1. Jiaze Li | Ningzhou Fang | Di Liu
Crown Crafts, Inc.
(Nasdaq.CM: CRWS)
Jiaze Li | Ningzhou Fang | Di Liu
November 15, 2016
Crown Crafts, Inc. 1

2. Agenda Company Overview Macroeconomic Analysis Industry Overview
Financial Projection
DCF Valuation
Comparable Valuation
Financial Analysis
Technical Analysis
Recommendation

3. Current Holding Transaction Summary Portfolio Analysis
2.33% of our portfolio value
7.39% of stock portfolio value
Source: RCMP Yahoo Account – My Portfolio

4. Crown Crafts Infant Products, Inc.
Company Snapshot
Crown Crafts Infant Products, Inc.
Compton, CA
Dominant manufacturer of infant and toddler bedding, blankets, and accessories to mass and specialty markets
Crown Crafts
Gonzales, LA
Hamco, Inc.
Gonzales, LA
Market leader of infant and toddler bibs and disposable products
Purchased Bibsters from
The P&G
Founded in Georgia
Entered infant business
2001 Reorganize and sold off adult bedding
1994
2001
2009
2011
1957
1995
2007
2010
Listed on Nasdaq
Purchased Neat Solution
Debt Free
Listed on NYSE
Purchased Toddler Bedding
Business from Springs Global
Source: FY K Form and Company Website

5. Crown Crafts Infant Products, Inc. Bibs and Burp Solutions
Product Portfolio
Crown Crafts Infant Products, Inc.
Hamco.
Crib Bedding
Toddler Bedding
Blanket
Bibs and Burp Solutions
Bath Solutions
On-the-go Solutions
Combine this slide with the next one.
Source: FY K Form Business Description, Pictures from Crown Crafts Infant Product, Inc. Website,

6. Brands and Licenses Company-Owned Brands Quality Licenses
62% of sales in FY 2016 come from licensed brands, which included 46% of sales from Disney, other 38% come from company’s own brand, primarily NoJo and Neat Solutions
Source: FY K Form Business Description, Pictures from Crown Crafts Infant Product, Inc. Website,

7. Net Sales by Operating Subsidiary Sales by Product Category
Revenue Breakdown
Net Sales by Operating Subsidiary
Sales by Product Category
“In the toddler bedding and blankets, Crown Crafts is a top provider with about 85% market share.  On the infant bedding side, Crown Crafts has about a 25% market share. ” - Hala Elsherbini, COO
Source: FY K Form; Comments from with Hala Elsherbini, COO

8. Operating Strategy Product Sourcing Design & Styling Customers
Produced by foreign and domestic manufacturer, with the largest concentration in China
Keep close to fad
Creative theme
Incorporate images of licensed brands into the products
Customers
Licensed Products
Mass merchants, mid-tier retailers, juvenile specialty stores, value channel stores, grocery and drug stores, restaurants, internet accounts and wholesale clubs
Major customers are Wal-Mart (42%) and Toys R Us (23%)
Sales of licensed products represent 63% of company’s gross sales
Licensed brands include Carter’s, Disney, Hello Kitty and Nautica Kids, etc.
CRWS K
Source: FY K Form

9. 134 Total Worldwide Employees
Operation Locations
Compton, CA
HQ for Crown Crafts Infant Products, Inc.
Design, product, development and distribution
Bentonville, AR
Administrative Office in support of sales to Walmart
Shanghai, China
International Office
Gonzales, LA
HQ for Hamco, product and design, IT, finance and accounting
134 Total Worldwide Employees
Source: 20th Annual BURKENROAD REPORTS Investment Conference Presentation,

10. Management Team E. Randall Chestnut, CEO
Became an executive since 1995
Elected as President, Chief Executive Officer and Chairman of the Board in July 2001
Reorganized the firm by cutting adult bedding business and relocate HQ
Olivia Elliott, Vice President and CFO
Served as Corporate Controller of Amedisys, Inc., a public home health care company, from May 1999 to November 2001
Served as the Company's Secretary and Treasurer since November 2001
Became Vice President and CFO in September 2008
Nanci Freeman, President and CEO of Crown Craft Infant Products, Inc.
Began her career in Red Calliope & Associates, a leader in infant and juvenile products industry and became president in 1997
Red Calliope merged with Crown Crafts NoJo Brand in 1999
Later served as president and CEO of Crown Crafts Infants Products, Inc.
Source: Crown Crafts Website,

11. Employee Length of Service
77% of employees have over 5 years of service
51% of employees have over 10 years of service
Average length of service is 12.8 years
Source: 20th Annual BURKENROAD REPORTS Investment Conference Presentation,

12. SWOT Strength Opportunity Weakness Threats No debt
Strong management team
Employee loyalty – average 12 years of service
Good customer relationship
Strength
Enhance online presence
More diversified licensed brands
Increase international sales
Increase toddler bedding market share
Opportunity
Customer concentration risk
Little pricing power
Weakness
License expiration
Currency fluctuation
Competition within the industry
Threats

13. Agenda Company Overview Macroeconomic Analysis Industry Overview
Financial Projection
DCF Valuation
Comparable Valuation
Financial Analysis
Technical Analysis
Recommendation

14. Macroeconomic Analysis
Number of Births
Per Capita Disposable Income
Average Age of Mothers
Women are having children later in life: The mean age of mothers at first birth was at an all-time high in 2014 at 26.3.
This could bode well for the market if these women are at more financially stable points in their careers and lives; they could have more disposable income and be targets for higher-end products.
Source: IBIS World URL:
CDC/NCHS, National Vital Statistics System URL:

15. Products and Service Segments
Industry Overview
Industry Revenue
Products and Service Segments
Industry Structure
Key Statistics
Life Cycle Stage: Mature
Revenue Volatility: Medium
Regulation Level: Heavy
Competition Level: High
Revenue: 6.1B (2016)
Profit: 727.1m (2016)
Annual Growth: 4.8%( )
Expected Growth: 3.1% ( )
Source: IBIS World URL:

16. Financial Projection
Revenue Driver 1: Industry Annual Growth 11-16: 4 %; Estimated Annual Growth 16-21: 3 %

17. Financial Projection Historical Growth Rate: Cyclical trend
Acquisition of baby product line of spring global
Acquisition of baby product line of spring global
Historical Growth Rate: Cyclical trend
1. Introduce New Product: Revenue increase
2. Decrease demand in some private label product: Revenue decrease
3. Discontinued unprofitable product: Revenue decrease
1. Introduce New Product: Revenue increase
Source: Source: Crown Crafts 10K Form

18. Financial Projection Historical Growth Rate: Cyclical trend
Impact from 2008 Recession
Historical Growth Rate: Cyclical trend
1. Introduce New Product: Revenue increase
2. Decrease demand in some private label product: Revenue decrease
3. Discontinued unprofitable product: Revenue decrease
1. Introduce New Product: Revenue increase
Source: Source: Crown Crafts 10K Form

19. Financial Projection

20. Income Statement Projection ($ in millions)
Financial Projection
Income Statement Projection ($ in millions)

21. DCF Valuation Discount Rate Discount Rate 11% Cost of Debt
Capital Structure
Weight of Debt Value
0.00%
Weight of Equity Value
100.00%
Cost of Debt -
Cost of Equity
Risk-free Rate 2%
Market Risk Premium
5.50%
Beta
0.60
Cost of Equity (CAPM) (Weight: 40%)
5.30%
Historical Ann. Return to Shareholders (Weight: 60%)
12.71%
9.75%
Risk Premium
1.00%
Discount Rate
11%

22. DCF Valuation ($ in millions)
Implied Price: $ 9.6

23. Source: IBIS World URL: http://clients1.ibisworld.com
Comparable Valuation
Comparable Companies
Carter’s, Inc.
Dorel Industry, Inc.
Children’s Place, Inc.
CSS Industry, Inc.
Ticker
CRI
DII.B
PLCE
CSS
Business
Description
The largest branded marketer in the United States and Canada of apparel and related products exclusively for babies and young children. 
A Canadian company which designs and manufactures for three areas: juvenile products, bicycles and other recreational products, home furnishings.
A New Jersey-based specialty retailer of children’s apparel and accessories, marketing apparel under the Children's Place, Place, and Baby Place brand names.
Design and execute a broad range of consumer products in specialty and mass market including bedding and bath, textiles, rugs, infant, toys, baby bedding, baby furniture and infant travel gear.
Market Cap
$4,349.0
$891.2
$1,515.7
$245.9 EV
$4,789.0
$1,354.4
$1,313.6
$215.7
LTM Sales
$3,131.5
$2,623.4
$1,745.2
$307.9
LTM EBITDA
$477.4
$164.7
$179.0
$28.4
LTM EBIT
$404.3
$122.0
$133.7
$19.9
Source: IBIS World URL:

24. Source: IBIS World URL: http://clients1.ibisworld.com
Comparable Valuation
Implied Price
$9.18-$10.46
Source: IBIS World URL:

25. Financial Ratios
Source: IBIS World URL:
CDC/NCHS, National Vital Statistics System URL:

26. Financial Ratios
Source: IBIS World URL:
CDC/NCHS, National Vital Statistics System URL:

27. Greenblatt Analysis & DuPont Analysis
Source: IBIS World URL:
CDC/NCHS, National Vital Statistics System URL:

28. Technical Analysis
60 day average crosses downward through 20 days average and both SMA goes down, which is a ST bearish signal
But recent election has changed the trend, waiting for further signal
Source: Yahoo! Finance Data

29. Recommendation HOLD VALUATION summary Current Price DCF Implied Price
Comparable Valuation Implied Price
$9.85
$9.60
$ $10.46
$9.85
$9.60
$10.46
$9.18
HOLD
Currency Fluctuation
Mature Industry
No debt
Market Leader