Myers Industries, Inc.

MYE Details

Myers Industries, Inc. (NYSE: MYE) is engaged in the manufacturing and commercialization of plastic and rubber products. The company produces a wide range of polymer products for industrial, agricultural, automotive, and consumer industries. The company operates in two segments - Material Handling and Distribution. The former is engaged in the manufacturing of products like plastic reusable material handling containers, custom plastic products, consumer fuel containers, military water containers, ammunition packaging, and shipping containers. The Distribution segment is engaged in distributing tools and equipment supplies used for tires, wheels, heavy trucks, manufacturing of tire repair, and retreading products. The company’s market capitalization stood at USD 770.44 million as of May 11, 2021.

Price Increases: In March 2021, the company announced the additional price rise of the Material Handling segment products. In its statement, the company informed that with effect from April 1, 2021, there will be an additional price increase of 9% to 12% of material handling segment products. The company had already announced the 8% price increase effective March 1, 2021. It is due to the continued increase in raw material cost of resin and steel.

MYE Long-Term Growth Vision (Source: Earnings Presentation, Q1FY21)

Robust Q1FY21 Results: The company reported a steep increase of 42.68% of net sales to USD 174.43 million in Q1FY21 (ending March 31, 2021) compared to USD 122.25 million in Q1FY20 (ending March 31, 2020). The Material Handling segment contributed 74.46%, while the Distribution segment contributed 25.54% to the net sales in Q1FY21. The company reported a 56.32% decline in net income to USD 7.30 million in Q1FY21 compared to that of USD 16.72 million in Q1FY20. As of March 31, 2021, the company has cash of 16.66 million while a total long-term debt of 70.92 million.

Key Risks: The company’s basic raw material includes resins, colorants, and natural and synthetic rubber. Over the past several years, the company has realized a rapid increase in resin prices. If it continues for a longer period, the company’s operational and financial affairs may be materially impacted by the decline in margins.

Outlook: In its Q1FY21 earnings call, the company stated that it is expecting strong sales growth in Q2FY21. Selling, General, and administrative expense (SG&A) are expected to be approximately 23% of the net sales. The company is projecting its FY21 outlook for adjusted EPS to be in the range of USD 0.90 to USD 1.05 with a CAPEX of approximately USD 15 million. 

Valuation Methodology: Price/Earnings Multiple Based Relative Valuation

(Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

MYE Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Stock Recommendation: MYE stock has declined 4.89% over the past three months and is currently trading in the higher band of the 52-week range of USD 10.87 to USD 23.98. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 23.76. On the technical chart, the next support level is USD 19.49. Considering the decent fundamentals, expected growth in earnings over the medium-to-long term, and reasonable dividend yield, and we recommend a “Speculative Buy” rating on the stock at the closing price of USD 21.35, down by 1.61% as of May 11, 2021.

* 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. 

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