January 22, 2017 NYSE: HMC

HONDA MOTOR CO LTD BUY A+

A

A-

HOLD

B+

B

Annual Dividend Rate $0.80

B-

C+

C

Annual Dividend Yield 2.63%

SELL C-

D+

D

Beta 1.20

Sector: Consumer Goods & Svcs HMC BUSINESS DESCRIPTION Honda Motor Co., Ltd. develops, manufactures, and distributes motorcycles, automobiles, power products, and other products worldwide. The company operates through four segments: Motorcycle Business, Automobile Business, Financial Services Business, and Power Product and Other Businesses.

Weekly Price: (US$)

D-

E+

E

E-

Market Capitalization $55.0 Billion

F

BUY 52-Week Range $24.03-$31.18

Sub-Industry: Automobile Manufacturers SMA (50)

RATING SINCE TARGET PRICE

08/15/2016 $35.05

Price as of 1/19/2017 $30.35

Source: S&P

SMA (100)

1 Year

2 Years 38 35

TARGET PRICE $35.05 TARGET TARGETPRICE PRICE$35.05 $35.05 TARGET PRICE $35.05

33 30

STOCK PERFORMANCE (%) 3 Mo. Price Change 3.65

1 Yr. 4.11

3 Yr (Ann) -8.61

12 Mo. 15.11 -7.42 -7.24

3 Yr CAGR 9.60 2.66 2.57

28

GROWTH (%) Last Qtr 6.34 62.13 65.00

Revenues Net Income EPS

RETURN ON EQUITY (%) HMC Q2 2016 6.04 Q2 2015 7.10 Q2 2014 9.96

Ind Avg 5.66 -3.13 4.30

S&P 500 12.00 12.28 14.59

13.92

9.93

25.41

HMC

Ind Avg

S&P 500

BUY

Volume in Millions

8 3

2015

0 2017

2016

COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History

HIGHLIGHTS The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Automobiles industry. The net income increased by 62.1% when compared to the same quarter one year prior, rising from $1,095.40 million to $1,775.99 million. Despite its growing revenue, the company underperformed as compared with the industry average of 10.7%. Since the same quarter one year prior, revenues slightly increased by 6.3%. Growth in the company's revenue appears to have helped boost the earnings per share.

2015

Q2 0.99

Q1 0.94

Q4 -0.32

Q3 0.57

Q2 0.60

Q1 0.85

Q4 0.39 Q3 0.51

Q2 0.66

HOLD

RECOMMENDATION We rate HONDA MOTOR CO LTD (HMC) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

EPS ANALYSIS¹ ($)

Q1 0.80

BUY

5

P/E COMPARISON

2014

25 Rating History

2016

NA = not available NM = not meaningful 1 Compustat fiscal year convention is used for all fundamental data items.

The debt-to-equity ratio is somewhat low, currently at 0.92, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.82 is somewhat weak and could be cause for future problems. HONDA MOTOR CO LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, HONDA MOTOR CO LTD reported lower earnings of $1.70 versus $2.36 in the prior year. This year, the market expects an improvement in earnings ($2.52 versus $1.70). The gross profit margin for HONDA MOTOR CO LTD is currently lower than what is desirable, coming in at 32.38%. Regardless of HMC's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 5.42% trails the industry average.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.

Report Date: January 22, 2017

PAGE 1

January 22, 2017 NYSE: HMC

HONDA MOTOR CO LTD Sector: Consumer Goods & Svcs Automobile Manufacturers Source: S&P Annual Dividend Rate $0.80

Annual Dividend Yield 2.63%

PEER GROUP ANALYSIS

Market Capitalization $55.0 Billion

52-Week Range $24.03-$31.18

Price as of 1/19/2017 $30.35

INDUSTRY ANALYSIS

100%

REVENUE GROWTH AND EBITDA MARGIN*

RACE FA RA VO BL E

TSLA

The automobile industry is comprised of companies that design, manufacture, engineer, assemble and market automobiles and motorcycles as well as provide leasing and financial services. Industry performance is closely linked with overall economic performance. Major players include General Motors (GM), Ford Motor Company (F) and Chrysler. This group is commonly referred to as Detroit’s big three. BMW, Daimler, Honda (HMC), Hyundai, Mazda, Nissan, Subaru, Toyota (TM) and Harley-Davidson (HOG) are other prominent players. There are also niche players such as Winnebago Industries (WGO) for motor- homes and Tesla Motors (TSLA) for high-end electric cars. Moderating oil prices have not shifted demand back to heavy SUVs and other trucks as more fuel-efficient options are now available. This change in consumer preferences has supported German, Japanese and Korean manufacturers, whose market share has consequently expanded. The big three are trying to adapt their product lines to changing preferences.

THO

UN

B RA VO

TM HMC FCAUGM HOG WGO LE

0%

FA

Revenue Growth (TTM)

Beta 1.20

5%F

35%

Huge health care and fringe benefits provided to big three employees give foreign competitors a strong advantage. All three are negotiating new labor contracts with the United Auto Workers (UAW) union. With these on-going negotiations, the big three hope to reduce the profit-per-vehicle gap. Reduced sales, different platforms for parts, high raw material costs and tough exchange rates are other hurdles facing the industry.

EBITDA Margin (TTM) Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $993.3 Million and $194.7 Billion. Companies with NA or NM values do not appear. *EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization.

100%

REVENUE GROWTH AND EARNINGS YIELD

Consumer choice in vehicles is more than ever being influenced by fuel efficiency. Automakers are exploring alternate fuels such as ethanol and electric fuel cells and are delivering hybrid gasoline-electric vehicles and pure-electric car for sale. The new cars are lighter, provide better fuel efficiency, enhanced safety features, and many come with tax credits from the government to make costs competitive. Having an auto industry is considered to be in the strategic interest of America and was bailed-out to help it survive the Great Recession.Manufacturers have recognized growing demand from developing economies and the opportunity to increase auto parts sourcing from these economies.

RACE FA

PEER GROUP: Automobiles

RA VO BL E

TSLA

THO

UN FA B RA VO

0%

HMC

LE

Revenue Growth (TTM)

US congress toughened the Corporate Average Fuel Economy (CAFE) regulations that no longer grant exemptions to light trucks classified as SUVs or passenger vans unless they exceed 10,000 lbs. In the near future, the standard is to be modified to accommodate many larger vehicles.

-5%

WGO

TM FCAU HOG

F

GM25%

Earnings Yield (TTM)

Ticker HMC WGO GM THO F TSLA TM FCAU RACE HOG

Recent Company Name Price ($) HONDA MOTOR CO LTD 30.35 WINNEBAGO INDUSTRIES 31.45 GENERAL MOTORS CO 37.30 THOR INDUSTRIES INC 100.79 FORD MOTOR CO 12.43 TESLA MOTORS INC 243.76 TOYOTA MOTOR CORP 119.31 FIAT CHRYSLER AUTOMOBILES NV 9.94 FERRARI NV 60.46 HARLEY-DAVIDSON INC 58.23

Market Cap ($M) 54,977 993 56,858 5,300 48,513 39,267 194,654 12,812 11,422 10,293

Price/ Earnings 13.92 17.57 4.27 18.56 6.87 NM 9.55 8.42 30.54 15.45

Net Sales TTM ($M) 135,275.05 1,006.31 162,083.00 5,260.29 153,397.00 5,929.88 264,180.00 120,840.39 3,295.03 6,066.49

Net Income TTM ($M) 3,921.52 48.68 13,858.00 284.77 7,247.00 -873.97 19,420.00 1,823.21 375.27 687.18

The peer group comparison is based on Major Automobile Manufacturers companies of comparable size.

Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between 0.9% and 95.2%. Companies with NA or NM values do not appear.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.

Report Date: January 22, 2017

PAGE 2

January 22, 2017 NYSE: HMC

HONDA MOTOR CO LTD Sector: Consumer Goods & Svcs Automobile Manufacturers Source: S&P Annual Dividend Rate $0.80

Annual Dividend Yield 2.63%

COMPANY DESCRIPTION Honda Motor Co., Ltd. develops, manufactures, and distributes motorcycles, automobiles, power products, and other products worldwide. The company operates through four segments: Motorcycle Business, Automobile Business, Financial Services Business, and Power Product and Other Businesses. The Motorcycle Business segment produces sports models, including trial and moto-cross racing vehicles; business and commuter models; all-terrain vehicles; and side-by-side models. The Automobile Business segment offers passenger cars, light trucks, and mini vehicles, as well as vehicles powered with alternative fuel, such as ethanol, battery electric and fuel cell vehicles. The Financial Services Business segment provides various financial services, including retail lending, leasing, and other financial services comprising wholesale financing to dealers and customers. The Power Product and Other Businesses segment engages in the manufacture and sale of various power products consisting of general-purpose engines, generators, water pumps, lawn mowers, riding mowers, grass cutters, brush cutters, tillers, snow blowers, outboard marine engines, power carriers, sprayers, pressure washers, and cogeneration units. This segment also offers HondaJet aircraft. The company sells its products through independent retail dealers, outlets, and authorized dealerships. Honda Motor Co., Ltd. was founded in 1946 and is based in Tokyo, Japan. HONDA MOTOR CO LTD No. 1-1, Minami-Aoyama 2-chome Tokyo 107-8556 JPN Phone: 81 3 3423 1111 http://www.honda.com Employees: 208000

Beta 1.20

Market Capitalization $55.0 Billion

52-Week Range $24.03-$31.18

Price as of 1/19/2017 $30.35

STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of HMC shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and weaknesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock’s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR

SCORE

4.0

Growth out of 5 stars weak Measures the growth of both the company's income statement and cash flow. On this factor, HMC has a growth score better than 70% of the stocks we rate.

strong

2.0

Total Return out of 5 stars weak Measures the historical price movement of the stock. The stock performance of this company has beaten 30% of the companies we cover.

strong

3.5

Efficiency out of 5 stars weak Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 60% of the companies we review.

strong

2.5

Price volatility out of 5 stars weak Measures the volatility of the company's stock price historically. The stock is less volatile than 40% of the stocks we monitor.

strong

4.0

Solvency out of 5 stars weak Measures the solvency of the company based on several ratios. The company is more solvent than 70% of the companies we analyze.

strong

4.0

Income out of 5 stars weak Measures dividend yield and payouts to shareholders. The company's dividend is higher than 70% of the companies we track.

strong

THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.

Report Date: January 22, 2017

PAGE 3

January 22, 2017 NYSE: HMC

HONDA MOTOR CO LTD Sector: Consumer Goods & Svcs Automobile Manufacturers Source: S&P Annual Dividend Rate $0.80

Annual Dividend Yield 2.63%

Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial

NA

2.52 E

2.79 E

NA

2017(E)

2018(E)

INCOME STATEMENT Net Sales ($mil) EBITDA ($mil) EBIT ($mil) Net Income ($mil)

Q2 FY16 32,760.27 5,471.27 2,293.56 1,775.99

Q2 FY15 30,805.11 4,118.58 1,413.32 1,095.40

Q2 FY16 16,596.28 167,853.43 59,952.33 64,860.55

Q2 FY15 13,718.61 152,927.71 56,771.51 59,589.44

Q2 FY16 32.38% 16.70% 7.00% 0.81 2.33% 6.04%

Q2 FY15 30.67% 13.36% 4.59% 0.77 2.76% 7.10%

Q2 FY16 1.15 0.48 31.08 73.79

Q2 FY15 1.20 0.49 36.70 38.51

Q2 FY16 1,802 0.19 0.99 35.99 NA 648,750

Q2 FY15 1,802 0.18 0.60 33.06 NA 710,159

Beta 1.20

Market Capitalization $55.0 Billion

52-Week Range $24.03-$31.18

Price as of 1/19/2017 $30.35

FINANCIAL ANALYSIS HONDA MOTOR CO LTD's gross profit margin for the second quarter of its fiscal year 2016 has increased when compared to the same period a year ago. The company has grown its sales and net income during the past quarter when compared with the same quarter a year ago, and although its growth in net income has outpaced the industry average, its revenue growth has not. HONDA MOTOR CO LTD has weak liquidity. Currently, the Quick Ratio is 0.82 which shows a lack of ability to cover short-term cash needs. The liquidity decreased from the same period a year ago, despite already having weak liquidity to begin with. This would indicate deteriorating cash flow. During the same period, stockholders' equity ("net worth") has increased by 8.84% from the same quarter last year. Overall, the key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the future. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.TheStreetRatings.com.

BALANCE SHEET Cash & Equiv. ($mil) Total Assets ($mil) Total Debt ($mil) Equity ($mil) PROFITABILITY Gross Profit Margin EBITDA Margin Operating Margin Sales Turnover Return on Assets Return on Equity DEBT Current Ratio Debt/Capital Interest Expense Interest Coverage SHARE DATA Shares outstanding (mil) Div / share EPS Book value / share Institutional Own % Avg Daily Volume

2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.

Report Date: January 22, 2017

PAGE 4

January 22, 2017 NYSE: HMC

HONDA MOTOR CO LTD Sector: Consumer Goods & Svcs Automobile Manufacturers Source: S&P Annual Dividend Rate $0.80

Annual Dividend Yield 2.63%

Beta 1.20

Market Capitalization $55.0 Billion

52-Week Range $24.03-$31.18

Price as of 1/19/2017 $30.35

2 Year Chart

Price/Earnings

HOLD: $27.02

BUY: $29.30

VALUATION BUY. The current P/E ratio indicates a premium compared to an average of 9.93 for the Automobiles industry and a significant discount compared to the S&P 500 average of 25.41. For additional comparison, its price-to-book ratio of 0.84 indicates a significant discount versus the S&P 500 average of 2.83 and a significant discount versus the industry average of 3.45. The price-to-sales ratio is well below both the S&P 500 average and the industry average, indicating a discount.

BUY: $30.84

RATINGS HISTORY Our rating for HONDA MOTOR CO LTD has not changed since 8/15/2016. As of 1/19/2017, the stock was trading at a price of $30.35 which is 2.7% below its 52-week high of $31.18 and 26.3% above its 52-week low of $24.03. $40 $35 $30

2015

2016

1

2

3

premium

HMC 13.92 Peers 9.93 • Premium. A higher P/E ratio than its peers can signify a more expensive stock or higher growth expectations. • HMC is trading at a significant premium to its peers. Price/Projected Earnings

From Hold Buy Buy

To Buy Hold Buy

Price reflects the closing price as of the date listed, if available

1

2

3

(as of 1/19/2017)

41.56% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months. 30.68% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss. 27.77% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns.

TheStreet Ratings 14 Wall Street, 15th Floor New York, NY 10005 www.thestreet.com Research Contact: 212-321-5381 Sales Contact: 866-321-8726

4

5

HMC 10.89 Peers 10.48 • Premium. A higher price-to-projected earnings ratio than its peers can signify a more expensive stock or higher future growth expectations. • HMC is trading at a premium to its peers. Price/Book

1

2

3

4

5

1

2

premium

3

4

5

3

4

5

discount

HMC 5.28 Peers 15.08 • Discount. The P/CF ratio, a stock’s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. • HMC is trading at a significant discount to its peers. Price to Earnings/Growth

1

2

3

premium

4

5

discount

HMC 0.29 Peers 1.48 • Discount. The PEG ratio is the stock’s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. • HMC trades at a significant discount to its peers. Earnings Growth

1

2

3

4

lower

5 higher

HMC -7.24 Peers 70.56 • Lower. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. • However, HMC is expected to significantly trail its peers on the basis of its earnings growth rate. Sales Growth

discount

HMC 0.40 Peers 1.14 • Discount. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. • HMC is trading at a significant discount to its industry on this measurement.

2

premium

discount

HMC 0.84 Peers 3.45 • Discount. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. • HMC is trading at a significant discount to its peers. Price/Sales

1

Price/CashFlow

discount

premium

RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS

5

discount

premium

MOST RECENT RATINGS CHANGES Date Price Action 8/15/16 $29.30 Upgrade 1/29/16 $27.02 Downgrade 1/16/15 $30.84 No Change

4

1

2

3

lower

4

5 higher

HMC 15.11 Peers 17.78 • Lower. A sales growth rate that trails the industry implies that a company is losing market share. • HMC trails its peers on the basis of sales growth

DISCLAIMER: The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT® Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at http://www.thestreet.com/static/about/terms-of-use.html.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.

Report Date: January 22, 2017

PAGE 5