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

Research evidence excerpt

J P M O R G A N

Asia Pacific Equity Research

06 August 2026

Trading Company Sector

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).

Sustainability of strong 1Q profit is key earnings focus: Combined 1Q

FY2026 net profit at the seven general trading companies rose by 27% YoY to

¥1,428.3 billion, achieving strong growth that breaks the sluggish trend of the

past two to three years. Progress against full-year guidance was 23–34%. All

but Sojitz (23%) and Mitsubishi Corp. (27%) were above 30%. Net profit

excluding one-off items grew faster still, as the companies generally booked no

notable one-off gains (Figure 1). Resources profit rose by 92% YoY and nonresources profit by 11%, driven by yen weakness and higher commodity prices

(combined basis for the seven companies, Figures 2 and 3). Non-resource areas

notably held up well, led by businesses such as chemicals trading. Only Toyota

Tsusho raised guidance, though many companies indicated that they would

review guidance at 2Q. Resources profit should strengthen further in 2Q, as

many overseas operations report on a three-month lag. We expect 2Q to be the

peak, with profit slowing in 2H. The sustainability of non-resource profits will

vary by company and by business. 1Q generally appears to include a boost to

trading profit from selling various low-cost inventories at the sharply higher

prices that followed the Middle East conflict. We therefore think that FY2026

profit will not reach 4x the 1Q level.

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