(News Bulletin 247) – The car manufacturer’s shares gained 4.57% and 5.99% during the sessions of December 25 and 26 on the Tokyo Stock Exchange and took off by 8.8% on Wall Street on the 26th. December. According to the daily Nikkei, the Japanese car manufacturer plans to almost double the profitability of its equity.

Clearly, Japanese car manufacturers find themselves at the heart of stock market news this Christmas week. On Monday, December 23, Honda and Nissan announced their engagement with a view to a merger. Their shares then jumped the next day on the Tokyo Stock Exchange.

Wednesday December 25 and Thursday December 26, Toyota in turn stood out on the Tokyo Stock Exchange. While the whole world was celebrating Christmas and most stock markets around the world were closed, the largest automobile manufacturer in the world (by volume) gained 4.57% then 5.99% in two sessions, a cumulative increase of 10.8%. On Friday, the stock gained another 1.46%.

>> Access our exclusive graphic analyses, and gain insight into the Trading Portfolio

Thursday on Wall Street, the ADR (American depositary receipts), investment certificates which allow American investors to position themselves in foreign groups, tried to catch up with this increase of 10.8% in a single session (since the New York Stock Exchange was closed on Wednesday). Toyota’s ADR rose 8.78% on Thursday evening, its largest increase since March 17, 2020.

Toyota was propelled onto the stock market by an article in the Nikkei newspaper, which was the first media to reveal merger discussions between Honda and Nissan.

An ambitious goal?

On Wednesday, the Japanese economic daily reported, citing an anonymous manager of the group, that Toyota intended to achieve a ROE (“return on equity”) of 20%, without specifying the horizon of this objective. This while the market anticipates a rate of 11% for the 2024-2025 financial year, ending next March, adds Nikkei.

ROE is an important indicator for a company and relates net profit to the company’s equity. It thus measures the profitability of this company’s equity. ROE is particularly closely monitored, for example, in the banking sector.

Asked by Bloomberg, a Toyota spokesperson said the company does not have a specific ROE target.

“The objective (of ROE, editor’s note) is ambitious, Toyota will have to take drastic measures, and a large-scale shareholder return policy will be essential to achieve its goal, such as increasing dividends or share buybacks” , wrote Koji Endo of SBI Securities, in a note cited by Bloomberg.

This small stock market rally at the end of the year allows Toyota shares to post an increase of 23% over the whole of 2024, a little more than the Nikkei 225 (+20.4%), the main index of the Tokyo Stock Exchange.

The Japanese automotive group saw its profitability fall in the second quarter of its 2024-2025 financial year, with operating margin falling by 2.5 percentage points, while its net profit was more than halved. This represented the group’s first drop in quarterly profit in two years, according to Reuters. The company notably saw its sales decline in Japan, where the group had to recall more than 100,000 Prius models, and suffered competition from local competitors in China.