American Woodmark Corporation

AMWD Details

American Woodmark Corporation (NASDAQ: AMWD) manufactures and distributes kitchen, bath, and home organization products for renovation and new home construction market. AMWD markets its product directly to home center retailers and builders through a network of independent dealers and distributors in the US. As of July 31, 2021, AMWD operated 17 manufacturing facilities, eight primary service centers, and one distribution center.

Q1FY22 Results:  The company reported YoY growth of 13.46% in revenue to USD 442.58 million in Q1FY22 (ended July 31, 2021) compared to USD 390.09 million in Q1FY21. The Home Center Retailers segment, which accounted for 47.30% of the total revenue in Q1FY22, reported YoY growth of 20.30%, whereas the Builders segment improved by 8.45% YoY. Net income for Q1FY22 reduced to USD 2.98 million from USD 16.06 million in Q1FY21. During the quarter, AMWD repurchased 299,781 common shares, at an average price of USD 83.36 per share, for a total consideration of USD 25.0 million. As of July 31, 2021, the company's stood with cash and cash equivalents of USD 27.82 million and total debt of USD 493.54 million on its balance sheet.

Key Risks: In FY21, AMWD's top two customers (Home Depot and Lowe's) accounted for ~48.7% of its net sales. As a result, the loss of any of its key customers could hurt its financials. In addition, AMWD's manufacturing process requires significant amounts of raw materials and energy, the pricing of which is highly volatile and unpredictable. Any lag in the supply of requisite quantity or unfavorable pricing could distort the company's overall performance.

Outlook: In FY22, AMWD anticipates YoY growth of mid-to-high single digits in net sales (in % terms), with sequential growth in margins for the remainder of FY22. In addition, AMWD expects to keep a cash balance similar to the historical periods and utilize the excess towards debt repayments and share repurchases. It also expects a capital investment of ~3.5% of net sales for FY22.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Data Source: REFINITIV)

* % 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.

AMWD Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: AMWD's stock price decreased 23.43% in the past six months and is currently trading in the lower band of its 52-week range of USD 67.42 to USD 108.81. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 34.80. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 85.25. Considering the significant correction in the stock price, improvement in topline, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 69.77, down 0.20% as of September 02, 2021, 3:28 PM ET.

* 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.

Village Super Market, Inc.

VLGEA Details

Village Super Market, Inc. (NASDAQ: VLGEA) operates a chain of twenty-nine ShopRite, five Fairway, and three Gourmet Garage in New Jersey, Maryland, New York, and Pennsylvania. VLGEA is the second-largest member of Wakefern Food Corporation, the US' largest retailer-owned food co-operative and owner of ShopRite, Fairway, and Gourmet Garage brands. Its operating segments are 1) Centre Store segment, which includes grocery, dairy, frozen, health and beauty care, liquor, and general merchandise, 2) Fresh segment, which consists of meat, deli, seafood, bakery, prepared foods, and floral products, 3) Pharmacy segment, that includes medicines, medical devices, and other human health therapies, and 4) Other, comprising ShopRite revenues from home service fees, gift cards, and lottery commissions. As of September 02, 2021, VLGEA's market capitalization stood at USD 321.76 million.

Q3FY21 Results: The company reported YoY growth of 4.98% in total revenues to USD 481.09 million in Q3FY21 (ended April 24, 2021) compared to USD 458.29 million in Q3FY20 (ended April 25, 2020), attributable to the Fairway acquisition completed on May 14, 2020, which was partly offset by a 5.5% decline in same-store sales. The Center Store segment, which accounted for 59.63% of the total revenue in Q3FY21, reported a YoY decline of 1.50%, whereas the Fresh segment improved by 18.54% YoY. Net income for Q3FY21 reduced to USD 2.57 million from USD 11.15 million in Q3FY20. As of April 24, 2021, the company had cash & cash equivalents of USD 112.68 million and total debt of USD 99.56 million.

Key Risks: Most VLGEA stores are concentrated in New Jersey, New York, Pennsylvania, and Maryland. As a result, a slowdown or disruption of business activity in any of these areas can adversely impact the company's financial position. In addition, VLGEA operates in the highly competitive supermarket industry and faces aggressive competition from in-store and online retail chains. Hence, any competitors' price reduction or promotional program could harm the financial and operational performance of the company.

Outlook: For the full FY21, the company anticipates a YoY growth of 1% - 2% in same-store sales. It also expects to incur capital expenditures of USD 25,000 for the entire year.

VLGEA Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: VLGEA's stock price decreased 8.91% in the past six months and is currently trading in the lower band of its 52-week range of USD 21.00 to USD 26.39. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 51.18. Considering the slight correction in the stock price, decent balance sheet, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 22.50, up 1.76% as of September 02, 2021.

* 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. 

Strattec Security Corp.

STRT Details

Strattec Security Corp. (NASDAQ: STRT) is engaged in designing, developing, manufacturing, and marketing automotive access control products, including electronic and mechanical keys and locksets, steering column and instrument panel ignition lock housings, latches, power sliding door systems, and other related automotive products primarily to automotive customers in North America. Owing to its strategic partnership with WITTE Automotive (Velbert, Germany) and ADAC Automotive (Grand Rapids, Michigan), STRT markets each partner's products under the brand name of VAST Automotive Group (VAST) globally.

FY21 Results: The company reported YoY growth of 25.95% in net sales to USD 485.30 million in FY21 (ended June 27, 2021) compared to USD 385.30 million in FY20 (ended June 28, 2020). In FY21, sales to all customer groups were higher primarily due to the negative impact of the COVID-19 pandemic on its revenue during FY20. STRT reported a net income of USD 22.53 million in FY21 vs. a net loss of USD 7.61 million in FY20. As of June 27, 2021, the company had a cash balance of USD 14.47 million and total debt of USD 12.0 million.

Sales Distribution By Customer and Products (Source: Company Presentation, August 19, 2021)

Key Risks: In FY21, STRT's top three customers (General Motors Company, Fiat Chrysler Automobiles, Ford Motor Company) accounted for 62% and 61% of its net sales and receivables, respectively. As a result, the loss of such key customers could hurt its financials. In addition, STRT operates in a highly competitive automotive component supply industry and faces direct competition from more significant players with higher financial and technological capabilities at their disposal. Hence, any advanced innovation or superior product development by its competitors could affect its market share and impair its financial performance.

Outlook: STRT expects to incur ~USD 13 million in capital expenditures in FY22 for new product programs and to upgrade and replace existing equipment.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Data Source: REFINITIV)

* % 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.

STRT Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: STRT's stock price decreased 26.38% in the past three months and is currently trading in the mid band of its 52-week range of USD 17.04 to USD 67.28. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 37.98. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 45.73. Considering the correction in the stock price, strong balance sheet, a surge in profitability, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 37.75, up 1.49% as of September 02, 2021, 11:38 AM ET.

* 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.