Honda It Is
Analysis of Honda Motor Company
Report by Valanium Analysts: Yutaka Matsumoto, Yuichi Murakami, Michio Okazaki (ymatsum@mit.edu, yuichi@mit.edu, mokazaki@mit.edu ) Investment Recommendation: MARKET OUTPERFORM December 3, 2001
NYSE (11/30/00) 52 week range Revenue (2002 Est.) Market Capitalization Share Outstanding
$ 76 $ 54.59 - $92.35 $ 60.08B $ 37.02B 487.2M 0.55% 34K
EPS Forecast FYE 12/30 EPS Ratios Forward P/E Forward PEG M/B
2001A 2002E 2003E 2004E $3.85 $5.49 $5.88 $6.27 Firm 12.42 1.96 1.97 Average of Competitors 21.47 3.95 1.73
Dividend Yield Avg. Daily Trading Volume
Book Value per Share (9/2001) $38.7 Return on Equity 13.02% Return on Assets 4.75% Est. 5 Years EPS Growth Rate 6.35% Industry Automobile
Valuation Predictions Actual Current Price $ 76 P/E Valuation (Ordinary) $ 131.38 P/E Valuation (Segment Adjusted) $ 119.46 PEG Valuation $ 153.5 M/B Valuation $ 66.58 EBO (Abnormal Earnings) Valuation $ 43.97 DCF Valuation $ 84.71 Performance of HMC 52 week change of HMC Return on S&P 500 8.1% -16.8%
Investment Summary • We assign a rating of market outperform on Honda Motor Company at its current price of $76 and a 12-month target price of $85 (based on DCF valuation). • Comparative P/E and PEG analysis also show that Honda is undervalued compared with its competitors such as GM, Ford, Daimler-Chrysler, etc. • We expect Honda’s market share in the Northern American market, where Honda generate 8090% of its operating profit, due to the introduction of Minivan/SUV. • Favorable change in the product mix would lead to the improved operating profit margin. • Global consolidation trend by the major competitors may disadvantage Honda’s global strategy. US recession and volatile currency may hit Honda’s sales.
Rating System: BUY: A strong purchase recommendation with above average long-term growth potential. MARKET OUTPERFORM: A purchase recommendation that is expected to marginally outperform the return of the market. MARKET PERFORMER:
Report by Valanium Analysts: Yutaka Matsumoto, Yuichi Murakami, Michio Okazaki (ymatsum@mit.edu, yuichi@mit.edu, mokazaki@mit.edu ) Investment Recommendation: MARKET OUTPERFORM December 3, 2001
NYSE (11/30/00) 52 week range Revenue (2002 Est.) Market Capitalization Share Outstanding
$ 76 $ 54.59 - $92.35 $ 60.08B $ 37.02B 487.2M 0.55% 34K
EPS Forecast FYE 12/30 EPS Ratios Forward P/E Forward PEG M/B
2001A 2002E 2003E 2004E $3.85 $5.49 $5.88 $6.27 Firm 12.42 1.96 1.97 Average of Competitors 21.47 3.95 1.73
Dividend Yield Avg. Daily Trading Volume
Book Value per Share (9/2001) $38.7 Return on Equity 13.02% Return on Assets 4.75% Est. 5 Years EPS Growth Rate 6.35% Industry Automobile
Valuation Predictions Actual Current Price $ 76 P/E Valuation (Ordinary) $ 131.38 P/E Valuation (Segment Adjusted) $ 119.46 PEG Valuation $ 153.5 M/B Valuation $ 66.58 EBO (Abnormal Earnings) Valuation $ 43.97 DCF Valuation $ 84.71 Performance of HMC 52 week change of HMC Return on S&P 500 8.1% -16.8%
Investment Summary • We assign a rating of market outperform on Honda Motor Company at its current price of $76 and a 12-month target price of $85 (based on DCF valuation). • Comparative P/E and PEG analysis also show that Honda is undervalued compared with its competitors such as GM, Ford, Daimler-Chrysler, etc. • We expect Honda’s market share in the Northern American market, where Honda generate 8090% of its operating profit, due to the introduction of Minivan/SUV. • Favorable change in the product mix would lead to the improved operating profit margin. • Global consolidation trend by the major competitors may disadvantage Honda’s global strategy. US recession and volatile currency may hit Honda’s sales.
Rating System: BUY: A strong purchase recommendation with above average long-term growth potential. MARKET OUTPERFORM: A purchase recommendation that is expected to marginally outperform the return of the market. MARKET PERFORMER: