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Tokyo: Toyota Motor Corp is set to trim its goal of selling more than 10 million vehicles in 2009 by at least 5 per cent, and with no sign of the US economy turning a corner, its shares are likely to languish near three-year lows.
Hit by a meltdown in demand for gas-guzzling vehicles in North America, Toyota last month cut its 2008 global sales forecast by 3.7 per cent to 9.5 million vehicles, inevitably delaying a plan to sell 10.4 million vehicles next year.
Japanese media reported last week that Toyota was set to revise the 2009 figure to around 9.8 million vehicles at its annual business briefing next Thursday, preventing it from becoming the first automaker to hit the 10 million milestone next year.
"Looking at the state of the North American and European markets, frankly it's difficult to expect an improvement next year," Goldman Sachs auto analyst Kota Yuzawa said.
On the positive side, investors and analysts believe the world's largest and most profitable car maker will be well positioned when the global slump ends.
"The US economy is weak but there's a feeling that it'll be the first region to recover," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management. "In that sense, the first auto stocks to bounce back will probably be the companies with a large exposure to North America, like Toyota." The bad news is that shareholders should not expect a quick recovery in Toyota stock.
Shares
Shares hit a near-three year low earlier this month, shortly before it reported a 28 per cent fall in first-quarter profits.
At yesterday's closing price of 4,770 yen, Toyota's stock is richly priced compared with other global carmakers, making a rebound difficult to justify without a weakening in the yen which boosts Toyota's bottom-line.
With a price-to-estimated earnings ratio of 11.6 times, Toyota carries a big premium over most of Europe's top automakers. Daimler AG, BMW AG, PSA Peugeot Citroen, Renault SA and Fiat SpA all trade at 5-6 times estimated earnings, as investors worry about the impact from a more recent downturn in the European market.
While maintaining a buy rating on Toyota, Goldman's Yuzawa conceded it would be tough to expect the shares to rally as long as the North American and European car markets continue to slide.
"The company's plan calls for production to reverse a slide in the January-March quarter, but there's no guarantee that demand won't slide further," he said.
Toyota's sales fell 7 per cent in both the United States and Europe in the first half of this year.
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