American Woodmark Corporation

AMWD Details

American Woodmark Corporation (NASDAQ: AMWD) is engaged in manufacturing and commercializing home organization products such as kitchen, bath, office cabinetry, and other allied hardware products to home center customers, builders, and independent dealers and distributors in the United States. AMWD manufactures its products across 17 facilities and provides turnkey installation services to its direct builder customers through a network of eight service centers. The majority of AMWD’s revenues are generated from home center retailer customers.

Share Buyback Program: On May 25, 2021, AMWD announced a USD 100 million repurchase program of its outstanding common stock. In concurrence with this authorization, the company cancelled the remaining portion of its existing USD 50 million authorization, of which USD 20 million was repurchased during Q4FY21 (ending April 30, 2021).

Restated Credit Facility: On April 22, 2021, AMWD entered into a revised credit facility consisting of a USD 500 million revolving credit facility (RCF) and a USD 250 million term loan facility. Both facilities will mature on April 22, 2026. At closing, the company borrowed the entire USD 250 million under the term loan and ~USD 264 million under the RCF to fund the redemption of its senior notes due 2026, scheduled for April 26, 2021.

FY21 Results: The company reported a 5.67% increase in net sales to USD 1.74 billion during FY21 compared to USD 1.65 billion during FY20. Its EBITDA for FY21 was USD 199.55 million compared to USD 228.08 million in FY20. However, AMWD witnessed a decline in net income to USD 58.76 million in FY21 vs USD 74.86 million in FY20. As of April 30, 2021, the company’s cash and cash equivalents stood at USD 91.07 million, with total debt amounting to USD 521.77 million.

Key Risk: AMWD’s two largest customers i.e., Home Depot and Lowe's, collectively accounted for 48.7%, 46.5%, and 47.9% of the total annual net sales in FY21, FY20, and FY19, respectively. Such excessive dependence on a certain customer for sales could harm the company’s financial health in the future.

Outlook: For Q1FY22, AMWD expects the growth in net sales to be in the mid to upper teens YoY, with an expected improvement in margins. In addition, the company intends to reduce its cash through debt repayment and share repurchases, and invest back into the business.

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.

AMWD Daily Technical Chart

Stock Recommendation: AMWD's share price has declined by 17.44% in the past 3 months and is currently trading in the lower-band of the 52-week range of USD 71.12 to USD 108.81. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 37.94. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 95.50. On the technical chart, the next support level is USD 72.08. Considering the company's market dominance, consistent track record, correction in lumber prices, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 81.94, up 0.31% as of July 01, 2021, at 2:55 PM ET.

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

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

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

Lakeland Industries, Inc.

LAKE Details

Lakeland Industries, Inc. (NASDAQ: LAKE) is engaged in manufacturing and selling industrial protective clothing and accessories to more than 1,600 global safety and industrial supply distributors, and federal, state, and local governmental agencies and departments. LAKE's products are commercialized in over 50 global countries, including China, the European Economic Community (EEC), Canada, Chile, Argentina, Russia, Kazakhstan, Colombia, Mexico, Ecuador, India, and Southeast Asia. The company’s manufacturing facilities are located in China, Mexico, Vietnam, Argentina, and India.

Strengthening its Financial Position: On June 29, 2021, LAKE announced the expansion of its credit facility with Bank of America to USD 25.0 million from USD 12.5 million to support its capital distribution strategies for inorganic business developments and other growth opportunities. However, the company has not yet used its credit facility and continues to operate with no outstanding debt.

Global Footprint (Source: Investor Presentation, May 2021)

Q1FY22 Results: The company reported a 25.20% decline in net sales to USD 34.09 million in Q1FY22 (ended April 30, 2021) compared to USD 45.58 million in Q1FY21, primarily due to a reduction in the direct container sales that were driven by COVID-19 demand during Q1FY21. The company witnessed a decline in net income to USD 4.64 million in Q1FY22 vs USD 8.63 million in Q1FY21. As of April 30, 2021, the company’s cash and cash equivalents amounted to USD 60.32 million, and working capital was USD 112.69 million. There was no outstanding debt as of Q1FY22 end.

Key Risks: Most of the company’s manufacturing operations are located outside the US, and are subject to regulatory and trade risks. As a result, any significant developments, such as civil disturbances, political instability, changes in currency valuations, and government activities such as border taxes could negatively impact the company’s operations.

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.

LAKE Daily Technical Chart

Stock Recommendation: LAKE's share price has declined by 19.43% in the past 3 months and is currently trading in the lower-band of the 52-week range of USD 17.88 to USD 47.95. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 37.658. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 26.65. On the technical chart, the next support level is USD 18.84. Considering the company's formidable track record, strong balance sheet, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 22.15, down by 0.80% as of July 01, 2021, at 3:16 PM ET.

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

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

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