J.P. Morgan Japan FTM 6 Aug 26 Trading companies 1Q results first impression; Suzuki Motor results; Kao results; Rohm results; Kikkoman results; Mercari results and More

Research evidence excerpt

Asia Pacific Equity Research

Japan First to Market

06 August 2026

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Trading Company Sector (Jiro Iokibe)

1Q first impression: Expect proactive capital control to become standard part of capital policy

1Q FY2026 results at the seven trading companies left a positive impression on two counts. (1) Progress toward guidance was

stronger than we expected, helped by inflation and a weaker yen. (2) On capital policy, we believe we can now expect more

companies to more proactively implement capital control to improve ROE and meet their ROE targets. The second point,

progress on capital policy, should raise the level of ROE investors expect in future, and we therefore see it as positive for sector

share prices. We downgraded our sector stance to neutral after FY2025 results, mainly on the lack of capital policy measures

that would lift ROE (report).

Suzuki Motor (7269) (Akira Kishimoto) (7269 JP, OW)

1Q results: Lowers guidance, but we see no need for concern

Neutral: 1Q operating profit of ¥158 billion was in line with our estimate, but we view 1Q results as solid considering the

previously announced decline in Maruti Suzuki (MSIL, covered by Amyn Pirani) earnings. Raw material cost impact increased,

but this was offset through volumes and improved COGS. Suzuki cut full-year operating profit guidance from ¥570 billion to

¥540 billion, which we believe reflects the maximum extent of changes in MSIL’s parts procurement settlement terms and

higher raw material cost impact, but this looks overly conservative to us. Questions remain, such as the need for a downward

revision at this juncture, but we see no need to be downbeat.

Kao (4452) (Akiko Kuwahara) (4452 JP, OW)

2Q results: Offsets rising material costs, raises full-year operating profit guidance

Positive: 2Q operating profit of ¥50.9 billion exceeded our estimate of ¥39.2 billion. Even excluding the ¥3.8 billion in

restructuring costs we had assumed, profits beat our estimate by ¥7.9 billion. The chemical and global consumer care (GC)

segments overshot by ¥5.8 billion and ¥1.7 billion, respectively. We are positive on the GC segment’s ability to raise prices

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