Patrick Industries, Inc.

PATK Details

Patrick Industries, Inc. (NASDAQ: PATK) is a leading manufacturer and distributor of component and building products and materials, with a focus on the recreational vehicle (RV), marine, manufactured home (MH), and industrial industries. Depending on the sort of product, manufacturing and distribution are the two segments of the company.

Latest News:

• Offering of Senior Notes: On December 07, 2021 PATK priced its private offering of USD 225 million of aggregate principal amount of its convertible senior notes due 2028. The company expects to receive approximately USD 217 million in net proceeds from the sale of the Notes to the initial purchasers on December 13, 2021, subject to customary closing conditions.
  

9MFY21 Results:

• Upsurge in Topline: PATK's net sales climbed by 70.98% to USD 2.93 billion during 9MFY21 (ended September 26, 2021), compared to USD 1.71 billion during 9MFY20 (ended September 27, 2020), due to significant and sustained performance in its RV and marine leisure lifestyle segments, as well as the MH and industrial end markets.
• Improvement in Bottomline: Its net income was USD 163.90 million during 9MFY21, compared to USD 59.24 million during 9MFY20.
• Leveraged Balance Sheet: The company exited the quarter with a cash balance of USD 44.88 million and a total debt of USD 1.09 billion.

Key Risks:

• Customer Concentration Risk: Two clients in the RV sector accounted for 39% of the company's total revenues in FY20. As a result, the loss of either of these customers could have a detrimental impact on the company's finances.
• Product Concentration Risk: The RV industry accounted for 56% of net sales in FY20 and 55% in FY19, respectively. Any large decline in RV unit shipments or a halt of the industry's growth could have a detrimental impact on the company's financials and cash flows.

Valuation Methodology: EV/EBITDA per share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

PATK Daily Technical Chart (Source: REFINITIV

Stock Recommendation:

PATK's share price has surged by 12.37% in the past six months and is currently trading at a mid-band of the 52-week range of USD 66.57 to USD 98.83. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 60.48. We have valued the stock using the EV/EBITDA based relative valuation methodology and arrived at a target price of USD 76.47.

Considering the uptick in the stock price, current valuation, and technical indicators, we believe the decent business fundamentals are adequately reflected at current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 82.77, up 2.58%, as of January 03, 2022, at 10:11 AM ET.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

MasterCraft Boat Holdings, Inc.

MCFT Details

MasterCraft Boat Holdings, Inc. (NASDAQ: MCFT) is engaged in designing, manufacturing and distributing performance sport boats (PSBs), luxury day boats, and outboard boats. Its operating segments are 1) MasterCraft, which manufactures performance sport boats used for water skiing and leisure boating and general recreational boats, 2) NauticStar, which is a manufacturer of saltwater fishing boats, deck boats, and bay boats for a variety of uses, including recreational and competitive sport fishing in freshwater and saltwater lakes, 3) Crest, which manufactures leisure pontoon boats and 4) Aviara segment, which produces luxury day boats at its Merritt Island, Florida facility for recreational boating. As of January 03, 2022, the company's market capitalization stood at USD 536.73 million.

Q1FY22 Results:

• Surge in Topline: The company's revenues expanded 38.81% YoY to USD 144.01 million in Q1FY22 (ended October 03, 2021) from USD 103.75 million in Q1FY21 (ended October 04, 2020).
• Strong Bottomline Performance: Net income increased to USD 10.39 million in Q1FY22 vs. USD 9.57 million reported in Q1FY21.
• Cash and Debt Position: As of October 03, 2021, the company had cash and cash equivalents of USD 11.65 million, with total debt amounting to USD 84.43 million.

Key Risks:

• Negative Impact of COVID-19 Pandemic: MCFT operates in the leisure products industry, which suffered a massive hit due to the outbreak of the COVID-19 pandemic. Should this declining trend continue, it will impact consumers' discretionary spending on non-essential items, harming the company's financials.
• Exchange Rate Fluctuation Risk: MCFT conducts its business in many currencies other than USD, making it vulnerable to exchange rate fluctuations. Therefore, any unfavorable movement in the exchange rates could harm its operations.

Outlook:

• Q2FY22 Forecast: In Q2FY22, the company forecasts its total revenue to grow by ~30%, with an adjusted EBITDA margin of around 14.5%. It also expects a 5% growth in adjusted EPS on a YoY basis.
• FY22 Forecast: MCFT anticipates a YoY growth of ~30% in total revenue. It also stated that its EBITDA margins and adjusted EPS is expected to grow at ~18% and 25% on YoY basis, respectively.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

 (Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

MCFT Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

MCFT's stock price has increased 9.89% in the past six months and is currently trading close to the mid-band of its 52-week range of USD 23.61 to USD 33.63. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 57.34. We have valued the stock using the EV/EBITDA multiple-based relative valuation methodology and arrived at a target price of USD 25.06.

Considering the uptick in the stock price, technical indicators, and current valuation, we believe the decent business fundamentals are adequately reflected at current trading levels. Hence, we recommend a "Sell" rating on the stock at the closing price of USD 28.22, down 0.39%, as of January 03, 2022.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.