Miller Industries Inc. May 3, 2016 Cindy Anggraini Sashikanth Yenika Tanvi Rotkar Vanditha M. R

AGENDA Introduction Company Overview Macroeconomic and Industry Analysis Financial Analysis Projection and Valuation Recommendation

INTRODUCTION

Screening Process Net Income (+) Simple Business Model Market Cap range: $50-$750 mn P/E < 25xP/BV < 3.5x US Based Company

Market Key Information VariableMLR Multiple Name of CompanyMiller Industries Inc. TickerMLR Market Cap$ 243 million SectorConsumer Goods Source: Yahoo Finance

COMPANY OVERVIEW

Business Overview Founded in 1990 in Ooltewah, Tennessee World’s largest manufacturer of Towing and Recovery Equipment Manufactures bodies of wreckers and car carriers installed on truck chassis Purchases the truck chassis for resale to customers 4 manufacturing facilities in United States, 1 in England and 1 in France Provides complete line of quality equipment including carriers up to 30 feet in length and towing recovery units of with capacities of 75 tons Coverage: US, Canada, Mexico and other foreign markets including Europe, Pacific Rim, Middle East, South America and Africa through large distribution network Source: 10-K Form

Product Description Products WreckersCar CarriersTransport Trailers Used to recover and tow disabled vehicles and other equipment Range from conventional tow truck to large recovery vehicles with up to 75-ton lifting capacities Wreckers range in capacity from 4 to 75 tons Light Duty Wreckers: to move vehicles from accident zones Heavy Duty Wreckers: to tow overturned tractor trailers, buses and large vehicles Specialized flat bed vehicles with hydraulic tilt mechanism Used to transport new or disabled vehicles and other equipment over long distances Used to transport industrial equipment Most towing operators have car carriers to complement their fleet Specialized auto transport trailers with upper and lower decks and hydraulic ramps to load vehicles Used to move multiple vehicles for auto auctions and car dealerships Easy to load and transport 6-7 vehicles Source: 10-K Form

Products Brand NamesProduct Offerings Manufacture under 10 major brand names: Century- Legendary leadership Vulcan – Innovative, Durable, Brutally tough Challenger Holmes Champion Chevron Eagle Titan Jige Boniface Source: 10-K Form, MLR website

SWOT Analysis Strengths Offers a broad range of towing and recovery equipment products Purchase the truck chassis for resale to customers Diverse network of independent distributors Hauling capacity up to 75 tons Weakness Cyclical nature of industry Competitors Prices of raw materials such as steel Expiring product patents in a few years Opportunities Capturing market with the new plants Expansion in global markets Threats Foreign currency risk Subject to extensive government regulations SWOT

MACROECONOMIC AND INDUSTRY ANALYSIS

Macroeconomic: Towing Industry Automotive Towing Industry Revenue Towing industry is expected to grow to $6.45 billion in the five years to 2020 Supported by increasing average vehicle age and rise in total vehicle miles Increase in vehicle miles, increases the requirement of road assistance Economic recovery greatly increased consumers' ability to purchase vehicles Revenue for the Used Car Dealers industry is anticipated to increase due to rising disposable income and looser credit access Industry revenue to grow at an annualized rate of 2.1% over next 5 years Used Car Dealer Revenue In $ Mil Source: IBISWorld

Macroeconomic: Industry Equally weighted average of automobiles and trucks that are registered in the United States Forecasts that the average vehicle fleet age will increase till 2021 Quality of vehicles manufactured has increased causing longer in running condition thereby pushing up the average age of the vehicle fleet Average Age of Vehicle FleetAluminum Price Prices have risen in the past 5 years Forecast for next 5 years is that the price of aluminum will stabilize and rise slowly Source: IBISWorld

Porter-5 Forces Analysis Rivalry Power of Suppliers Threat of New Entrants Power of Buyers Threat of Substitute Products Low High Power of Suppliers: Dependent on market fluctuations of raw materials Threat of New Entrants: Niche business Low capital requirement Power of Buyers: Market leader Threat of Substitute Products: Only way to tow and to recover vehicles

FINANCIAL ANALYSIS

Revenue & Net Income Performances Source: 10-K Form, Group Calculation

Profitability & Liquidity Ratios Source: 10-K Form, Group Calculation

Activity Ratios Source: 10-K Form, Group Calculation

Dupont Analysis: ROE Dupont AnalysisUnit2006A2007A2008A2009A2010A2011A2012A2013A2014A2015A Tax Burden x Interest Burden x Operating Profit Margin % 8.05%7.26%2.59%4.56%6.38%9.42%3.90%3.52%4.88%4.77% Asset Turnover x Leverage x ROE % 13.28%2.71%4.40%8.02%15.18%5.88%5.77%9.01%9.33% Source: 10-K Form, Group Calculation

Greenblatt Ratios Greenblatt Ratio Unit2006A2007A2008A2009A2010A2011A2012A2013A2014A2015A EBIT/Tangible Asset % 28.35%22.13%5.05%7.87%13.72%26.69%8.59%9.14%14.80%15.14% Shares Outstanding thousand 11,478 11,606 11,625 11,757 11,917 11,792 11,163 11,279 11,326 11,342 Share Price $ Market Cap $thousand 275, ,879 61, , , , , , , ,029 - Cash & Short Term Investments $thousand 8,20423,28219,44536,16046,33450,15348,59142,86439,59738,449 + Total Noncurrent Liabilities$thousand 10,5374,2032,417561,9832,1101,7581,8422,1842,499 + Total Minority Interest$thousand Total Enterprise Value$thousand 277, ,800 44,585 97, , , , , , ,079 EBIT/EV % 10.59%18.35%12.94%10.22%15.40%27.74%10.25%8.17%11.86%11.78% Source: 10-K Form, Group Calculation

PROJECTION & VALUATION

Technical Analysis MLR stock price is in upward trend with SMA 20 and 200 going up Source: Yahoo Finance

IS Projection Source: 10-K Form, Group Calculation

Other Projection Source: 10-K Form, Group Calculation

Discount Rate Cost of Equity: CAPM7.01% Risk Free Rate (30yrs)2.69% Beta0.75 Market Risk Premium5.75% Historical Return (1yr):8.60% WACC: Equity:Cost:Weight: Realized Return7.80%100.00% Debts:Cost:Weight: Cost of Debt0.00% WACC:7.80% Business Risk Premium:2.50% Total discount rate:10.30% Terminal Growth rate2.00% Source: Bloomberg, Yahoo Finance, Group Calculation

Valuation: DCF Source: 10-K Form, Group Calculation

Comparable Companies Supreme Industries, Inc., through its subsidiary, Supreme Corporation, manufactures and sells truck bodies, trolleys, and specialty vehicles in the United States. The company offers Signature van bodies for dry-freight transportation. Wabash National Corporation designs, manufactures, and markets truck and tank trailers, intermodal equipment in North America. Its Commercial Trailer Products segment provides dry van trailers; platform trailers; specialty products, such as converter dollies, big tire haulers, steel coil haulers, and road railer trailers PACCAR Inc, together with its subsidiaries, designs, manufactures, and distributes light, medium, and heavy-duty commercial trucks worldwide. The Truck segment offers trucks that are used for the over-the-road and off- highway hauling of freight, petroleum, wood products, and construction- related materials. Source: Capital IQ

Valuation: Comps In $million, except per share dataTickerP/EEV/EBITDAP/BEV/Revenue Supreme IndustriesSTS13.71x6.74x1.46x0.49x Paccar Inc.PCAR33.02x8.30x2.48x1.18x Wabash National Corp.WNC8.37x4.92x1.88x0.47x Miller IndustriesMLR14.94x6.23x1.44x0.38x Median13.71x6.74x1.88x0.49x Implied Stock Price$22.39 Current Stock Price$21.39 Upside4.68% VariableMLR MultipleImplied Share Price EPS, in $1.41$19.33 EBITDA, in $ mn30.40$18.06 Book Value, in $ mn173.86$28.81 Revenue, in $ mn540.97$23.36 Source: Capital IQ

Valuation: Total Implied Price DCF: $24.36 Comps: $22.39 Equally Weight Implied Price: $23.38

Share Price Expectation Source: Yahoo Finance, Group Calculation

RECOMMENDATION

Recommendation Industry Towing Industry is in upward trend Favorable raw materials Company Company’s expansion plan Company flexibility in managing costs and revenues Valuation DCF & Comps Valuation: Undervalued Technical Analysis: Bullish Pattern BUY: 400 Price Current

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