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Honda Motor Co Ltd HMC

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Morningstar’s Analysis

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Honda Finishes Fiscal 2021 With Strong Growth, Dividend Policy Change Comes in Fiscal 2022

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.

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Company Profile

Business Description

Incorporated in 1948, Honda Motor was originally a motorcycle manufacturer. Today, the firm makes automobiles, motorcycles, and power products such as boat engines, generators, and lawnmowers. Honda sold 24.1 million cars and motorcycles in fiscal 2020 (4.8 million of which were autos), and consolidated sales were JPY 14.9 trillion. Automobiles constitute 67% of revenue and motorcycles 14%, with the rest split between power products and financial services. Honda also makes robots and private jets.

Contact
Number 1-1, Minami-Aoyama 2-chome, Minato-ku
Tokyo, 107-8556, Japan
T +81 334231111
Sector Consumer Cyclical
Industry Auto Manufacturers
Most Recent Earnings Dec 31, 2020
Fiscal Year End Mar 31, 2021
Stock Type
Employees 36,062

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