Honda Motor Co., Ltd.

Honda Motor Co., Ltd. (NYSE: HMC) is a Japanese conglomerate that manufactures motorcycles, automobiles, financial services, and life-creation products. The company generates its revenues through four segments: Motorcycle, Automobile, Sales finance and leasing, and Power products. HMC has 1.81 billion American Depository Shares (ADS) listed and outstanding (each ADS representing one ordinary shares).

Key Highlights:

• Despite some unfavourable circumstances such as lower automotive unit sales due to a supply shortfall of specific parts, such as semiconductors, and higher raw material costs, consolidated operating profit for the fiscal nine months (ended December 31, 2022) was JPY 671.6 billion, up JPY 224.6 billion year on year.
• For the first nine months of the fiscal year 2022, the company's consolidated profit was JPY 582.1 billion, up JPY 138.0 billion from the previous year.
• However, the company operates at a longer cash conversion cycle of 82.5 days in Q3FY22 compared to the industry median of 41.5 days.
• HMC has been operated at a debt/equity ratio of 0.78x as of December 31, 2021, compared to the industry norm of 0.48x.
• Stock is currently trading far below its crucial short-term (50-day) and long-term (200-day) SMA support levels, indicating a bearish trend.
• Stock is leaning towards the mid-band of the 52-week range of USD 26.16 to USD 33.42.
• HMC's stock price has been relatively stable throughout the year and has fallen 7.14% and 10.95% in the past one and nine months, respectively.

Conclusion:

Considering the company's robust financial performance, leveraged balance sheet, long cash conversion cycle, macroeconomic headwinds, and hyped technical indicators, we recommend a "Watch" rating on the stock at the closing price of USD 28.23, down 0.32% as of March 21, 2022.

Three-Year Technical Price Chart (as of March 21, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Trinseo PLC

Trinseo PLC (NYSE: TSE) is a global materials firm specialising in synthetic rubber, latex, and plastics. Latex binders, synthetic rubber, feedstocks, polystyrene, Americas styrenics, engineered materials, and essential plastics are among the company's operating segments.

Key Highlights:

• The company reported a 75.89% increase in net sales to USD 4.83 billion in FY21 (ended December 31, 2021) from USD 2.74 billion in FY20.
• TSE reported a significant increase in net income to USD 440.0 million in FY21, from USD 7.9 million in FY20.
• At the end of FY21, TSE's debt/equity ratio was 2.29x, significantly higher than the industry norm of 0.78x.
• It reported Gross and EBITDA margins of 14.5% and 13.6% in FY21, respectively, which are much lower than the industry medians of 35.7% and 19.0%.
• Stock is currently trading below its crucial short-term (50-day) and long-term (200-day) SMA support levels, indicating a bearish trend.
• Stock is leaning towards the mid-band of the 52-week range of USD 43.24 to USD 70.25.
• TSE's stock price has fallen 15.37% and 28.81% in the past nine and twelve months.

Conclusion:

Considering the company's fundamentals, industry lagging margins, high leverage, macro headwinds, and other technical indicators, we recommend a "Watch" rating on the stock at the closing price of USD 49.48, up 3.43% as of March 21, 2022.

Three-Year Technical Price Chart (as of March 21, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.