Latest Developments:
In 2Q25, Toyota (TM) posted ¥11.45 trillion in revenue, marking a minimal 0.09% year-on-year increase and a 3.32% sequential decline. This is the first time since 2021 that Toyota has seen a quarterly revenue decline. While gross margins improved, operating margins and net margins both declined due to higher SG&A expenses, resulting in operating margins of 10.1% and net margins of 5.01%. Toyota also reduced its production guidance, now expecting 9.7 million units instead of 10 million, following ongoing production setbacks.

Investment Case:
Despite strong demand in the automotive market, Toyota is facing several challenges. Production delays, including issues related to certification test failures, and rising labor costs are eroding margins. The company also faces potential tariffs under President Trump's proposed policies, which could increase manufacturing costs and reduce demand. Toyota's struggles in China, including a price war and a shift in consumer preferences, further complicate its prospects.

Valuation:
Toyota's stock is fairly valued at the current price of ¥172.52 per share. The company's dividend yield of 3.35% is below the industry average of 6.28%, and with no immediate positive catalysts, there is limited upside potential. Based on a multi-stage dividend discount model, Toyota's shares are worth around ¥175, providing little margin of safety for investors.

Disclaimer: The above is an excerpt on a report written by our close associate, Selendis Research. Interested parties may check out the full report here on Seeking Alpha. All information provided is intended solely for general informational purposes. Seven Insights does not take into account individual financial goals or situations and does not provide personalized investment advice. Seven Insights is not a licensed securities dealer, broker, U.S. investment adviser, or investment bank.