Toyota Motor Corp. (NYSE: TM) Coverage Initiated by Morgan Stanley with an Overweight rating

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Toyota Motor Corp. (NYSE: TM) stock fell 0.68% (As on Oct 13, 12:30:17 AM UTC-4, Source: Google Finance) after Morgan Stanley started coverage with an Overweight rating. The consensus price target is $227.07.

For the first quarter of 2022, the consolidated vehicle sales was at 2 million 148 thousand units, which was 185.4% of such sales for the first quarter of the previous fiscal year. Toyota and Lexus brand vehicle sales was at 2 million 545 thousand units, which was 149.1% of such sales for the first quarter of the previous fiscal year. The sales volume recovered to a level close to that of 2019, the year before the COVID-19 outbreak, despite the severe business environment due to semiconductor shortage and spread of COVID-19 in emerging countries. For the first quarter of 2022, the sales revenues were of 7 trillion 935.5 billion yen, Operating income were of 997.4 billion yen, Income before income taxes were of 1 trillion 257.2 billion yen and Net income were of 897.8 billion yen.

Moreover, as for the China business, operating income of consolidated subsidiaries increased year on year due to the impact of foreign exchange rate, and the share of profit of investments accounted for using the equity method increased year on year, driven by the impact of marketing efforts. Regarding Financial Services, the operating income excluding swap valuation gains and losses for the fiscal year increased year on year. This was mainly due to the decrease in costs related to residual value loss and credit loss. Meanwhile, in the U.S., vehicle inventory has remained quite low since the middle of 2020 due to rapid recovery in demand. And it has further declined in 2021 due to a shortage of semiconductors, severe cold weather and other multiple factors. However, Toyota’s sales volume has been performing well so far under such challenging environments due to the competitiveness in products, efforts in supply chain, and sales operation.

Going forward, the company will continue to accelerate the transformation into a Mobility Company by both further improving the earnings structure and aggressively investing in the future. The first quarter results were the result of maintaining stable sales and supply together with the suppliers and dealerships, despite the semiconductor shortage and spread of COVID-19. This was based on improvements in the competitiveness of the products that were achieved through “Making Ever-better Cars” initiatives.

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