Thor Industries, Inc.

THO Details

Thor Industries, Inc. (NYSE: THO) is focused on manufacturing and distributing recreational vehicles (RVs) to independent, non-franchise dealers across the United States, Canada, and Europe. Its operating segments are 1) North American Towable segment, which includes the sale of travel trailers and fifth wheels, 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 facilities in Europe. As of December 21, 2021, the company’s market capitalization stood at USD 5.28 billion.

Latest News:

• Share Repurchase Program: On December 21, 2021, THO approved a repurchase program to buy back common shares worth up to USD 250 million, through open market and privately negotiated transactions. The program will expire on December 21, 2024.
• Quarterly Dividend: On December 16, 2021, THO declared a quarterly dividend of USD 0.43 per common share, payable on January 13, 2022, to shareholders of record on December 30, 2021.

Q1FY22 Results:

• Surge in Topline: The company reported a 56.00% rise in net sales to USD 3.96 billion in Q1FY22 (ended October 31, 2021) from USD 2.54 billion in Q1FY21, attributable to growth in recreational vehicles in North America.
• Rise in Bottomline: Net income (attributable to common shareholders) for Q1FY22 increased to USD 242.24 million from USD 113.76 million reported in Q1FY21.
• Cash and Debt Position: As of September 30, 2021, the company had cash & cash equivalents of USD 336.24 million and total debt of USD 2.27 billion.

Key Risks:

• Customer Concentration Risk: FreedomRoads, LLC, the company's largest dealer, accounted for 13% of total revenue in FY21. FreedomRoads' recent acquisition of several additional RV dealerships has impacted THO's ability to negotiate lower prices.
• Operates in a Cyclical Industry: THO operates in a cyclical and seasonal RV market; thus, revenues can vary, placing the company's financials at risk.

Outlook:

• FY22 Guidance: THO increased its wholesale shipment forecast for CY21 to over 602,000 units and more than 613,000 units in CY22, which is expected to grow ~2% in the coming year.

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 declined 24.16% in the past nine months and is currently leaning towards the lower-band of the 52-week range of USD 92.20 to USD 152.20. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 30.27. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 119.54.

Considering the correction in the stock price, robust financials, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the closing price of USD 95.00, up 1.51% as of December 21, 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.  

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