Citi Research Raises Estimates on Toyota as Demand Remains Strong
Citi Research, a leading financial institution, has reiterated its Buy rating on Japan’s automaker Toyota Motor (TM) and raised its 12-month price target on the company’s shares. This comes as demand for Toyota and Lexus brand vehicles continues to show strength in the market.
Demand for Toyota and Lexus Brand Vehicles Exceeds Expectations
According to analysts at Citi, demand for Toyota and Lexus vehicles is stronger than expected. Despite the impact of irregularities at Daihatsu, the automaker’s improved product mix and price hikes are expected to drive growth and surpass market expectations.
Toyota’s Hybrid Electric Vehicles (HEVs) Gain Market Share
Toyota’s hybrid electric vehicles have seen a significant increase in market share. In the fiscal year ending in March 2023, HEVs accounted for 27% of Toyota’s sales. However, this proportion has now risen to approximately 35%, with analysts predicting further growth in the coming years. With the upcoming debut of the Camry HEV in 2024, analysts believe that HEVs could account for 40% of Toyota’s sales by the fiscal year ending in March 2025 and 45% by March 2026.
Toyota’s Diverse Strategy Holds Advantage Amid Market Uncertainties
Citi views Toyota’s diverse strategy as advantageous in the face of market uncertainties. In non-battery electric vehicles (BEVs), Toyota’s global market share has shown steady growth. From just over 10% in FY3/18, it has now surpassed 13% in FY3/23, with expectations to reach over 14% by FY3/26. This diversification strategy allows Toyota to navigate changing market conditions and maintain a strong position in the industry.
Enhanced Product Mix and Yen Depreciation to Offset Setback from Daihatsu Issues
Despite facing setbacks from Daihatsu issues, Citi believes that Toyota’s enhanced product mix, price hikes, and yen depreciation will offset these challenges. Citi has raised Toyota’s FY3/24 operating profit forecast to ¥4.5 trillion from ¥4.4 trillion. In addition, Q3 operating profit is projected at ¥1.26 trillion, taking into account the impact of ¥240 billion from Daihatsu irregularities. Citi assumes a ¥140/$ exchange rate from Q4, with Toyota/Lexus production volume estimated at 10.20 million vehicles.
Stock Performance and Market Reaction
In mid-day trading on Wednesday, shares of TM are slightly down by 0.11%. This minor fluctuation in stock performance reflects the market’s reaction to the news of Citi Research’s increased estimates on Toyota. Investors will continue to monitor Toyota’s performance and market trends in the coming months.
Overall, Citi Research’s optimistic outlook on Toyota’s demand, market share, and profitability highlights the automaker’s strong position in the industry. With a diverse product lineup and strategies to navigate uncertainties, Toyota is well-positioned for future success.
Analyst comment
Positive news. Analysts expect Toyota’s market share and profitability to continue growing due to strong demand for Toyota and Lexus vehicles, increased market share of hybrid electric vehicles, and a diverse product lineup. Stock performance is slightly down but investors will continue to monitor Toyota’s performance in the coming months.
