Toyota shares hit record on forecast, Isuzu tie-up

TOKYO, Nov 8 (Reuters) Shares in Toyota Motor Corp. hit an all-time high on Wednesday, rising 1.83 percent to add billion to its market capitalisation, after Japan's top auto maker lifted its profit forecasts and announced a tie-up with truck maker Isuzu Motors Ltd.

The rise made Toyota the biggest positive contributor to the benchmark Nikkei 225 average, which lost 1.08 percent.

Toyota, the world's most successful auto maker by almost every yardstick including absolute profits, margins and market value, has gone from strength to strength as it wins customers around the world with a reputation for building reliable and fuel-efficient cars at reasonable prices.

Shortly after it announced stellar second-quarter results and a big upward revision in annual profit projections on Tuesday, Toyota unveiled a surprise plan to buy into Isuzu with the aim of broadening its diesel lineup and sharpening its competitive edge even more.

''A tie-up with Isuzu is part of Toyota's strategy to expand its sales and I regard this as positive,'' said Tatsuo Nishimura, a portfolio manager at Meiji Dresdner Asset Management.

''There are no negative factors I can see in the business environment for Toyota right now,'' he said.

On the back of Toyota's new forecasts, which puts operating profit at 2.2 trillion yen (.7 billion) and net profit at 1.55 trillion yen for the year to March 31, UBS raised its target price to 7,900 yen from 7,200 yen.

Toyota's shares have already gained 18 percent in the past three months and are up 19 percent in the year to date. A median consensus from 12 brokerages has the target price at 7,650 yen.

After hitting an intraday high of 7,370 yen, the shares ended at 7,230 yen, putting its price-to-earnings ratio at 15.0 -- a slight premium over rival Honda Motor Co.'s 14.1 based on their respective profit forecasts for this business year.

The ratio at second-ranked Japanese auto maker Nissan Motor Co., which has forecast a 1 percent rise in net profits this year, stands at 12.7.

Shares in Isuzu, known for its strength in diesel technology and small to medium-sized trucks, surged 12 percent to 465 yen as investors cheered the link-up with Toyota, easily outperforming a 1.19 percent rise in the transport sector subindex ITEQP.

''Directly and indirectly, this could enable Isuzu to establish longer-term growth potential and strengthen its operating base,'' Goldman Sachs analyst Toru Yaezawa said in a note to clients.

Also benefiting from the news was Hino Motors Ltd., a Japanese truck maker majority held by Toyota, after business newspaper the Nihon Keizai Shimbun reported that it had started talks with Isuzu on a comprehensive alliance.

A Hino spokesman denied the report but said discussions over cooperation in some form could follow. Hino shares rose 3.75 percent to 609 yen, after hitting a high of 635 yen in early trade, up 8.2 percent.

The newspaper later reported on its Web site that Isuzu and Hino are discussing alliances in four to five areas, including joint development and production of large trucks in China, engine development, parts procurement and sharing of sales networks.

Both Isuzu and Hino said no such talks were taking place. But a Hino spokesman said the truck maker would want to participate in a collaboration if Isuzu and Toyota asked it to.

UBS analyst Tatsuo Yoshida said a tie-up between two of Japan's four big truck makers would likely be difficult to realise because their combined share in the domestic large and medium-sized truck market would be around 60 percent, raising anti-monopoly issues.

REUTERS SBA BD1327