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BOSTON (TheStreet) -- The rebuilding of parts of Japan will take time and money. The country's two largest prefabricated homebuilders, Daiwa House Industry (DWAHY) and Sekisui House (SKHSY) , are sure to be beneficiaries.

The companies' market values of $7.8 billion and $6.6 billion are bigger than that of the top U.S. homebuilder,




Daiwa House Industry and Sekisui House are traded in the U.S. on the OTC Markets Group online market, formerly known as the "pink sheets." Both stocks rose to 2011 highs March 14, just three days after the earthquake and tsunami hit, on expectations they'll play big roles in the nation's rebuilding.

Daiwa House Industry is Japan's second-largest largest residential homebuilder, but its biggest prefabricated homebuilder, while Sekisui House is one of the largest homebuilders in the country and its prefabricated construction business is second-biggest.

The prospects for the two companies are compelling. The Japanese government has said it will cost as much as $309 billion to rebuild the nation, which is about 6% of Japan's total economic output in 2010.

It estimates that more than 135,000 buildings were destroyed or damaged by the March 11 earthquake and tsunami.

According to the World Bank, Japan will need up to five years to rebuild and recover from the damage caused by the natural disasters.

Japan's Miyagi prefecture has already started building 1,110 temporary homes as that region's government begins work to house more than 243,000 displaced residents. As part of that, it has requested 10,000 housing units from the Japan Prefabricated Construction Suppliers and Manufacturers Association. Daiwa and Sekisui are both members of the industry trade group.

Fukushima prefecture, where radiation leaks triggered evacuation of areas near two nuclear power plants, began building temporary homes March 23 and aims to build 14,000 units.

Here is a summary of each company's prospects:

Daiwa House Industry's


core business is the construction and sale of pre-fabricated, single-family homes and apartment buildings. It's also involved in commercial construction, hotel ownership, and it owns a chain of sports facilities.

Daiwa House Industry has business interests in office relocation and staffing services, and vehicle and equipment leasing. It has more than 100 branch offices and factories throughout Japan, and in China and Vietnam.

Its shares are down 0.4% this year but up 8% over the past year, and are currently trading at $122.75. It has a price-to-earnings ratio of 33.

Parametric Portfolio Associates was the largest U.S. institutional investor at the end of 2010, with a 0.1% stake, according to Morningstar.

Credit Suisse


said in an April 1 research report that Daiwa House Industry will play an "important role in Japan's recovery" and it reiterated its "outperform" rating on its shares.

"We favor the stock from both near-term and long-term perspectives," said the note. "In the near term, amid growing concerns about earnings declines at many companies owing to the disaster's impact, we expect Daiwa House to keep earnings on an upward track in (its fiscal year that ends March 2012.)

"From a longer-term perspective, we think the medium-term plan that is expected to be released along with (fiscal 2011) results will include solid profit targets. The plan's announcement is likely to raise domestic and overseas investors' expectations for profit growth at Daiwa House," said the Credit Suisse analyst's note.

"We think the company is indispensable to Japan's future, because it provides products and services needed by Japanese society as it rebuilds from the rubble of the recent quake and tsunami disaster. Over the longer term, we expect Daiwa House to provide greater levels of satisfaction to its stakeholders, including shareholders," it said.

Daiwa House Industry called its first prefabricated homes "pipe houses" because original models were built on a frame made from steel pipes.

In addition to its residential homebuilding business,

Sekisui House


is involved in the design and construction and management of commercial construction projects. It also owns a real estate brokerage and landscaping business.

Sekisui House has a 5.5% market share in prefab housing and 8.2% in rental apartment construction in Japan.

Its shares are down 7.8% this year and down 6.5% over the past year, and are currently trading at $9.34. It has a 17.7 price-to-earnings ratio.

Nuveen Fund Advisors owned 0.2% of its shares at the end of January, making it the largest U.S. institutional owner, per Morningstar.

In an April 4 research note, Credit Suisse, which has Sekisui House shares rated "outperform," said the "provision of suitable housing is essential to (Japan's) recovery process, and society is likely to expect Sekisui House to play its role."

It projects revenue growth of 7% for the company in the coming fiscal year and 5% the next year based on rising demand for replacement housing.

But it added that Japan's "housing sector companies are likely to face longer completion periods for residential construction as well as higher labor and material costs, in the wake of the earthquake. However, Sekisui House's earnings structure suggests it will suffer less impact from higher labor costs than its peers."

Therefore, the earthquake's aftermath is expected to "have a negative impact on earnings initially, but thereafter drive a profit recovery."

And it notes that Sekisui House has a growing and highly profitable international business, including in China, which is undergoing a huge residential building boom, which will help offset some negative issues.

In a March 7 analyst's report,

Deutsche Bank


reiterated its "buy" rating on Sekisui House and said its detached housing and urban redevelopment projects should drive revenue growth of 6.6% for fiscal 2012.


Bank of America's


Merrill Lynch unit has a "neutral" rating on Sekisui House as its most recent quarterly results were slightly disappointing. But it says the company's "strength is its rich pipeline of single-family homes for the relatively wealthy" and that is expected to grow, longer-term, due to recent changes in estate tax laws in Japan.

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