Minrav's Contracting Backlog: How Much of the Infrastructure Surge Can Become Durable Margin?

What the Backlog Really Means

The main Minrav article argued that the 2025 recovery was real, but that it still had not resolved the funding test. This follow-up isolates the second question hiding inside that same story: does the surge in contracting backlog, especially in infrastructure, really improve the quality of future profit, or does it mainly increase activity volume?

There is good news here. Contracting backlog reached NIS 3.932 billion at the end of 2025, up from NIS 3.520 billion at the end of 2024. The presentation points to roughly NIS 4.6 billion of wins over the last two years, with a clear tilt toward public bodies, infrastructure, and national tenders. The rating report points in the same direction: sharp backlog growth, better results in the recent quarters, and an assumption that older troubled projects are gradually leaving the mix.

But that is only half the picture. A larger backlog still does not mean a better margin. In the table of projects still under execution, remaining expected revenue stood at NIS 3.479 billion at year-end 2025, against only NIS 243.9 million of remaining expected gross profit. That is roughly 7% of remaining revenue. So the data support a read of recovery and backlog cleanup, but not a read of a step-change into a contractor with unusually strong margin economics.

The timing point matters too. Of the reported contracting backlog, about NIS 2.071 billion is scheduled for revenue recognition in 2026, another NIS 1.240 billion in 2027, and only NIS 620.4 million from 2028 onward. More than half the backlog therefore sits inside the next twelve months. That is good for visibility, but it also means the quality test is not a distant one. It happens now.

The implication is straightforward: if Minrav does not show in 2026 that the new backlog converts into volume and profit without another round of estimate revisions, the quality argument will remain an attractive theory rather than a proven fact.

The Public Sector Is Entering the Backlog Faster Than It Is Entering the Income Statement

The presentation sharpens what actually changed in the business direction. According to management, roughly 70% of incoming backlog in 2019 through 2025 was tilted toward the public sector, especially infrastructure. That is not a side note. It means Minrav is pushing its order book away from a world of purely private construction and toward tenders for government entities, public institutions, and transport projects.

That also shows up in the recent win list:

That table helps explain why the Minrav narrative has become an "infrastructure" story. But to understand whether it has already changed the quality of earnings, it is worth pausing on the annual report. In 2025 only 38% of contracting revenue came from the public sector, versus 42% in 2024 and 32% in 2023. In other words, incoming backlog has become more public much faster than the actual revenue mix has changed. Even after a year of public-sector wins, 62% of contracting revenue in 2025 still came from the private sector.

This is the point a reader could easily miss on first pass. The backlog already tells a more public-sector story. The income statement still tells a story in which Minrav performs a very large amount of private and commercial work. So the shift in backlog is a positive signal on direction, but not yet proof that the everyday economics of the business have already been rewritten.

There is also a double message here on quality. On one hand, the order book is shifting more toward government entities, public institutions, and transport projects, and less toward a world built only on private developers. On the other hand, these are still contractor tenders built around schedules, guarantees, input indices, and pricing discipline. That means the public tilt changes the identity of the work, but does not erase contractor math.

Where Quality Has Actually Improved, and Where Margin Still Looks Like Contracting

This is where the core answer to the headline question sits. The real improvement in 2025 was not an explosion in infrastructure margin. It was first and foremost an exit from the hole created by older building projects.

In the table of projects still under execution, annual gross margin in building moved to 5% in 2025 after minus 14% in 2024. That is a dramatic shift, and it explains a large part of the repair. By contrast, annual gross margin in infrastructure stood at 8% in 2025, versus 10% in 2024 and 10% in 2023. Electro-mechanical systems stood at 6% in 2025, versus 10% in 2024. So the infrastructure surge helps stabilize the business, but based on the report it did not arrive with a built-in margin upgrade.

The true quality test sits in the remaining backlog:

That chart makes three things clear.

First, infrastructure is now the largest reservoir of future revenue inside the open project book, with NIS 1.629 billion of expected revenue. That is the volume engine.

Second, building is still not far behind, at NIS 1.491 billion of expected revenue. So Minrav has not turned into a pure infrastructure company. It still carries a heavy building book as well.

Third, and most important, expected gross margin on the remaining open project book stays single digit in both infrastructure and building. Infrastructure is about 7.6%, building about 5.5%, and only electro-mechanical systems move above 10%. This is not a picture of a backlog that guarantees exceptional margin. It is a picture of a backlog that looks cleaner, but is still priced like contracting.

The most current example reinforces exactly that read. In the Beit Dagan win report, the company explicitly said the expected profit rate is similar to the rates it usually uses to price similar contracting projects. That is a very important disclosure. It does not describe an unusually attractive project. It describes a large project coming in at normal economics. So Beit Dagan is evidence of continuing order flow, not evidence that Minrav has suddenly entered a new margin regime.

Put all of this together and the answer becomes more precise than the slogan "infrastructure backlog." The infrastructure surge improves activity visibility, increases reliance on public-sector work, and raises the odds of moving beyond older weak projects. But based on the numbers embedded in the open backlog, it still does not prove that Minrav has built itself a new margin moat.

Older Projects Are Rolling Off, but 2026 Is the Proof Year

To understand why it still makes sense to talk about improving quality, it helps to look at what is leaving the system, not only what is entering it. The rating report explicitly describes 2023 through 2024 as years in which the contracting segment absorbed material losses, mainly because of older projects that suffered from planning and pricing problems, longer execution timetables, higher input costs, statutory complexity, and external war-related effects. In the same breath it says that in January through September 2025 the segment had already moved to about NIS 61 million of profit, equal to roughly 4.9% of revenue, versus only NIS 12.8 million, or 1.1% of revenue, in the comparable period.

The more critical detail is that the loss-making engineering projects are expected to be completed in the first half of 2026, and according to the company were already fully provided for at the balance-sheet date. If that is borne out, then 2026 should be the first year in which Minrav is dealing with a larger backlog, a more public backlog, and a lower weight of painful legacy baggage.

But precision still matters. The end of older troubled projects does not automatically solve the quality problem. It only removes a weight. From that point on, Minrav still has to show that the new projects do not fall into the same traps. And the company itself lays out what could interfere: shortages of skilled labor, dependence on government policy toward foreign workers and Palestinian labor, relatively high exposure to steel and concrete in infrastructure work, and the built-in risk of tender pricing where margins are limited from day one.

That is exactly why the backlog surge should not yet be read as proof of durable margin, but as an opportunity for durable margin. For that opportunity to become a fact, Minrav needs to pass three tests almost in sequence:

1. The legacy loss-making projects really do need to exit by mid-2026.
2. The newer public-sector wins need to enter execution without another round of estimate slippage.
3. Backlog conversion into revenue cannot come at the cost of another sharp deterioration in working capital or margin.

That also explains why the more than NIS 2 billion expected in 2026 is a double-edged number. On one hand, it gives Minrav a very strong activity base for the coming year, about 21.9% above actual contracting revenue in 2025. On the other hand, it concentrates the execution test into a relatively short time frame. If 2026 runs cleanly, the backlog-quality thesis will strengthen quickly. If not, even a backlog approaching NIS 4 billion will not hide the problem.

Bottom Line

The infrastructure surge does change the quality of Minrav's contracting backlog, but at this stage it changes mainly the direction of the business, not the level of margin. The public-sector weight of the order book is higher, troubled projects are moving toward completion, and recent wins show the company can still replenish volume at a meaningful pace. Those are real changes.

But anyone looking in the filings for proof of a new durable-margin level still does not have it. Expected gross profit on the open project book remains in a single-digit range, and Beit Dagan itself supports a normal-pricing read rather than an exceptional one. So the right 2026 thesis is not "Minrav has become a margin story." The right thesis is "Minrav has cleaned part of the backlog, and now has to show that the new book is genuinely more disciplined than the old one."

If that happens, the large backlog will start to look like a durable profit engine. If not, it will remain mostly a volume engine.