Japanese carmakers will recover fast with Honda ‘a buy’: Goldman

Bloomberg

The coronavirus outbreak will reduce Japanese automakers’ combined operating profit by 38% this fiscal year, but the manufacturers may rebound faster than they did after the global financial crisis more than a decade ago, analysts at Goldman Sachs Group Inc said.
Demand could “recover relatively quickly” once the pandemic nears an end, Kota Yuzawa and other analysts wrote in a report. Honda Motor Co was upgraded to a buy rating, from a hold, by the bank, which said its valuation was attractive after a sharp decline of about 25% this year.
The global auto industry, which was already seeing sputtering sales, is reeling from shutdowns aimed at preventing the spread of the pathogen, which has infected almost 2 million people across the globe.
With showrooms shut, consumers aren’t buying cars and auto supply chains are in disarray, leaving factories idle. Toyota Motor and Nissan Motor are among those that have sought financing to weather the storm.
“Most of the automakers are sufficiently well-placed in terms of net cash and shareholders’ equity to weather a steep fall in sales,” the analysts wrote. “They should be able to overcome near-term declines in working capital. While circumstances vary, we do not expect across-the-board cuts or suspensions of dividend by automakers.”
Operating losses for major Japanese automakers in April-June will probably reach $1.7 billion, according to the bank. Honda is well positioned for a recovery, the analysts said.