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Honda Motor: Key Challenges To Come For Both Motorcycles And Automobiles

Apr. 05, 2021 4:43 PM ETHonda Motor Co., Ltd. (HMC), HNDAF6 Comments
Karreta Advisors profile picture
Karreta Advisors


  • Honda's motorcycle business is the company's core earnings driver. We believe it will face headwinds in the form of maturing ASEAN markets, and EV product introduction.
  • The automobile business continues to face challenges to execute cost reductions, although the key will be to raise sales volume primarily in the US.
  • The shares are trading on PER FY3/2022 8.8x with a prospective dividend yield of 3.4%. These are not expensive but we are neutral on the shares.

Photo by xuanhuongho/iStock Editorial via Getty Images

Investment thesis

We expect to see Honda (NYSE:HMC) see a muted return to growth in its motorcycle business as ASEAN markets mature and EV products deteriorate the sales mix. The automobile business has

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Karreta Advisors profile picture
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Comments (6)

itamarro profile picture
I have to say I am curious about HMC's non-automotive potential. Its 'Life Creation' segment; Honda Aircraft, robotics and other innovations are quite promising and can deliver lots of future growth for this otherwise valued-for-mediocrity business.

However, I am finding it hard to break down and properly estimate its growth prospects, while also properly taking into account the factors driving the key automotive segments as described in the article.
Due to lack of time to do proper analysis on this, I may just have to put this idea in the "too hard" pile. If anyone's done some work and is willing to share insights on HMC's non-automotive growth prospects, I'd love to hear.
FROGBERT profile picture
@Karreta Advisors Trefis shows motorcycles are only 6.5% of the business..what is your source?
itamarro profile picture
@Karreta Advisors See their financial reports or IR decks, for instance slide 37 here: global.honda/... .
Honda Launches World’s First Level-3 Self-driving Car japan-forward.com/...
Agree on the challenges - whenever I hear about the future being micro mobility I never head Honda's name brought up (even though in some senses they are currently the world leader). They need to be aware of the disruption risks and get ahead of it - they are well positioned to do that. My worry is they are so ingrained as an engine manufacturer that they won't be able to.
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