Honda (HMC) Last Update 8/16/22
Related: DDAIF F GM TM
% of Stock Price
Revenue
Gross Profits
Free Cash Flow
Honda
STOCK PRICE
DIVISION
% of STOCK PRICE
Automobiles
17.5%
$6.07
Motorcycles
4.5%
$1.57
TOTAL
100%
$34.67
$34.67
Yours
Trefis Price
N/A
$23.52
Market
 
Top Drivers for Period
Key Drivers
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TREFIS Analysis


Trefis Report
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RECENT NEWS AND ANALYSIS

Potential upside & downside to trefis price

Honda Company

VALUATION HIGHLIGHTS

  1. Vehicle Leases & Loans constitute 21% of the Trefis price estimate for Honda's stock.
  2. Automobiles constitute 18% of the Trefis price estimate for Honda's stock.
  3. Motorcycles constitute 5% of the Trefis price estimate for Honda's stock.

WHAT HAS CHANGED?

  1. Latest Earnings

Honda posted a relatively mixed set of results for Q1 FY'23, with revenue growing by 6.9% year-over-year to 3,829.5 billion yen ($28.74 billion), driven by strong motorcycle sales and a weakening yen although this was offset by the impact of the semiconductor supply shortage and the lockdowns in China. Net income declined 33% to 149.2 billion yen ($1.1 billion).

Note: Honda's FY'22 ended on March 31, 2022. Q1 FY'23 ended on June 30.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

  • Honda's Automobile Units Sold: Honda's auto sales have declined from almost 5 million units in FY'19 to just about 4 million in FY'22. Trefis expects the metric gradually recover to around 4.5 million units by FY'28. However, if volumes remain roughly flat at 4 million units, there could be a 5% downside to our price estimate.

BUSINESS SUMMARY

Honda is one of the world’s ten largest automakers and the largest motorcycle producer. In addition to producing Honda branded vehicles (cars, vans, SUVs, trucks) and motorcycles, the company is also a leading producer of power sport vehicles (ATVs, watercrafts) as well as other motor-based products (generators, pumps). Honda also provides financing in the form of leases and loans for its products. Honda's financing business is a significant contributor to the company's profits. Honda is headquartered in Tokyo, Japan.

SOURCES OF VALUE

High gross margins for automobile business

According to our estimates, Honda's gross margin for its vehicle business is almost 19%. We expect this number to remain steady over our forecast period.

KEY TRENDS

  1. Focus On Electric Vehicles

Honda Motors is taking concrete steps to build strong capabilities in the electric vehicles space. While the company has been investing in EV development for the last few years, in early 2022 it signed a collaboration agreement with General Motors to develop affordable electric vehicles based on a new global platform. The first vehicles are likely to roll out in 2027, with prices likely to start at below $30,000.

  1. Declining U.S. sales

Honda faces a challenging industry environment in the U.S. with consumer preferences shifting toward SUVs and crossovers leading to a decline in the sale of its sedan models. Over the first four months of 2022, the company's total volumes in the U.S. declined by about 28% year-over-year.