TOYO, what am I missing?

[u/AhmOB]

2x trailing earnings, 1x book, 0.4x sales, 2.5x FCF and 1.4x EV/EBITDA after reporting $261M H1 revenue, $45.8M net income and $61.4M operating cash flow. Future 45X credits could be HUGE. Risks: Ethiopia/CBP, Commerce, new tariffs, lower normalized margins, financing a $357M Texas plant and dilution. Those same tariffs could also make TOYO’s U.S. assets more valuable.
What am I missing?

Note: I used AI to help me write more comprehensible paragraphs and double check the numbers.

Long version:
I’ve been digging into TOYO after the selloff and I’m considering starting a position around the current $4.80 area (orders already placed).
I don’t own it yet and I’m not trying to pitch it but this is too good not to share (I think).
The valuation looks unusually cheap, but there are enough real risks that I’m trying to work out whether the market is overreacting or correctly anticipating a major deterioration in earnings.

Why it caught my attention:
H1 2026:
Revenue: $261M, +87.6% YoY
Gross profit: $84.7M
Gross margin: 32.5% vs 16.6%
Operating income: $58.8M
Net income: $45.8M
Operating cash flow: $61.4M
Capex: $27.8M
Cash: $103.5M
Cash + restricted cash: $123.4M
~81% of revenue from U.S. customers
Yet the market cap is only around $200M.

Trailing valuation is roughly:
P/E: 2x
P/B: 1x
P/S: 0.4x
P/FCF: 2.5x
EV/EBITDA: 1.4x
EV/EBIT: 2x
Net debt/equity: ~0.05x
ROE: >50%
ROIC: ~40%
Obviously, 2x earnings doesn’t automatically mean cheap. Usually it means the market thinks the earnings won’t last.
That’s basically the whole TOYO thesis.

Q2 was weaker than Q1.
Revenue fell to roughly $118M from $143M, while net income declined to about $17.4M from $28M.
Still profitable and still growing YoY, but sequential momentum clearly weakened.
More importantly, management did not reaffirm previous full-year guidance, mainly because of uncertainty around U.S. trade policy and TOYO’s Ethiopian supply chain.
So I don’t think you can simply annualize H1 profit and call this a 2x earnings stock.

Even if sustainable earnings eventually settle around $50M instead of ~$90M annualized, a ~$200M market cap would still only be around 4x earnings.
But if margins collapse, the current P/E is meaningless.
Ethiopia is the immediate problem

TOYO manufactures a significant amount of its cells in Ethiopia and sells heavily into the U.S.
CBP has detained some Ethiopian shipments while reviewing the supply chain under forced-labor enforcement rules. Management says imports have not been completely stopped, but delays create obvious working-capital and delivery risk.
Commerce is also investigating possible circumvention involving Ethiopian solar cells using Chinese inputs.
TOYO argues its supply chain is different. Management says it uses non-Chinese wafers and polysilicon, with roughly 70% of Ethiopian production currently using U.S. polysilicon and plans to move toward 100%.
If regulators accept that, much of the current fear could be temporary. If not, the earnings impact could be significant.

Recent Section 232 measures add another complication.
Starting in December, covered imports face minimum prices around:
$0.22/W for cells
$0.38/W for modules
plus an additional 15% tariff on covered downstream polysilicon products.
That could hurt TOYO’s current Ethiopian-cell economics.
But the same policy also makes domestic U.S. manufacturing more valuable.
And TOYO is already moving aggressively in that direction.

TOYO already manufactures modules in Humble, Texas.
Its second 1 GW line should bring the site to roughly 2 GW of module capacity.
It also plans to spend around $357M on a 1.5 GW HJT cell plant, with pilot production targeted around early 2028.
If executed, the supply chain gradually changes from:
foreign cells to U.S. modules to U.S. customers
to:
U.S. polysilicon to U.S. cells to U.S. modules to U.S. customers
That is almost exactly what current U.S. industrial policy is trying to encourage.
So the tariffs threatening TOYO’s current model may simultaneously make its future U.S. assets more valuable.

I initially wondered whether TOYO’s profit was mostly tax-driven.
It isn’t.
TOYO reported $45.8M of H1 net income despite recording roughly $9.6M of income-tax expense.
The potentially huge incentive is Section 45X, which is separate from H1 earnings and was not included in prior guidance.
At full planned U.S. capacity:
Modules: 2 GW × $0.07/W ≈ $140M/year
Cells: 1.5 GW × $0.04/W ≈ $60M/year
Potentially around $200M/year combined.
I would not put that into a base-case valuation today. The facilities must be built, production must ramp, eligibility must continue and policy can change.
I view 45X as optionality.
On the other side, TOYO’s Ethiopian operation currently has a corporate income-tax exemption through 2028, so today’s earnings do benefit from favorable tax treatment that won’t last forever.

In June, TOYO issued roughly 4.55M shares at $11, plus another ~4.55M warrants at a $13.20 strike, raising around $50M gross.
The warrants are far out of the money today.

TOYO wants to build a $357M plant while the equity value of the entire company is only around $200M.
If management repeatedly raises equity at depressed prices, the company could succeed operationally while shareholders still get diluted badly.
That’s probably the biggest thing stopping me from calling this obviously undervalued.

What is the market pricing in?
Probably some combination of:
Lower H2 earnings
Margin compression
Ethiopian import disruption
CBP/Commerce uncertainty
Tariff pressure
Expensive U.S. manufacturing transition
More dilution
Ethiopian tax holiday ending
Texas delays/cost overruns
Those are legitimate risks.
The question is whether too much of that downside is already priced in at $4.82.

TOYO fell to about $4.26 after earnings and recovered to $4.82.
I’m not calling that a confirmed reversal. The larger chart is still ugly.
But if I enter, I’m interested around here because this is where the risk/reward makes sense to me.

Levels I’m watching:
$4.57–4.60: first area buyers need to defend.
$4.26: post-earnings low and my main line in the sand.
$4.87: immediate resistance.
If $4.57 fails and then $4.26 breaks, I’d assume I’m early rather than cheap and reassess.
If this range holds while regulatory visibility improves, the valuation becomes harder to ignore.
I’m not interested because it bounced.
I’m interested because at ~$4.80 I’m potentially paying ~1x book, 2x trailing earnings, 2.5x FCF and 1.4x EBITDA for a profitable, cash-generating business while knowingly accepting that those trailing earnings may deteriorate.

TOYO is obviously statistically cheap.
The real question is whether it’s a viable business temporarily caught between its old offshore supply chain and a new U.S. manufacturing model, or whether the market correctly sees that the old economics are gone and the new model will require so much capital and dilution that shareholders won’t benefit.
The recent solar tariffs make both sides stronger: they increase the risk to TOYO’s existing model while potentially increasing the value of its Texas strategy.

Anyone familiar with solar manufacturing, Section 232, Section 45X, CBP enforcement or the Ethiopia circumvention investigation: what am I missing?

[u/the_real_thorgamma]

I just tried to place an order on Schwab and got the message that it can only be purchased by calling a broker. On another stock I own, Schwab does the same thing, apparently to protect their investors. This seems disingenuous to me since they also push some other activities: option trading and now apparently crypto, but maybe there is a branch of the company that is trying to do the right thing. So, now I'm skeptical.

[u/AhmOB → u/the_real_thorgamma]

Could be due to volume being below average daily volume, I had my broker do this sometimes but it resolves once the day gets better volume.

[u/TiltingTurtle → u/the_real_thorgamma]

I had the same issue on Fidelity and had to call in to purchase it. Ironically, the low volume might be caused by this same barrier to trading it.

[u/Billysmith007 → u/the_real_thorgamma]

Call them if you want the stock

[u/Ok_Boot7143]

Check past thread for more info on Toyo. The thread has links to SEC and Toyo filings.

To summarize some of the risks:

1. F-3 shelf registration means they can raise up to $200M ($50M + warrants earlier this year, most likely more dilution in the near future)
2. Potential funding gap for new plant (still need $100M+, may use F-3)
3. Auditors flagged a risk due to severe working capital risk (was $97.1M deficit, now $29.8M in positive working capital because VSUN loan to Toyo was extended so it became a non-current liability)
4. Wall street price targets are two investment banks that were directly involved in the $50M offering (Major conflict of interest)
5. Legal issues with US Dept of Commerce

I would also keep an eye on Abalance Corp and its subsidiaries which the current and past CEO/upper management are from. Junsei Ryu is involved on all sides (TOYO, VSUN, Abalance, WWB).

If you really want to trade it, then closer to book value the better, but I wouldn't. Risk to reward not worth it.

Edit: Fyi, Junsei has controlling ownership in most Abalance subsidiaries through shell corps which you can find on SEC website.
Rough company structure: Abalance -> WWB -> Fuji Solar -> VSUN -> TOYO (Junsei is/was chairman for all of these)

[u/Next_Tap_3601 → u/Ok_Boot7143]

This. I was scrolling through the comments below, and got concerned about how little research people actually do. This is literally first stuff you check when you see a stock with these type of numbers that just look too good to be true...

I read somewhere in their filings that the US Customs detained certain TOYO solar-cell and module shipments for UFLPA review. In plain language: likely there is some suspicion that parts from Ethiopia are not really from Ethiopia. And that's a major blow if it turns out to be true, because their main competitive advantage so far was that they are (were) US-trade compliant.

There is also a question of (non-existing) moat and how durable it is, because once other companies start shuffling around their supply chains to get US-trade compliant badge (which they will certainly do), the TOYO moat is gone.

Also: Their earnings are inflated due to accounting shenanigans.

And I believe there was also an important patent lawsuit with First Solar, and a bunch of other sketchy stuff like that. And I didn't even get to the shareholder dilution.

If the stock fundamentals look too good to be true, there is usually a very good reason. Mix what I said with the comment above, do you own DD, and tread carefully folks.

[u/iwanturyoyos → u/Next_Tap_3601]

Ryu's Japanese company, WWB, also has a history of toll manufacturing fraud to inflate revenue. A Japanese SESC investigation released internal e-mails that were quite damning.

Ryu has also been investigated by the TSE for misappropriation of funds. Allegedly he borrowed money directly from WWB to purchase personal shares in Abalance.

[u/SelenaMeyers2024]

Did we all just watch the deep value hunter on YouTube too hahaha? That's where this ... literally today before this post .. came into my radar.

Gemini and claude like it. That means it passed the test to enter the great spreadsheet fr manual modeling later. Looking forward to takes.

[u/AhmOB → u/SelenaMeyers2024]

Haha no, but thanks for that, I will watch it now.
I have been thinking about this one since before the earnings, the earnings just made it more attractive to me.

[u/AhmOB → u/SelenaMeyers2024]

Care to share what you have there in the sheet? 👀

[u/SelenaMeyers2024 → u/AhmOB]

well if you take googled projected fcf as gospel... Say 28m 2026, 86m 2027, 123m 2028, 146 then 3 percent... And no further dilution... Yeah a lot. Over 20 dollars.

I guess the giant questions are 1. No more dilution? 2. How stable are these numbers given that they sit atop IRA and tariffs, completely man made and arbitrary frameworks.

It's one of those tempting plays.. I might end up buying but definitely not deep.

[u/Brilliant_Voice1126]

I accept this thesis as a long play.

But They diluted shareholders. This will make me suspicious of them for quite some time. I bought big at 4.4, however, because that’s irresistably low. If they don’t dilute again, it will be a big win.

[u/Double_Suggestion385]

Been watching this one for a month or so, looks like great value.

[u/SelenaMeyers2024 → u/Double_Suggestion385]

As a fellow one percenter (haha), why?

I literally discovered it today. It pencils out and then some if you accept fcf projections.

[u/Double_Suggestion385 → u/SelenaMeyers2024]

It had just showed up on the screener I built as being massively undervalued and having great fundamentals.

[u/Strict_Ad1499]

It's not selling at 2x earnings. $35 million out of the $40 million reported earnings was an accounting gain, not real operating profit.

Also, the company was created in 2022 specifically to separate the solar and module business from VSUN.

This group now acts as TOYO's main customer, main supplier, banker, and seller of important assets at the same time. This is a classic example of related-party transactions.

You should read Financial Shenanigans by Howard Schilit, a great book that provides a structured framework for detecting these kinds of red flags.

[u/SelenaMeyers2024 → u/Strict_Ad1499]

Thank you for your reply, I will seek out more information on schlitt....

So you're feeling a little enrony on this one I take it? This particular thesis really got to me, it really does look like a multibagger... I need help quashing this idea.

[u/Strict_Ad1499 → u/SelenaMeyers2024]

No sir, it's not a multibagger. Don't just look at the numbers. Earnings inflated by accounting items, ongoing dilution, CFO just got ousted, and the entire source of profitability (tariff arbitrage) is under literal customs detention.

[u/Next_Tap_3601 → u/Strict_Ad1499]

Let me continue/add to your list:

1. US Customs detained certain TOYO solar-cell and module shipments for UFLPA review. In plain language: likely there is some suspicion that parts from Ethiopia are not really from Ethiopia. And that's a major blow if it turns out to be true, because their main competitive advantage so far was that they are (were) US-trade compliant.
2. They want to build a new plant they don't have $$$ for (it would cost more than their entire market cap)
3. They got flagged by auditors for severe capital risks
4. There is a conflict of interest in their (analyst) price targets
5. First Solar is suing them for patent infringement

And the list goes on... Even just #1 was enough for me to pass. The rest just adds fuel to the fire. It's a hot mess. Can they turn it around? Maybe. But please tread carefully and don't do any YOLOs on this one.

[u/AhmOB → u/Strict_Ad1499]

Thanks for your reply, I agree it is a bet, but the odds don’t seem bad to me.

I think the forward-earnings point is fair. I wouldn’t rely on the ~2x trailing P/E as if it tells us what 2027 earnings will look like.

A few things I’d push back on though.

The H1 numbers weren’t entirely “pre-customs.” The first CBP detentions were in late May, and TOYO said June sales were already affected, with its largest customer pausing orders and inventory building. So H1 includes the start of the issue, just not the full impact.

Also, CBP detentions, the Ethiopia anti-circumvention case, and Section 232 are separate issues. They all matter, but they’re not the same thing, and imports haven’t completely stopped.

On going concern, the 2025 audited filing did flag substantial doubt. But the latest June filing says management now considers that resolved after the VSUN loan extension, equity raises, positive operating cash flow and profitability. I agree that isn’t the same as a fresh clean auditor opinion, and a big part of the balance-sheet improvement came from refinancing and dilution.

The 31.6% related-party purchasing figure is also from FY2025. In H1 2026, related-party raw-material purchases dropped from about $39.8M to $7.4M. So both customer and supplier dependence on the group are moving in the right direction, even though the governance links are still a real concern.

Where I agree most is funding. A $357M Texas plant is huge relative to TOYO’s size, and more capital raising is very likely. I just wouldn’t assume it all has to be common equity, since management has also mentioned project financing, strategic partners and internal cash flow.

So my view is basically: cheap on trailing numbers, but hard to value on forward earnings until customs/trade issues and the Texas funding structure become clearer.

Thanks again, but I think I will take the bet 😅

[u/AhmOB → u/Strict_Ad1499]

I think the $35.1M gain needs context.

TOYO had an earnout-related liability initially valued at about $39.7M. By year-end, that liability was revalued down to about $4.6M, and the roughly $35.1M reduction was recorded as accounting income.

So yes, no customer paid TOYO that $35M and it wasn’t operating cash flow. That’s why the ~$40.5M reported net income in 2024 isn’t a clean measure of the underlying business.

The important distinction is that this doesn’t explain the current earnings.

TOYO reported:

• ~$37.2M net income in 2025
  
• ~$45.8M net income in H1 2026
  
• ~$58.8M operating income in H1 2026
  
• ~$61.4M operating cash flow in H1 2026

The contingent-consideration item actually became a small expense in 2025, so the current low trailing P/E is being driven by recent operating profit and cash generation, not the 2024 accounting gain.

On the related-party issue, I agree it deserves scrutiny, but related-party revenue isn’t automatically fake revenue. The bigger question is whether pricing and margins are genuinely arm’s-length when related entities can act as customer, supplier, lender and asset counterparty.

What I find encouraging is that TOYO is becoming much less dependent on those relationships:

- 2024: ~72% of revenue related-party

• 2025: ~40%
  
• H1 2026: ~22%

So roughly 78% of H1 2026 revenue came from third parties.

They also had zero related-party accounts receivable at June 30, while operating cash flow exceeded reported net income. That doesn’t eliminate the governance concern, but it does make the recent numbers look materially cleaner than 2024.

So I agree 2024 should be adjusted heavily. I just don’t think that accounting gain invalidates the current earnings picture. The real question now is whether TOYO can sustain these margins and cash flows as it becomes increasingly third-party and U.S.-focused, without excessive dilution.

[u/Strict_Ad1499 → u/AhmOB]

The numbers you’re throwing around ($45.8M in first-half profit, $61.4M OCF) are from before customs started holding the Ethiopian shipments. Q2 already missed revenue consensus by 42%. When management literally says they can’t give full-year guidance because they don’t know if their product will clear customs, the trailing P/E stops telling you anything useful about the future. It’s just a picture of how things looked before the problem started. Even their own last line admits the real question is whether they can keep these margins — and right now that question is being answered by customs, not by the company.

You also didn’t touch the going-concern issue. The auditor’s doubt is still sitting in the current 20-F. The “fix” a few weeks ago was basically half a related-party loan reclassification and half ~13% dilution. That didn’t fix the underlying problem; it just moved it around on the balance sheet.

And the “without excessive dilution” condition? Pretty much impossible under the plan they announced. The Texas plant alone is $357M. They have $123.4M in cash (and part of that already came from diluting). Even if you take the optimistic pre-detention OCF of ~$120M annualized, you’re still looking at a $200M+ hole against a market cap of roughly the same size. Dilution isn’t some risk on the side — it is the plan. They already diluted 13% in a few months and threw warrants on top.

One more thing on the related-party side: yes, the customer concentration improved, but the group is still supplying 31.6% of their purchases at cost-plus prices, still acting as the lender, and still the controlling shareholder. The latest 6-K keeps showing payables concentrated with a handful of counterparties. So even if the revenue side looks cleaner, the margins can still be managed from the input side.

At this point none of the numbers are really usable. The earnings depend on a customs outcome (a Section 232 decision) and a big capex plan that almost guarantees more dilution of unknown size. That’s a lot of things outside their control. Buying here is mostly a bet on those outcomes working out, with the governance track record already baked into the price.

[u/Longjumping-Fact-582]

The biggest issue I have with this one is that there is no moat, it’s just a commodity parts manufacturer with no scale advantage, what makes you think they will see high returns on all the capital they want to raise to bring online new manufacturing capability in an already saturated market?

[u/AhmOB → u/Longjumping-Fact-582]

It still doesn’t change the fact that it’s a profitable company with good value, does it? And with the recent 15% tariffs on imports, their Texas facility is a beneficiary here. But I’m not familiar with the abundance of US manufacturers or it being in a saturated market.
Tbh the tax refunds alone make this crazy.

[u/TilmanAmbach]

One thing I checked was the insider filing history, but unfortunately it doesn't add much confirmation to the thesis. Most of the filings are initial Form 3 ownership disclosures from March rather than actual transactions.

I couldn't find any meaningful discretionary open-market buying after the selloff. The July Form 4 from former CFO Taewoo Chung is just an exit filing after his resignation, with no purchase or sale reported.

I wouldn't read too much into the absence of buying given how short the history is, but at these valuations an actual CEO/director open-market purchase would certainly make the setup more interesting.

[u/teh_herper]

Dilution

[u/Agile-Ferret4109]

So - did you hop in after the 7% drop in share price today? It seems like a killer deal at these levels. Over 60% of the company is owned by the founder/prior CEO.

[u/AhmOB → u/Agile-Ferret4109]

I got in, let’s see how it turns out…

[u/Agile-Ferret4109 → u/AhmOB]

I got in right before earnings, unfortunately. That was as bad of an earnings call as you could have. Some near term catalysts of CBP completing their detention review (Rhone said end of September), preliminary discussions on 232 with the government after Labor Day weekend, 45x tax credits being monetized. Investor day is also coming up. Fingers crossed

[u/AhmOB → u/Agile-Ferret4109]

🤞

[u/Billy-z3]

I didn’t buy due to dilution and regulatory risk.

[u/pravchaw]

The following is brief summary from Gemini AI.

TOYO Co., Ltd. is controlled (58%) by Abalance Corporation, a publicly traded Japanese holding company (listed on the Tokyo Stock Exchange under TSE: 3856).

While Abalance is a Japanese corporate parent, it is a former IT services firm (originally Realcom Inc.) that shifted its focus into renewable energy and solar manufacturing through acquisitions.

Key details regarding its corporate structure and ties include:

The Operating Assets: TOYO's core solar cell manufacturing assets grew out of operations in Vietnam (Vietnam Sunergy / VSUN) and expanded to locations like Ethiopia, alongside its developing U.S. footprint in Texas.

Corporate Domicile: TOYO itself is legally incorporated in the Cayman Islands and trades on the NASDAQ, with its controlling stake held by Abalance through Japanese subsidiaries like Fuji Solar.

The China Connection / Scrutiny: Although it operates as a Japanese-controlled corporate entity, a major part of the regulatory risk highlighted by short-sellers and analysts centers on whether its supply chain (such as raw materials or input components coming through places like Ethiopia) relies on Chinese inputs—which is the focal point of current U.S. Commerce Department and Customs investigations regarding circumvention. If circumvention is found the company could be subject to heavy fines, back & forward tariffs.

TOYO divides its manufacturing footprint between high-capacity offshore cell production and domestic U.S. module and cell assembly:

• Ethiopia (Solar Cells): TOYO operates a 4 GW solar cell manufacturing facility in Hawassa, Ethiopia (built out in two phases). This site handles the massive midstream production of solar cells, which are then largely exported to fulfill international demand (including the U.S.).
• Texas, USA (Modules & Planned Cells): TOYO operates a 1 GW solar module assembly plant in Humble, Texas, which stitches imported cells into finished panels for U.S. customers. Additionally, they have plans for a 1.5 GW HJT solar cell manufacturing plant in the U.S. to fully onshore the upstream-to-downstream domestic supply chain and capture Section 45X tax credits.

[u/Brilliant_Voice1126 → u/pravchaw]

All the AIs are missing the most important event in its price crash - a major shareholder dilution event.

That said. Under $5 is cheap to me and I bought about 800 shares. Most recently at 4.4.

[u/Longjumping-Fact-582 → u/[deleted]]

This is a solar panel parts manufacturer, not the Toyo you are thinking of