Thor Industries, Inc.

THO Details

Thor Industries, Inc. (NYSE: THO) is focused on manufacturing and marketing recreational vehicles (RVs) to independent, non-franchise dealers across the United States, Canada, and Europe. Its three reportable segments are 1) North American Towable segment, which includes the sale of travel trailers and fifth wheels via Airstream, Heartland, Jayco, Keystone, and KZ brands, 2) North American Motorized segment, which consists of the Airstream, Jayco and Thor Motor Coach brands, and 3) European segment, which manufactures both towables and RVs through eight production vehicles in Europe.

Pricing of Senior Notes: On October 06, 2021, the company priced the USD 500 million offering of 4.0% senior unsecured notes due 2029. The proceeds from the offering will be used to partially repay the revolving credit facility and certain transaction expenses. The notes will mature on October 15, 2029.

Inorganic Growth Initiatives: On September 01, 2021, THO acquired AirX Intermediate, Inc. (Airxcel), a Kansas-based RV manufacturer, for a total purchase consideration of USD 750 million. The annual pro forma revenue generated by Airxcel amounts to ~USD 680 million, 80% of which comes from sales to Original Equipment Manufacturers (OEM). The transaction is estimated to be accretive to THO's FY22 earnings and furthers its strategic objective to grow sales and improve profit margins.

FY21 Results: The company reported a 50.80% rise in net sales to USD 12.32 billion in FY21 (ended July 31, 2021) compared to USD 8.17 billion in FY20, primarily due to an increase in consumer demand. Net income for FY21 increased to USD 659.87 million from USD 222.97 million reported in FY20. The company exited the year with a cash balance of USD 445.85 million, with total debt amounting to USD 1.64 billion.

Key Risks: THO's largest dealer is sales to FreedomRoads, LLC, which contributed around 13% to the company's net sales in FY21. In the past few years, FreedomRoads acquired several other RV dealerships, impacting THO's ability to negotiate better terms. Furthermore, the company's business is cyclical and seasonal in nature and is subject to fluctuations in sales, which could affect the company's results of operations.

Outlook: In its FY21 earnings release, THOR stated that it expects the interest from new RV buyers and order activity to continue to grow in FY22. Total wholesale shipment estimates for the RB industry (according to the most recent RVIA estimate) is around 577,200 units in CY21, which is expected to grow by 4.0% CY22.

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.

THO Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: THO's share price has increased 10.22% in the past three months and is currently close to the mid-point of its 52-week range of USD 78.64 to USD 152.20. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is 47.98. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 130.23. Considering the slight uptick in the stock price, robust financials, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the current price of USD 117.70, down 3.14% as of October 14, 2021, 1:28 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.