LSI Industries, Inc.

LYTS Details

LSI Industries, Inc. (NASDAQ: LYTS) is non-residential lighting and display solutions manufacturer. Its operating segments are 1) Lighting, which manufactures and assembles both conventional and LED light sources for outdoor and indoor lighting solutions, as well as electronic circuit boards, assemblies, and sub-assemblies for retail and other commercial facilities; and 2) Display Solution segment, which develops and sells digital visual image elements for commercial organizations such as interior branding, electrical and architectural signage, and other electrical board systems.

Latest News:

• Foray Into Solar Solutions: LYTS announced the expansion of turnkey solar solutions for petroleum fueling stations to its energy-efficient, environmentally beneficial technology portfolio. The first project, which took place at a Speedy Stop in Austin, Texas, showcased LSI's project capabilities, including everything from idea to installation. LG solar panels put atop the fuel canopy and car wash at the Speedy Stop site is expected to create more than 170,000 kWh of solar energy annually, reducing the site's energy use by 18%. The project is anticipated to be finished in Q1FY22.
• Dividend Declaration: On November 03, 2021, the company declared a quarterly dividend of USD 0.05 per common share, paid on November 23, 2021, to shareholders of record on November 15, 2021.

Q1FY22 Results:

• Surge in Topline: The company reported a YoY increase of 51.98% in net sales to USD 106.40 million in Q1FY22 (ended September 30, 2021) from USD 70.01 million in Q1FY21, attributable to 124.13% growth in the Display Solution segment.
• Growth in Profitability: LYTS reported a net income of USD 3.13 million in Q1FY22, increased from USD 1.99 million in Q1FY21.
• Cash and Debt Position: As of September 30, 2021, the company had cash & cash equivalents of USD 2.57 million and total outstanding debt of USD 79.99 million.

Key Risks:

• Customer Concentration Risk: In FY20, the petroleum/convenience store market accounted for 36% of LYTS' total revenue. As a result, any unfavorable changes in these markets' economic environment could significantly impact their financial performance.
• Competition Risk: LYTS operates in a highly competitive electrical equipment industry with aggressive price competition from foreign competitors, which could put the company under pricing pressure. If this pattern continues, the company's financials may suffer.
  

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.

LYTS Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

LYTS's stock price had decreased 22.67% in the past nine months and is currently leaning towards the lower band of its 52-week range of USD 6.31 to USD 11.22. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 39.34. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 8.13.

Considering the correction in the stock price, strong balance sheet, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 6.65, traded flat, as of January 07, 2022.

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

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

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.