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Sector: Manufacturing
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Fundamental View
AS OF 27 May 2025Nissan unveiled their second strategic plan in as many years, with the Re: Nissan Recovery Plan under new CEO Ivan Espinosa focused on sweeping changes to the company’s manufacturing footprint and cost structure. We believe the plan comes with a high degree of execution risk considering execution has been a major organizational weakness in recent years. Lacking in the recovery plan, in our view, was updated details of its hybrid vehicle development and introduction targets, which would address a hole in its product lineup in a fast-growing global segment. While we are hopeful the Re: Nissan Recovery Plan succeeds, and we will be rooting for management to flawlessly execute the plan, we view currently view the plan as a “show me” story until we gain confidence in their ability to execute.
Business Description
AS OF 27 May 2025- Nissan, with headquarters in Yokohama, Japan, is a leading global automotive manufacturer with a market presence in many countries around the globe. The company’s growth investments are focused primarily on Japan, North America, and China, core markets with large profit pools in which Nissan has a meaningful market share. The company’s business in China is conducted through a joint venture with Dongfeng Motor Corporation.
- Nissan’s Sales Financing segment supports the sale of its vehicles by providing financing solutions to its customers and dealers. To enhance their creditworthiness, Nissan maintains keepwell (support) agreements with its wholly owned financial subsidiaries including Nissan Motor Acceptance Corporation (NMAC) in the United States and Nissan Financial Services (NFS) in Japan.
- The Renault-Nissan-Mitsubishi Alliance was established in 1999 to enhance member company scale in product development and raw material purchasing. The alliance includes equity participation, which led to Nissan holding ownership stakes in Renault (15% non-voting) and Mitsubishi (34%) and Renault holding an ownership stake in Nissan (43%). The Alliance’s automobile production volume is the third largest globally behind Toyota and Volkswagen.
Risk & Catalysts
AS OF 27 May 2025Management provided FY25 guidance for production volumes, retail sales, and consolidated operating profit, noting the guidance excludes tariff impacts. However, it noted its guidance for operating profit, net income, and automotive free cash flow is preliminary owing to uncertainty related to the potential impact of tariffs and additional restructuring costs that are currently being assessed. More broadly, the company is viewing FY25 as a year of transition that will set the stage for achieving positive automotive operating profit and free cash flow by FY26.
The company expects to produce and sell 3% fewer vehicles in FY25 than it did in FY24. The retail sales decline expectation is driven by lower projected sales in China, which management expects to decline by about 18%. Global production volume is expected to decline to 3.0 mn units to manage dealer inventories based on the company’s lower retail sales outlook. The company expects revenue to decrease 1% in FY25 as lower volumes are partially offset by improved sales incentive management and favorable pricing related to new model launches in 2H25.
Key Metric
AS OF 27 May 2025| JPY bn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Revenue | 6,843 | 7,393 | 9,573 | 11,524 | 11,371 |
| EBIT | (471) | (42) | 242 | 409 | (54) |
| EBIT Margin | (7%) | (1%) | 3% | 4% | (0%) |
| EBITDA | (201) | 247 | 559 | 760 | 309 |
| EBITDA Margin | (2.9%) | 3.3% | 5.8% | 6.6% | 2.7% |
| Total Liquidity | 4,096 | 3,601 | 3,658 | 4,196 | 4,272 |
| Net Debt | (636) | (728) | (1,213) | (1,546) | (1,499) |
| Total Debt | 1,260 | 973 | 687 | 468 | 661 |
| Gross Leverage | n/m | 3.9x | 1.2x | 0.6x | 2.1x |
| Net Leverage | 3.2x | -2.9x | -2.2x | -2.0x | -4.8x |
CreditSight View Comment
AS OF 06 Jun 2025Our Underperform recommendation on Nissan Motor and Nissan Motor Acceptance Corporation (NMAC) notes is based on our view the notes are subject to downside risk from the recently enacted US auto import tariffs that could thwart its profit improvement initiatives in the US and potentially extend its recovery process. The major risk to our underperform recommendation is a potential partnership with Foxconn, KKR, Tesla, or Honda, the latter of which could lead to expectations for a near-term rating upgrade back to investment grade.
Recommendation Reviewed: June 06, 2025
Recommendation Changed: February 26, 2025
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Fundamental View
AS OF 27 May 2025Toyota’s financial guidance for FY26 reflects expectations for higher vehicle production and wholesales but lower consolidated operating profit. Most of the decline in profit is attributable to currency that is projected to go from a tailwind in FY25 to a material headwind in FY26. The other major profit headwind is tariffs, which we estimate could be a 200 bp automotive EBITDA margin headwind based upon management’s estimates. While significant, we believe the tariff headwind – if realized – would not push its profit margin below the rating agency downgrade triggers. Management noted tariff impacts are difficult to estimate based on ongoing negotiations, including government-to-government dialog between Japan and the US.
Business Description
AS OF 27 May 2025- Toyota Motor Corp. (TMC) engages in the manufacture and sale of motor vehicles and parts. It operates through the following segments: Automotive, Financial Services, and All Other. The Automotive segment designs, manufactures, assembles and sells passenger cars, minivans, trucks, and related vehicle parts and accessories. Toyota is also involved in the development of intelligent transport systems. The Financial Services segment offers purchase or lease financing to Toyota vehicle dealers and customers. It also provides retail leasing through lease contracts purchased by dealers. The company was founded by Kiichiro Toyoda on August 28, 1937, and is headquartered in Toyota, Japan.
- Toyota Financial Services Corporation (TFSC), a wholly owned subsidiary of TMC, oversees the management of Toyota's finance companies worldwide. Toyota Motor Credit Corporation (TMCC) is the company’s principal financial services subsidiary in the United States. Under terms of the credit support agreement between TFSC and TMCC, TFSC agrees to: (1) maintain 100% ownership of TMCC; (2) cause TMCC and its subsidiaries to have a tangible net worth of at least $100,000; (3) make sufficient funds available to TMCC so that it will be able to service the obligations arising out of its own bonds, debentures, notes and other investment securities and commercial paper. The terms of the credit support agreement between TMC and TFSC are very similar to the terms of the TFSC and TMCC credit support agreement.
Risk & Catalysts
AS OF 27 May 2025Toyota unveiled FY26 financial guidance that includes a 5% increase in vehicle wholesales and a 1% increase in automotive revenue but a 21% decrease in consolidated operating income. Consolidated vehicle sales are expected to increase by about 5% YoY based on growth in all regions. FY25 consolidated operating income guidance of ¥3.8 tn is 21% lower on a YoY basis, which would represent the second consecutive double-digit decline from its peak ¥5.4 tn consolidated operating income it reported in FY24.
On tariffs, management stated details of tariffs are still in flux, including ongoing government-to-government negotiations between Japan and the US. It indicated the tariffs that have been imposed to date are reflected in its forecast, but noted it is difficult to forecast the future given the fluidity of global trade negotiations. The company has a long-term plan to increase its local supply percentage ratio in the US as part of its business continuity plan. However, it has no immediate plans to change in its US vehicle production or auto parts sourcing plans in the near term owing to uncertainty in country tariffs and the durability of US vehicle and auto parts tariffs.
Key Metric
AS OF 27 May 2025| JPY bn | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Automotive Revenue | 24,652 | 28,606 | 33,777 | 41,081 | 42,996 |
| EBIT | 1,778 | 2,519 | 2,486 | 4,890 | 4,047 |
| EBIT Margin | 6.5% | 8.0% | 6.7% | 10.8% | 8.4% |
| EBITDA | 2,654 | 3,526 | 3,671 | 6,159 | 5,425 |
| EBITDA Margin | 9.8% | 11.2% | 9.9% | 13.7% | 11.3% |
| Total Liquidity | 11,557 | 15,864 | 10,090 | 12,401 | 11,599 |
| Net Debt | 597 | (1,719) | (2,825) | (4,025) | (3,355) |
| Total Debt | 3,872 | 2,580 | 2,724 | 2,868 | 2,736 |
| Gross Leverage | 1.5x | 0.7x | 0.7x | 0.5x | 0.5x |
| Net Leverage | 0.2x | -0.5x | -0.8x | -0.7x | -0.6x |
CreditSight View Comment
AS OF 24 Jun 2025Our Underperform recommendation on notes of Toyota Motor Co. and Toyota Motor Credit Corporation is based primarily on relative value, although we consider the Toyota bond complex to be a relatively safe haven for long-term investors.
Recommendation Reviewed: June 24, 2025
Recommendation Changed: May 09, 2025
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Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Fundamental View
AS OF 27 May 2025Virtually all the company’s FY26 profit headwinds stem from currency and tariffs that combined represent a 370 bp consolidated operating profit headwind. The currency headwind is related to the depreciation of emerging market currencies against the US dollar and, in our view, is rarely a consideration in the credit rating decision-making process. The tariff headwind is more concerning, although we note the company’s tariff cost estimates are a worst-case scenario that includes tariffs on parts as the company works to complete the country-of-origin certification process to qualify for the USMCA tariff exemption. Still, we believe the weak guidance and uncertain trade environment may be enough for Moody’s and Fitch to follow S&P’s lead in revising Honda’s outlook to negative.
Business Description
AS OF 27 May 2025- Honda Motor Co., Ltd. engages in the manufacture and sale of automobiles, motorcycles, and power products. It operates through the following segments: Automobile, Motorcycle, Financial Services, and Power Product and Other Businesses. The Automobile segment manufactures and sells automobiles and related accessories. The Motorcycle segment handles all-terrain vehicles, motorcycle business, and related parts. The Financial Services segment provides financial and insurance services. The Power Products and Other Businesses segment offers power products and relevant parts.
- American Honda Finance Corporation (AHFC) is a wholly-owned subsidiary of American Honda Motor Co., Inc. (AHM or the Parent). Honda Canada Finance Inc. (HCFI) is a majority-owned subsidiary of AHFC. Non-controlling interest in HCFI is held by Honda Canada Inc. (HCI), an affiliate of AHFC. AHM is a wholly-owned subsidiary and HCI is an indirect wholly-owned subsidiary of Honda Motor Co., Ltd. (HMC). Honda Motor Co. (HMC) maintains Keep Well (support) agreements with its North American finance subsidiaries, AHFC and HCFI. Under the Keep Well agreements, HMC agrees to (1) maintain at least 80% ownership in AHFC and HCFI, (2) ensure AHFC and HCFI maintain a positive net worth, and (3) ensure both AHFC and HCFI have sufficient liquidity to meet their debt payment obligations.
Risk & Catalysts
AS OF 27 May 2025Management unveiled FY26 guidance that represented higher motorcycle wholesales, lower automobile wholesales, and a steep decline in consolidated operating income based on currency and tariff headwinds. Management expects FY26 motorcycle wholesales to increase 4%, with the change compared to FY25 driven primarily by Asia. It expects automobile wholesales in North America to increase 2% YoY; while management currently expects the North America automobile market size to be about the same as last year, it is concerned about the impact of tariffs on total demand.
FY26 revenue is expected to decline by about 6% as price increases related to “improved product values” are expected to be offset by currency headwinds. Management predicts its FY26 consolidated operating margin would be the same as its FY25 margin of 6.2% when adjusted for warranty, currency, and tariff impacts. However, the expected impacts of currency and tariffs are expected to reduce Honda’s consolidated operating income by 59% in FY26, or 370 bp of margin compression to 2.5%. The currency impacts are driven by projected depreciation of emerging market currencies against the US dollar
Key Metric
AS OF 27 May 2025| JPY bn | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Revenue | 10,908 | 11,967 | 14,167 | 17,434 | 18,509 |
| EBIT | 576 | 741 | 612 | 1,219 | 899 |
| EBIT Margin | 5.3% | 6.2% | 4.3% | 7.0% | 4.9% |
| EBITDA | 1,175 | 1,334 | 1,294 | 1,964 | 1,630 |
| EBITDA Margin | 10.8% | 11.1% | 9.1% | 11.3% | 8.8% |
| Total Liquidity | 3,717 | 4,612 | 4,926 | 6,150 | 5,387 |
| Net Debt | (2,048) | (2,481) | (2,751) | (3,762) | (3,216) |
| Total Debt | 480 | 837 | 803 | 863 | 646 |
| Gross Leverage | 0.4x | 0.6x | 0.6x | 0.4x | 0.4x |
| Net Leverage | -1.7x | -1.9x | -2.1x | -1.9x | -2.0x |
CreditSight View Comment
AS OF 25 Jun 2025We are lowering our recommendation on Honda Motor Co. and American Honda Finance Corporation notes from Market perform to Underperform based on relative value and projected tariff costs that could lead to negative outlook revisions by Moody’s and Fitch, partially offset by tariff risk mitigation strategies that we believe could improve its profit outlook over the intermediate term.
Recommendation Reviewed: June 25, 2025
Recommendation Changed: May 15, 2025
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
How may we help you?
Search topics about wealth insights and investments.San Miguel Corporation
- Sector: Manufacturing
- Sub Sector: Diversified Conglomerates
- Country: Philippines
- Region: Philippines
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Fundamental View
AS OF 27 May 2025SMC’s FY24 earnings and credit metrics EBITDA improved YoY as we had expected from resilient broad-based demand recovery, lower thermal coal input costs, new project contributions, and good cost control measures.
We are comfortable with SMC’s large diversified operations and dominant market share in key sectors, which could outweigh its persisting high airport and infrastructure capex.
We see low non-call risk for the c.2025 and c.2026 perps in the SMC complex, given SMC’s strong ability and willingness to repay earlier perps at SMC GP, good access to diverse funding channels, and deep reputational concerns upon a non-call.
Business Description
AS OF 27 May 2025- SMC is a massive conglomerate in the Philippines with business interests across six business segments: Food & Beverage (F&B), fuel refining and retailing, power, packaging, infrastructure, and others.
- Its F&B business is operated through San Miguel Food & Beverage, the largest F&B company in the Philippines with three main divisions: Beer and Non-alcoholic Beverage (including beers and juices), Spirits (gin and Chinese wine), and Food (including packaged foods, animal feeds, poultry and fresh meats).
- SMC’s fuel refining and retailing business is operated through Petron Corporation (~68% stake), the largest oil refining and retailing company in the Philippines, and one of the largest in Malaysia. Petron has a total refining capacity of ~268k barrels/day.
- SMC’s power business is operated through SMC Global Power Holdings (SMC GP, 100% stake), one of the largest power generating companies in the Philippines. It maintains a diversified portfolio across coal (62%), natural gas (26%), and renewable energy (12%) sources.
- Through its packaging business, it manufactures glass containers, plastic crates, pellets, bottles and caps, aluminium cans, and other types of packaging products.
- It operates its Infrastructure business through San Miguel Holdings Corp (SMHC), in which it holds a 100% stake. It currently operates ~190 km of toll roads in the country, connecting high-traffic, arterial routes in Luzon.
Risk & Catalysts
AS OF 27 May 2025SMC’s revenues are concentrated in the Philippines (~80%), which poses geographical concentration risk.
SMC incurs significant capex, particularly in its power/energy and infrastructure businesses. In October 2020, SMC began construction of the mega New Manila International Airport (requires ~PHP 750 bn of capex spread over 5-7 years). This could keep SMC’s credit metrics elevated and free cash flows in negative territory.
As a holding company, SMC is reliant on dividend upstreaming from its operating subsidiaries to service its debt, which can be difficult should the operating subsidiaries face cash flow difficulties.
SMC operates in the businesses of thermal power generation and fuel refining, which may be looked at unfavourably by some ESG-focused investors.
Key Metric
AS OF 27 May 2025| PHP bn | FY22 | FY23 | FY24 | 1Q24 | 1Q25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 72.3% | 71.6% | 73.0% | 72.0% | 71.0% |
| Net Debt to Book Cap | 58.5% | 60.4% | 61.2% | 60.6% | 58.0% |
| Debt/Total Equity | 261.3% | 251.9% | 269.9% | 256.7% | 244.8% |
| Debt/Total Assets | 69.8% | 68.1% | 68.2% | 68.0% | 68.4% |
| Gross Leverage | 9.1x | 8.4x | 8.3x | 8.2x | 7.9x |
| Net Leverage | 7.4x | 7.1x | 7.0x | 6.9x | 6.5x |
| Interest Coverage | 2.8x | 2.1x | 2.1x | 2.1x | 2.1x |
| EBITDA Margin | 12.2% | 13.8% | 14.0% | 12.5% | 15.6% |
CreditSight View Comment
AS OF 27 May 2025We have a Market perform recommendation on SMC and its sole c.Jul-25 $ perp; we see limited extension risk for SMC’s perp, yet we don’t see much price upside from current levels. SMC’s c.Jul-2025 trades close to par and fairly to Ayala Corp’s c.Sep-2026 in our view. We like SMC’s dominant market position in multiple sectors, long operating track record and diversified operations. Yet it incurs sizable airport and infrastructure capex that would likely keep its credit metrics elevated and free cash flows negative. Meanwhile, we remain watchful of SMC’s ability to support SMC GP past 2025.
Recommendation Reviewed: May 27, 2025
Recommendation Changed: April 05, 2023
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Search topics about wealth insights and investments.Hyundai Motor
- Sector: Manufacturing
- Sub Sector: Automotive
- Country: Korea
- Bond: HYNMTR 5.5 26
- Indicative Yield-to-Maturity (YTM): 4.834%
- Credit Rating : A
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Fundamental View
AS OF 22 May 2025Hyundai Motor Group posted solid 1Q25 results and maintained its FY25 sales and consolidated operating profit guidance. While we continue to expect lower FY25 automotive profitability owing to tariff impacts on its US vehicle sales, which account for 25% of its global unit sales, we expect the tariff headwind to be partially offset by favorable currency and higher financial services profitability along with support by the South Korean government for the automotive sector. We expect these tariff mitigation factors to alleviate our previous concerns regarding potential negative rating actions.
Business Description
AS OF 22 May 2025- Hyundai Motor Co., Ltd. engages in the manufacture and distribution of motor vehicles and parts. It operates through the following business areas: Vehicle, Financial and Other. The Vehicle division offers motor vehicles. The Financial division provides financing, leasing and credit cards. The Other division includes manufacture of railways. The company was founded on December 29, 1967, and is headquartered in Seoul, South Korea.
- Hyundai Capital America benefits from a support agreement with Hyundai Motor (HMC). HCA investor relations confirmed its support (keepwell) agreement contains a fixed charge coverage provision that it views as particularly strong compared to other peers.
Risk & Catalysts
AS OF 22 May 2025Hyundai and Kia both maintained FY25 sales and consolidated operating profit guidance – which did not include the potential impact of tariffs – citing both uncertainty surrounding tariff implementation, especially for USMCA-compliant parts, and strategies to mitigate the tariff impact. Both companies called out the likelihood of price increases to mitigate the tariff impact, while Hyundai management highlighted additional mitigation strategies in their earnings conference call. On a combined basis, the Hyundai Motor Group (HMG) targets FY25 wholesale unit growth of 2% to 7.4 mn units, revenue growth of 5% to 6%, and a consolidated operating profit margin of 8.8% at the midpoint of the range for YoY margin contraction of 40 bp.
The company’s FY25 consolidated operating profit could also benefit from higher captive finance profit and favorable currency impacts related to the weak Korean won, two factors that boosted its 1Q25 profit. The South Korean government announced emergency support for the auto sector, including financial aid and tax cuts to mitigate the impact of US tariffs on imported vehicles.
Key Metric
AS OF 22 May 2025| KRW bn | FY21 | FY22 | FY23 | FY24 | LTM 1Q25 |
|---|---|---|---|---|---|
| Revenue | 94,143 | 113,718 | 130,150 | 136,725 | 139,725 |
| EBIT | 5,459 | 8,950 | 15,440 | 14,189 | 13,945 |
| EBIT Margin | 5.8% | 7.9% | 11.9% | 10.4% | 10.5% |
| EBITDA | 10,015 | 13,998 | 20,387 | 18,476 | 18,237 |
| EBITDA Margin | 10.6% | 12.3% | 15.7% | 13.5% | 13.9% |
| Total Liquidity | 19,745 | 26,639 | 26,507 | 27,488 | 23,397 |
| Net Debt | (5,202) | (11,035) | (10,916) | (11,799) | (15,252) |
| Total Debt | 12,569 | 12,940 | 12,940 | 12,940 | 5,805 |
| Gross Leverage | 1.3x | 0.9x | 0.6x | 0.7x | 0.3x |
| Net Leverage | -0.5x | -0.8x | -0.5x | -0.6x | -0.8x |
CreditSight View Comment
AS OF 18 Jun 2025We upgrade our recommendation on notes of Hyundai Capital America (HYNMTR), Hyundai Capital Services (HYUCAP), and Kia Corp. (KIA) to Outperform from Market perform based on our view the company’s tariff mitigation strategies, its financial services and currency tailwinds, and South Korean automotive sector emergency aid initiatives should help support the company’s profit outlook and enable it to avoid credit rating downgrades. Our recommendation is based on relative value, its geographic diversification, increasing innovative hybrid and EV offerings, and its solid brand positioning within the affordable vehicle category.
Recommendation Reviewed: June 18, 2025
Recommendation Changed: April 28, 2025
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
How may we help you?
Search topics about wealth insights and investments.Reliance Industries
- Sector: Manufacturing
- Sub Sector: Diversified Conglomerates
- Country: India
- Region: India
- Bond: RILIN 4.125 25
- Indicative Yield-to-Maturity (YTM): 5.531% (Indicative as of March 2)
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Fundamental View
AS OF 29 Apr 2025We are comfortable with Reliance’s large diversified scale of operations and dominant presence in various key sectors (refining, petrochemicals, retail and telecom), which allows for earnings resilience.
We believe a lackluster oils-to-chemicals outlook is well mitigated by strong outlooks for telecom and retail.
Plans to ramp up its renewable energy business could provide the next leg of growth and improve ESG perception.
Reliance incurs significant capex that has weighed on free cash flow generation, though we acknowledge its historically prudent financial management and robust credit metrics that provide ample elbowroom for some credit profile deterioration.
Business Description
AS OF 29 Apr 2025- RIL is an Indian diversified conglomerate engaged in oil & gas refining, marketing, petrochemicals, organized retail, telecom and digital services, amongst others. It is the largest company in India by revenue, profits, exports and market capitalization (INR 20 tn).
- It is the second largest refiner in India and produces petroleum products such as petrol, high-speed diesel (HSD), aviation turbine fuel (ATF), LPG and lubricants.
- It is the largest petrochemicals producer in India, boasting production of ~38 mn tons in FY20. Through its integrated Jamnagar refinery complex, it produces Polymers/Plastics, Elastomers (synthetic rubber) and Polyester products.
- It is the largest retailer in India in terms of revenue. It operates 18.8k stores (as of March 2024) to sell products ranging from consumer electronics, fashion and lifestyle, grocery, petrol retail and telecom and digital services. It launched its online retail channel, 'JioMart', in December 2019.
- Reliance Jio is the largest mobile telecom operator by subscriber base (482 mn as of March 2024) in India and boasts the widest 4G wireless network in the country.
- In 2021, RIL announced investments to the tune of INR 750 bn/ $10 bn (for next 3 years) to build a renewable energy ecosystem which will include 4 giga factories. Set to be located in Gujarat, the factories will produce solar modules, hydrogen, fuel cells and battery grid to store electricity. Long-term goals also include building 100 GW of PV solar plants by 2030.
Risk & Catalysts
AS OF 29 Apr 2025Reliance’s O2C (oil-to chemicals) margins remain under pressure from global tariff-led growth slowdown concerns and persisting oversupply conditions in China.
Reliance incurs significant capex at historically high levels, particularly from continued investments into its O2C, retail, and nascent renewables businesses. This has weighed on its free cash flow generation, though we take comfort in Reliance’s historically prudent financial management and robust credit metrics.
Reliance faces key-person risk; 65-year old Chairman Mukesh Ambani has begun to hand over the reins of the company’s different business divisions to his children.
Key Metric
AS OF 29 Apr 2025| INR bn | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 25.9% | 26.4% | 35.3% | 33.1% | 31.9% |
| Net Debt to Book Cap | 24.3% | 23.4% | 29.9% | 26.1% | 24.8% |
| Debt/Total Equity | 34.9% | 35.9% | 54.5% | 49.6% | 46.9% |
| Debt/Total Assets | 21.1% | 21.3% | 28.1% | 26.1% | 24.3% |
| Gross Leverage | 3.5x | 2.9x | 3.2x | 2.8x | 2.9x |
| Net Leverage | 3.2x | 2.6x | 2.7x | 2.2x | 2.2x |
| Interest Coverage | 3.1x | 5.7x | 5.0x | 7.0x | 6.8x |
| EBITDA Margin | 16.6% | 15.3% | 15.9% | 17.7% | 16.9% |
CreditSight View Comment
AS OF 29 Apr 2025We have a Market perform recommendation on Reliance (RIL); we prefer its 2032 and would avoid its 2045 and 2052. We see room for RIL 2032 to tighten 10-15 bp versus Bharti 2031 and PTTGC 2032. We like RIL’s large diversified operations and dominant market shares in key sectors (refining, retail and telecom) that boosts earnings resilience. Its growing renewable business could aid ESG investor sentiment too. While we acknowledge persisting weakness in the O2C segment and RIL’s elevated capex needs, we think the impact is mitigated by RIL’s prudent financial management and healthy credit metrics that provide ample elbowroom for some credit profile deterioration. While key man risk remains a concern, we take comfort in gradually progressing succession plans.
Recommendation Reviewed: April 29, 2025
Recommendation Changed: June 30, 2021
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Fundamental View
AS OF 29 Feb 2024Toyota’s slower ramp of battery electric vehicle (BEV) production and sales relative to its peers was a common investor concern a year ago. However, with the recent slowdown in consumer adoption of BEVs in North America and Europe and Toyota’s dominance in the hybrid electric vehicle (HEV) market, those concerns have abated, at least for the time being. Importantly, Toyota management has indicated its profitability of its HEV portfolio is on par with its ICE portfolio profitability. We continue to believe that Toyota’s market leading position in HEVs provides consumers with a more eco-friendly option than traditional ICE vehicles that can serve as a bridge to EVs while the charging infrastructure is built out and the cost of producing EVs is reduced.
Business Description
AS OF 29 Feb 2024- Toyota Motor Corp. (TMC) engages in the manufacture and sale of motor vehicles and parts. The Financial Services segment offers purchase or lease financing to Toyota vehicle dealers and customers. It also provides retail leasing through lease contracts purchased by dealers. The company was founded by Kiichiro Toyoda on August 28, 1937, and is headquartered in Toyota, Japan. In July 2000, the company established Toyota Financial Services Corporation (TFSC), a wholly owned subsidiary, to oversee the management of its finance companies worldwide.
- Toyota Financial Services Corporation (TFSC), a wholly owned subsidiary of TMC, oversees the management of Toyota's finance companies worldwide. Toyota Motor Credit Corporation (TMCC) is the company’s principal financial services subsidiary in the United States and is an indirect wholly owned subsidiary. Under terms of the credit support agreement between TFSC and TMCC, TFSC agrees to: (1) maintain 100% ownership of TMCC; (2) cause TMCC and its subsidiaries to have a tangible net worth of at least $100,000; (3) make sufficient funds available to TMCC so that it will be able to service the obligations arising out of its own bonds, debentures, notes and other investment securities and commercial paper. The terms of the credit support agreement between TMC and TFSC are very similar to the terms of the TFSC and TMCC credit support agreement.
Risk & Catalysts
AS OF 29 Feb 2024Toyota Motor Credit Corporation (TMCC) credit metrics stable. TMCC F3Q24 earnings before taxes increased 50% YoY and 3x sequentially. At F3Q24 the delinquency rate expanded 10 bp YoY to 0.9%, nearly double pre-pandemic levels, while the retail charge-off rate expanded 10bp YoY to 0.7%. The company notes that changes in interest rates or unemployment could increase credit losses and additional provisioning. Additionally, elevated prices and high borrowing costs have impacted some consumers’ ability to make scheduled payments resulting in an increase in consumer delinquencies and charge-offs.
Key Metric
AS OF 29 Feb 2024| ¥ bn | FY20 | FY21 | FY22 | FY23 | F3Q24 |
|---|---|---|---|---|---|
| Total Company Earning Assets | 110,621 | 116,546 | 117,659 | 120,018 | 129,320 |
| Cash and Investments | 6,790 | 8,195 | 7,670 | 6,398 | 6,458 |
| Total Liquidity | 31,390 | 35,895 | 36,070 | 33,498 | 35,058 |
| Unsecured Debt | 83,172 | 85,513 | 82,288 | 78,949 | 85,744 |
| Secured Debt | 14,568 | 24,212 | 26,864 | 32,736 | 33,262 |
| Total Debt | 97,740 | 109,725 | 109,152 | 111,685 | 119,006 |
| Allowance % Retail Rece. | 0.86% | 1.64% | 1.66% | 1.83% | 1.81% |
| Allowance / Net Charge-offs | 1.58x | 4.50x | 6.68x | 3.03x | 2.56x |
| Net Charge-offs % Avg. Receivable | 0.56% | 0.39% | 0.26% | 0.63% | 0.72% |
| 30+ Day Delinquency Rate | 1.8% | 1.2% | 1.8% | 2.3% | 3.1% |
CreditSight View Comment
AS OF 13 May 2024We reiterate our Underperform recommendations on notes of Toyota Motor Co. (TOYOTA: A1/A+/A+; S/S/S) and Toyota Motor Credit Corporation (TMCC: A1/A+/A+; S/S/S) based primarily on relative value. Toyota reported record profit in FY24 and announced increased investments in labor, suppliers, and BEVs in FY25 that it expects to reduce operating profit 20%. We applaud the investments that we believe should further its new energy vehicle offerings well beyond its hybrid electric vehicles (HEVs), which account for more than one-third of its sales. We believe the Toyota bond complex is fairly valued at current levels but will continue to underperform the broader market and the A-rated index owing to its high-A credit rating and short duration.
Recommendation Reviewed: May 13, 2024
Recommendation Changed: January 13, 2023
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