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Patrick Industries Inc. (NASDAQ: PATK)

Patrick Industries Inc. (NASDAQ: PATK). Qianyi (Cathy) Han Guanrong (Rachel) Fu Jingfeng ( Jeffrey)Li Presented: April 29, 2014. AGENDA. Business Overview Macro-Economic & Industry Overview Technical Analysis Financial Ratios Valuation Recommendation. BUSINESS OVERVIEW.

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Patrick Industries Inc. (NASDAQ: PATK)

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  1. Patrick Industries Inc. (NASDAQ: PATK) Qianyi (Cathy) Han Guanrong (Rachel) Fu Jingfeng (Jeffrey)Li Presented: April 29, 2014

  2. AGENDA • Business Overview • Macro-Economic & Industry Overview • Technical Analysis • Financial Ratios • Valuation • Recommendation

  3. BUSINESS OVERVIEW • Incorporated in 1959, in Indiana • 3600 employees • Market Cap : $455MM • 16 Warehouse and distribution centers & 18 manufacturing operations • Business : • Manufacturing: Suppliers to other industrial markets, such as household furniture and manufactures for various products, such as hardwood furniture • Distribution: Wholesale distributor of pre-finished walls and other miscellaneous products Source: PATK 10-K Report, CapitalIQ

  4. PRODUCT OVERVIEW Source: PATK 10-K Report

  5. PRODUCT OVERVIEW • Source: PATK Website

  6. ACQUISITION OVERVIEW Source: PATK 10-K Report

  7. SALES NEWORK Source: PATK 10-K Report

  8. FINANCIAL OVERVIEW Net Sales • Consistent growth • Improving total return • Significant increase in RV industry • Stable Growth in MH and Industrial market Source: PATK 10-K Report

  9. MACROECONOMIC OVERVIEW • Recovery from recession • Consumer discretionary income • Global trend of time and money spent on leisure • Credit regulations and lending in housing starts and mortgage market aided by Fed • Price of gasoline and diesel fuel • Price of raw material/commodity: wood, steel, fiberboard, gypsum Source: IBIS World

  10. INDUSTRY OUTLOOK • Manufactured housing: • Rebound from weaker demands in housing starts back to 2009 and 2010 • Increased substantially (32.9%) in 2012 following the recovery of recession • Private spending in housing construction and improvement is expected to grow till 2019 • Greater sales of existing housing will stimulate the renovation • Lower cost of construction than site-built homes Source: Manufactured Housing Institute IBIS World, Manufactured Home Dealer in US

  11. INDUSTRY OUTLOOK • Recreational vehicle: • Financial crisis disrupted credit flows and lowers buyers capacity to finance their RV purchases • After 2013, RV sales is expected to grow at 3.2% steadily • Shipment declines from 2007 to 2009, but rebound from 2009 to 2012 by 72% Source: Recreational Vehicle Industry Association IBIS World, Recreational Vehicle Dealer

  12. INDUSTRY OUTLOOK • Recreational vehicle: • Number of aging (35-54) consumers enter retirement (baby-boomers) • Lifestyle trend: healthy, outdoor activities, pet friendly, quality family time Source: Recreational Vehicle Industry Association IBIS World, Recreational Vehicle Dealer

  13. INDUSTRY LIFE CYCLE • Maturity stage in RV and MH: • Increase in market share through strategic acquisition • Stable cost structure and brand reputation • Facing fierce competition Decline Maturity Introduction Growth Total Industry Revenue Time • Source: Recreational Vehicle Industry Association • IBIS World, Recreational Vehicle Dealer

  14. PORTER’S FIVE FORCES Source: Patrick Industries, 10-K. 2013

  15. SWOT ANALYSIS Source: Patrick Industries, 10-K. 2013

  16. TECHNICAL ANALYSIS Source: Yahoo! Finance

  17. FINANCIAL RATIOS Source: Patrick Industries, 10-K. 2013

  18. FINANCIAL RATIOS Source: Patrick Industries, 10-K. 2013

  19. VALUATION - COMPS Source: Patrick Industries, 10-K. 2013

  20. VALUATION - COMPS

  21. VALUATION – Discount Rate Source: Patrick Industries, 10-K. 2013 Yahoo! Finance

  22. VALUATION – Projections Source: Patrick Industries, 10-K. 2013

  23. VALUATION - DCF Source: Patrick Industries, 10-K. 2013

  24. VALUATION - Result Current Stock Price: $41.73 Our Valuation: $41.51

  25. RECOMMENDATION WATCH LIST Future Outlook and Concerns • Stable growth in RV industry against high energy costs • Any cost saving from acquisition in the future (e.g.. SG&A) • Opportunity to diversify into other industrial markets Source: Patrick Industries, 10-K. 2013

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