Patrick Industries Inc (PATK)

History and Background

Patrick Industries Inc. was founded in 1959. Initially, it focused on distributing hardwood products. Over time, it expanded through organic growth and acquisitions to become a major manufacturer and distributor of components and building products for the RV, manufactured housing, marine, and industrial markets.

Core Business Areas

• RV: Manufactures and distributes a wide range of products for recreational vehicles, including interior components, exterior parts, and chassis products.
• Manufactured Housing: Supplies building products and components for the manufactured housing industry, such as wall panels, roofing materials, and plumbing supplies.
• Marine: Provides components and accessories for the marine industry, including seating, cabinets, and electrical systems.
• Industrial: Supplies products to various industrial customers, including transportation, construction, and other manufacturing sectors.

Leadership and Structure

Todd Cleveland is the Chief Executive Officer. The company has a traditional hierarchical structure with various divisions focused on specific product lines and customer segments.

Key Offerings

• Interior Components (RV & MH): Includes cabinets, countertops, furniture, and wall panels. Patrick holds a significant market share in this area, especially within the RV sector. Competitors include Drew Industries (LCI), and various smaller regional manufacturers. Market share is estimated to be 20-30% based on segment reporting within the RV and MH industries.
• Exterior Components (RV & MH): Encompasses siding, roofing, doors, and windows. Market share is slightly less dominant than interior components but still significant. Competitors include Trulite and various siding manufacturers. Market share is estimated to be 15-25% based on segment reporting within the RV and MH industries.
• Marine Products: Includes seating, hardware, and electrical systems for boats. This segment contributes a smaller portion of overall revenue compared to RV and MH but is a growing area. Competitors include marine-specific suppliers like Taylor Made Products. Market share is estimated to be 10-15% based on segment reporting within the marine industries.

Industry Overview

The industries Patrick Industries serves (RV, manufactured housing, marine) are cyclical and influenced by economic conditions, consumer spending, and interest rates. Demand for RVs and boats surged during the COVID-19 pandemic but has normalized. The manufactured housing market is relatively stable, driven by affordability and demographic trends.

Positioning

Patrick Industries is a leading supplier in its target markets, known for its broad product portfolio, strong relationships with OEMs (Original Equipment Manufacturers), and efficient distribution network. Its competitive advantage lies in its scale and ability to offer a comprehensive range of products.

Total Addressable Market (TAM)

The combined TAM for RV, manufactured housing, and marine components is estimated to be over $20 billion. Patrick Industries' current revenue suggests they capture a relatively small but significant portion of this TAM, leaving room for growth. The positioning with respect to this TAM is that Patrick has built up through acquisitions a sizeable chunk of the addressable market.

Key Competitors

• LCI
• Skyline Champion Corp
• Winnebago Industries Inc.

Competitive Landscape

Patrick Industries' competitive advantages include its broad product portfolio, strong relationships with OEMs, and efficient distribution network. Its disadvantages include its cyclical business model and exposure to raw material price fluctuations. Compared to LCI, Patrick is arguably more diverse and has had an extensive acquisition history to strengthen its presence in all its markets.

Teak Isle Manufacturing

• Year: 2021
• Acquisition Price (USD millions): 80
• Strategic Rationale: Expands Patrick's marine product offerings and strengthens its position in the marine market.

Coastal Marine Products

• Year: 2022
• Acquisition Price (USD millions): 67
• Strategic Rationale: Diversifies Patrick's marine-based product offerings, specifically in electrical distribution products.

Historical Growth: Patrick Industries has experienced significant growth through acquisitions and organic expansion, particularly in the RV and manufactured housing markets.

Future Projections: Analyst estimates suggest continued growth, albeit at a slower pace than in recent years, reflecting a normalization of demand in the RV industry. Future growth will likely depend on continued market share gains, new product introductions, and strategic acquisitions.

Recent Initiatives: Recent initiatives include investments in new manufacturing facilities, acquisitions of complementary businesses, and expansion of its product portfolio.

Patrick Industries is a leading supplier of components to the RV, manufactured housing, and marine industries. Its growth has been driven by a combination of organic expansion and strategic acquisitions. The company benefits from its diversified product portfolio and strong relationships with OEMs, but it is vulnerable to economic cycles and raw material price fluctuations. Future success will depend on continued market share gains, product innovation, and effective integration of acquisitions.

Data Sources:

• Company SEC Filings (10-K, 10-Q), Investor Presentations, Analyst Reports, Company Website

Disclaimers:

This analysis is based on publicly available information and is intended for informational purposes only. It should not be considered investment advice. Actual results may vary.