Honda Motor Company

1. Honda Motor Company Presented By: Zach Bodine March 9, 2006

2. Price 52-Week High 52-Week Low Average Volume (3 months) Market Capitalization $29.54 $30.36 $23.75 539,598 $55.55 Bil Stock Fundamentals

3. Investment Recommendation Buy/Hold

4. Ratios (all per share) P/E Ratio Earnings Dividend and Yield Financial Strength Ratios Quick Current Long-Term D/E Total Debt to Equity Return on Equity (per share) Return on Assets 13.46 $2.19 0.34 (1.10%) 0.84 1.13 0.839 13.52% 5.03% Key Ratios

5. Over the past 5 Years Revenue Dividend Per Share Earnings Per Share Operating Income 7.2% 19.42% 14.1% 8.2% Growth Percentages

6. Company Description Automotive Manufacturers – Major • Automobiles • Motorcycles • Power Products • Financial Services • Honda is the World’s Largest motorcycle manufacturer but is most known for its automotive industry

7. Global Position Over 9 month span Honda generated 59% of its automobile profit from the North America alone, which was an increase of 2.5% from a year ago. However, Asia led in Motorcycle sales with 27.5%, while N.A. had 25.5%. This was opposite of a year ago. Sales for the last 9 months ended Dec 30, 2005 totaled $60.9B, and Sales for all of 2005 totaled $80.5B.

8. Honda’s Automobile Brands Honda’s principal automobile products include passenger cars under: Legend, Accord, Civic, City, Fit Saloon, Acura RL, Acura TL, and Acura TSX brands Multiwagons, Minivans, Sport utility vehicle, and Sports coupe under: Elysion, Odyssey, Step Wagon, Edix, FR-V, Stream, Fit, Jazz, Pilot, Element, CR-V, Acura MDX, and Acura RSX brands

9. Consumer Reports Top Automobile picks for2006 • Top Small Sedan (less than $20gs) • Top Family Sedan ($20-$30gs) • Top Upscale Sedan ($30-40gs) • Luxury Sedan • SUV ($30gs and more) • Small SUV (less than $30gs) • Top Minivan • Top Pick-up Truck • Green Car • Fun to drive Honda Civic Honda Accord Acura TL (Honda) Infiniti M35 (Nissan) Toyota Highlander Hybrid Subaru Forester Honda Odyssey Honda Ridgeline Toyota Prius Subaru Imprezza • Additionally, Honda was 2nd overall in vehicle reliability right behind Lexus

10. Marketing/Technology • The new ACE System (Advanced Compatibility Engineering) • 5 star rating • Hybrid Engines • ASIMO • Jet Engines Manufacturing • Nattokinase

11. Research and Development • Honda currently has individualized R&D facilities in Japan for motorcycles, automobiles, and power products, and a motorcycle R&D center in China for its increasing market demand. • HRI (the Honda Research Institute) is located in Japan, U.S., and Germany. - Research focus on: robotics technology, automotive safety, ultra lightweight products, and fuel cell technology - Deriving automotive fuel from plants. • Honda also has networked facilities in the UK, Germany and Italy (to help focus on the European market more independently)

12. Management Structure • President and Representative Director Takeo Fukui Age: 62 • Executive Vice-President and Representative Director Satoshi Aoki Age: 60 • Promotion of Objective Management: Staff composed of 22 personnel. Two director positions and one auditor assigned annually outside the company. Temporary directors are paid according to how well the Company performs during their tenor.

13. Image • New Jersey Supreme Court: Honda sued for engine failure by a leasee. • Magnussen Warranty Act • Engine failure occurred @ 22,000 miles • Losing company must cover all legal fees • AAM supports Honda • Clean- Fuel tax deduction (2005) • Tax breaks under new energy bill (2006)

14. Competitive Analysis

15. Industry Trends • Trend of Companies performing well in foreign markets, but not domestically. • GM: Dealing with Health care problems ($100B annually) • Sold GMAC Subsid. • Possibility of bankruptcy in the future • Ford: $1.6B decline in car sales from years ending 04’ – 05’ • Sold Hertz rentl car business • Chrysler: Changes management around • Only U.S. manufacturer not in the red • Volkswagen: high prices, low quality, plus labor force issues • Toyota and Honda are prospering well in U.S. market • Everyone looks to China for expansion

16. Market PerformanceOne Year Price Performance Compared to the S&P 500

17. Market Performance5 year Price Performance Compared to the S&P 500

18. Common Size Financials

19. Valuation Data For Return on Equity Beta = .46 Risk Free Rate = .486 Avg. Market Risk = 11% Re = Rf + B(Equity Risk Premium) Re = .0486+.46(.11-.0486) =7.68%

20. Valuation of Stock Price • Intrinsic Value based on Future Cash Flows • Conservative Growth rate Normal Growth Re= 7.68% Owner earnings= $3.14B Growth rate = 4% Second Stage Growth rate = 2.5% Estimated Intrinsic Value= $39.11

21. Valuation continued Diminishing Growth • Using revenue growth of 14.3% from 2003-2004, and 6% from 2004-2005, you could project that revenue growth from 2005-2006 could be equal to: • 6/14.3=.4196 • .4196*6= 2.52% (new assumed growth rate) • Leaving all other variables the same • Estimated Intrinsic Value = $34.84

22. Valuation continued….. • Impressive growth • By Viewing the table which displays sales in yen over the 9 months ended 12/31/2004, and then looking at the sales in yen for the 9 months ended 12/31/2005 you get the following numbers • 2004 sales = 6300551 • 2005 sales =7074255 • Growth rate= 7074255/6300551= 12.2% • Adjusted to 10% • Estimated Intrinsic Value = $62.50

23. Analysts Ratings finance.yahoo.com

24. Pros and Cons • Pros: • Fuel/ cost efficient products and technology • Extensive R&D programs • Superior Technology • Moving towards differentiated product lines • One of the few currently profiting companies in its industry • Objective Management Structure • Continuous increase in automotive sales in North America, particularly U.S., and in Europe as well. • Cons: • Fluctuation of Exchange rates, makes for inconsistent earnings • Japan’s Economy • Automotive industry very susceptible to interest rates • Toyota may be a better buy

25. Questions ?