Motorcycles Make Up for Low Auto Inventory in Honda's Fiscal 2023 First Quarter

Honda’s first-quarter fiscal 2023 results saw the firm confirm full-year volume targets and also raise guidance mostly from expecting the yen to remain weak against the dollar. We see no reason to change our thesis and are leaving our fair value estimate in place. Operating profit fell 8.6% year over year and margin by 100 basis points to 5.8%. Honda is being hit hard by the chip shortage in calendar 2022. Lost volume and mix contributed to a JPY 89.4 billion negative variance in profit that was mostly offset by a JPY 64.2 billion foreign currency benefit, with JPY 51 billion of that benefit from the yen weakening against the dollar to about 20-year lows. A JPY 22.2 billion unfavorable cost variance from warranty negated the JPY 14.4 billion pricing benefit in the quarter from low inventory.