HONDA MOTOR : Most EV losses written off in 4QFY26; risks remain as company undergoing a transition

研报英文原文证据摘录

HONDA MOTOR : Most EV losses written off in 4QFY26; risks remain as company undergoing a transition

Investment case, valuation and risks

Honda Motor (Underperform, Target Price JPY1,200)

Investment case

We rate Honda Underperform as we believe the worst is not over for its automobile

business segment. In the short term, we expect Honda to continue to lose share in

automobile sales. In the US market, the hybrid variant of Honda's large SUV Passport

and Pilot will come in 2027 or later when Honda launches its next-gen large-size hybrid

system. In the Chinese market, Honda's BEV products launched in 2025 recorded

disappointing sales volume. This should prompt the company to revisit its product

strategy in China, which could delay new product launches. In the mid-term, Honda is

facing weakening economies of scale, in its key markets, China and the US, are going

towards different powertrain directions. To maintain its previous sales volume level,

Honda needs to increase R&D expenses to maintain both EV and ICE powertrain

development. We think its profitability will be impacted due to rising R&D expenses and

lower sales in the coming years.

Valuation methodology

To value Honda, we adopt a target P/E methodology, as the company has delivered

stable net profit, especially from its motorcycle business. As Honda is recording one-off

losses in FY3/26 and FY3/27, we apply the 5-year average NTM P/E multiple of 8x to

Honda's FY3/28E earnings and discount by 1 year with 8% cost of equity.

Risks

To the upside:

1) Faster-than-expected growth in its motorcycle and automobile sales volumes; 2)

Better-than-expected cost measure; 3) Depreciation of JPY will benefit Honda's

profitability.

To the downside:

1) Slowdown in motorcycle sales volume growth; 2) Lower-than-expected profit margin