Analyst Note| David Whiston, CFA, CPA, CFE |
Honda finished fiscal 2021 with substantial fourth-quarter year-over-year growth thanks partly to a soft comparable a year ago with the pandemic’s start. We are not changing our fair value estimate but will reassess all valuation inputs after Honda files its 20-F, likely in late June. Revenue rose 4.8% year over year while operating margin of 5.9% rose 610 basis points from a small loss in the prior-year’s quarter. We calculate non-financial services revenue increased by 5.3% with the automotive segment up 4.0%. All segments improved operating income with overhead cost reductions contributing JPY 146.4 billion of a JPY 218.8 billion total improvement. Management cited lower credit loss provisions for this favorable cost variance, which makes sense when noting that the finance segment’s operating profit increased by 4.6 times the prior-year quarter’s figure to JPY 106.4 billion.