’s policy rates, given the 25% jump in interest expenses.
• New bond issuance by construction firms in H2 2026, as a gauge of liquidity access.
• Implementation progress of the 2025 Construction Law, particularly approval timelines for major projects.