Japan auto stocks sink as Citi turns bearish after quake

TOKYO, April 11 (Reuters) – Shares of Japanese automakers
fell on Monday after Citigroup cut its ratings across the
sector, saying it expected vehicle production to recover only in
autumn after the devastating earthquake that rocked Japan last
month.

Toyota Motor Corp , Nissan Motor Co , Honda
Motor Co and others have suspended most vehicle output
in Japan since the magnitude-9.0 earthquake on March 11
disrupted parts supply, and the impact is spreading overseas as
parts inventory runs out.

“We do not think the fall in earnings and slowness of the
recovery (in vehicle production) have been fully priced in yet,”
Citigroup auto analyst Noriyuki Matsushima wrote in a report.

“While some investors may be tempted to position for a
recovery in the (October-March) second half and out, the full
extent of damage to the supply chain and production disruption
from the power outages is being underestimated by the market,
and we would avoid the sector as things stand,” he added.

Matsushima now rates all automakers “sell”, with the
exception of Suzuki Motor Corp and truck makers Isuzu
Motors Ltd and Hino Motors Ltd , for which he
assigned a “hold”.

In late afternoon trade, Toyota shares were down 2.5
percent, Nissan fell 2.4 percent, and Honda lost 2 percent.
Matsushima previously had a “hold” rating on Toyota and Nissan,
and a “buy” on Honda.

A dearth of supply from Renesas Electronics Corp ,
the world’s top maker of microcontroller chips, is one of the
main causes of the disruption, including to automakers outside
Japan. Renesas has a 40 percent share of the global market for
automotive microcontroller chips. [ID:nL3E7F804E]

Matsushima said he was assuming a 15 percent drop in
Japanese automakers’ global auto output in the business year
that started this month. In a worst-case scenario, the sector’s
combined operating losses in the first half would be the
“biggest ever, surpassing even those posted at the time of the
Lehman Brothers bankruptcy,” he said.

Citigroup now expects Toyota to lose 588 billion yen ($6.9
billion) in the April-September first half and break even at the
operating level for the full year to March 31, 2012. It expects
a full-year operating profit of 160 billion yen at Nissan and
280 billion yen at Honda.

Its previous operating profit forecasts for Toyota, Nissan
and Honda were 850 billion yen, 670 billion yen and 750 billion
yen, respectively.

Given the broad-based supply bottleneck — from parts makers
within the 20 km exclusion zone of Tokyo Electric Power’s
(TEPCO) nuclear power plant to factories damaged by the
tsunami — Matsushima said he was assuming the supply chain
would not be restored until autumn.

Automakers could also face power shortages, especially when
consumption peaks during the summer, in the operating areas of
the affected plants of TEPCO and Tohoku Electric Power .

On Friday, Toyota and Nissan announced plans to resume
production at all domestic factories by April 18, but said
output levels will be at half their original plans and at the
mercy of parts availability. Honda restarted assembly at all of
its Japanese factories on Monday, also at half the planned
volumes.

($1 = 84.720 Japanese Yen)

(Reporting by Chang-Ran Kim; Editing by Chris Gallagher)

Japan auto stocks sink as Citi turns bearish after quake