WABASH NATIONAL CORPORATION (NYSE:WNC) Investment Managers Sashikanth (Sash) Yenika Siwei (Lerissa)...
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Transcript of WABASH NATIONAL CORPORATION (NYSE:WNC) Investment Managers Sashikanth (Sash) Yenika Siwei (Lerissa)...
WABASH NATIONAL CORPORATION (NYSE:WNC)
Investment Managers
Sashikanth (Sash) Yenika
Siwei (Lerissa) Li
Vanditha M Ravindranath
Presented on Dec, 8 2015
Agenda
Screening Criteria
Company Introduction
Segment Profiles
Industry Overview
Key Macroeconomic Drivers
Comparable Valuation
Financial Analysis
Financial Projections
DCF Valuation
Technical Analysis
Recommendation
Screening Criteria
Industry – NOT(Energy, Financials, IT, Healthcare)
Market Cap < $1B
Piotroski Score > 5
3 Year Avg. Revenue Growth > 10% P/E < 15x
P/BV < 2x
Current Share Price < 1.2*52wk low
Company Introduction
Founded in 1985; 2014 Revenue: $1.86B
Designs, manufactures and markets standard and customized truck and tank trailers, and related transportation equipment
Source: Annual report 2014
WABASH NATIONAL CORPORATION
Commercial Trailer Products Diversified Products Retail
CompositesAviation & Truck Equip.
Tank Trailer
Process Systems
Source: Investor Presentation August 2015, November 2015 and Annual reports
Dramatic margin improvement since 2010
Segment Profile: Commercial Trailer
80%
9%
8% 3%
Dry Vans
Refrigerated Vans
Platforms
Other74%
9%
8%
6%2%
1%General Freight - Truckload
Refrigerated Freight
Platform Freight
< Truckload Freight
Used Trailer Sales
Other
2014 Sales: $1.3B
2014 new trailer shipments: 53,550
Portfolio: Dry vans, refrigerated vans, platform trailers
Industry leader in van and platform trailer manufacturing
2010 2011 2012 2013 2014-
200
400
600
800
1,000
1,200
1,400
-
1%
2%
3%
4%
5%
6%
7%
8%
9%
PRODUCT MIX END MARKETS
SALES & GROSS PROFIT MARGINSIn USD m
Source: Investor Presentation August 2015, November 2015 and Annual reports
Diverse Products and End Markets
Segment Profile: Diversified Products
2014 Sales: $0.5B
Higher growth (81% - CAGR 2010-2014 and higher margin businesses
Portfolio: Sanitary, chemical trailers, aircraft refueler, vertical silos, portable storage containers
Possess industry leading stainless steel trailer brands: Walker, Brenner, Bulk
PRODUCT MIX END MARKETS
SALES & GROSS PROFIT MARGINSIn USD m
53%
20%
15%
12%Tank Trailers
Process Systems
Composites
Aviation & Truck Equipment
24%
22%
12%
10%
8%
7%
6%5%
6%Food, Dairy & Beverage
Chemical
Energy
General Freight
Aviation
Pharma
Parts & Service
Aerodynamic Services
Other
2010 2011 2012 2013 2014-
100
200
300
400
500
-
5%
10%
15%
20%
25%
30%
Source: Investor Presentation August 2015, November 2015 and Annual reports
Segment Profile: Retail
2014 Sales: $0.2B
Dealership model, selling new and used trailers, aftermarket parts, and maintenance and repair services
Expansion into new markets with mobile service and third party maintenance
PRODUCT MIX COMPANY-OWNED RETAIL LOCATIONS
SALES & GROSS PROFIT MARGINSIn USD m
2010 2011 2012 2013 2014-
50
100
150
200
-
3%
6%
9%
12%
47%
44%
9%
New TrailersParts & ServiceUsed Trailers
Flatbed trailer
Refrigerated trailers
Freight trailers
14%
20%
21%
45%
Wabash National Corporation
Utility Trailers
Great Dane Limited Partnership
Other
MAJOR PLAYERSKEY PRODUCTS
Overview - Truck Trailer Manufacturing
OUTLOOKLIFECYCLE
Mature stage of the industry’s life cycle
Slight product saturation has been reached
Trailer with fuel saving technologies for heavy duty trucks will spur new sales during the next five years
Industry will face cost pressures from product development
Source: IBISWorld
Porter’s Five Analysis
• High: high price competition, lack of products differentiation Rivalry
• Moderate: volatile price of steel and aluminum Bargain Power of
Supplier
• Moderate: high price competition Bargain Power of Buyer
• Moderate: high initial capital cost, limited access to competitive raw material price Threats of New Entrants
• Low: no substitute for trailerThreats of Substitution
Source: IBISWorld
Key Economics Drivers• Price of crude oil• Total trade value • Price of Steel
Supply Industries • Aluminum
manufacturing • Iron & Steel
manufacturing
Demand Industries • Local freight trucking • Long-distance freight
trucking • Tank & refrigeration
trucking
Truck Trailer Manufacturing
Industry Drivers
Source: IBISWorld
• Increase in the total trade value will lead to increased demand for truck trailer manufacturing
• Increasing price of steel and crude oil may pose potential threat for the industry
2014 2015 2016 2017 2018 2019 2020 2021(50%)
(40%)
(30%)
(20%)
(10%)
-
10%
20%
30%Economic Drivers Growth
World Price of Crude Oil Total Trade Value Price of Steel
YoY
% C
hange
Economic Drivers
Source: IBISWorld
Demand Industry
• Growing demand industries revenue will lead to increased demand for truck trailer manufacturing industry
2016 2017 2018 2019 2020 2021-
1%
2%
3%
4%
5%
6%
Demand Industries Revenue Growth
Local freight trucking Long distance freight trucking
Tank and refrigeration trucking
YoY %
Cham
ge
Source: IBISWorld
Comparable Companies
Provide mechanical, mechatronic and electronic technologies for braking, stability and transmission automation systems for commercial truck, bus and trailer manufacturers
• Revenue: $2.6B• Market Cap: $5.74B
Provide axle, brake and suspension solutions to commercial truck, trailer, bus and coach and off-highway machinery manufacturers
• Revenue: $3.8B• Market Cap: $0.8B
EV
Company Name Ticker LTM Earnings LTM Sales LTM EBIT/Share WABCO Holdings Inc. WBC 23.8x 2.2x 15.7xMeritor, Inc. MTOR 13.2x 0.2x 4.9xAverage 18.5x 1.2x 10.3xWabash National Corporation WNC $1.35 $28.02 $1.84 Implied Price per Share $24.92 $33.62 $13.94 Weight 33.30% 33.30% 33.30%
Estimated Price per Share $24.14
Post 20% discounting – Share Price $19.31
Price/
Comparable Valuation
Source: Bloomberg, Capital IQ, Annual Reports
2010 2011 2012 2013 2014(40%)
(20%)
-
20%
-
400
800
1,200
1,600
2,000
Revenue Gross Profit MarginNet Profit Margin
Activity Ratios & Profitability Ratios
PROFITABILITY RATIOS
2011 2012 2013 2014-
5x
10x
15x
20x
25x
30x
Fixed Asset Turnover A/R TurnoverA/P Turnover
ACTIVITY RATIOS
Source: Annual reports 2014, 2013, 2012
The Value of Profit Margin is high due to the income tax benefit that they received in 2012
2011 2012 2013 2014-
15%
30%
45%
60%
ROA ROE (Book Value) Adjusted Net Margin
Profitability & Leverage Ratios
2011 2012 2013 2014-
1
2
3
(6x)
(5x)
(4x)
(3x)
(2x)
(1x)
-
Debt/Assets Debt/Equity Interest Coverage
PROFITABILITY RATIOS LEVERAGE RATIOS
Source: Annual reports 2014, 2013, 2012
The Value of ROE is very high due to the income tax benefit received in 2012
Adjusted Net Margin is the value of Net Profit Margin had the tax benefit not been availed
DuPont Analysis & Greenblatt Ratios
2011 2012 2013 2014-
8%
16%
24%
32%
40%
EBIT/Tangible Asset EBIT/EV
GREENBLATT RATIOS
DUPONT ANALYSIS
2010 2011 2012 2013 2014
Tax Burden 118% 99% 217% 60% 62%
Interest Burden NM 77% 57% 75% 80%
Operating Profit Margin (2%) 2% 6% 6% 7%
Asset Turnover 3x 2x 2x 2x
Leverage 3x 3x 3x 3x
ROE 11% 51% 16% 17%
Source: Annual reports 2014, 2013, 2012, Ycharts
This was considered as NM as the value was an outlier
I/S PROJECTION
Source: Annual Reports and Investor update Nov-2015
KEY INPUTS
KEY INPUTS WEIGHTED AVERAGE COST OF CAPITAL
Source: Yahoo! Finance
DISCOUNTED CASH FLOW
Present Value of Equity SENSITIVITY ANALYSIS
Source: Annual report, industry report
Technical Analysis
Source: Yahoo! Finance – Dec 7, 2015
RECOMMENDATION
Current Stock Price:$11.55
DCF Valuation: $13.63
Relative Valuation: $19.31
Recommendation: BUY 500 shares at
Market PriceTarget Price: $14.77
Expanding Margins
Increased Share Repurchase
Strategic Acquisitions
Entry to diversified growth markets
and less cyclical industriesStock Price
Stock Price
DIVERSIFICATION OF EXISTING PORTFOLIO
Global Economic Weakness
Rise in raw materials &
competition
Stringent Regulations
Source: Yahoo! Finance