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Investment idea - POOL Corp (POOL)

POOL Corp is the largest wholesale distributor of swimming pool and related backyard products. The Company’s performance is proved by the following factors: expected accelerated growth over next 7-10 years as housing and home improvements markets return to normal; 2012 marked the third year of 20%+ adjusted EPS growth following 2007 to 2009 industry recession;  leverage of infrastructure will drive profit growth (15-20%). Company estimated that pool market grows every year as more pools are added than are taken out of service. One of the main risks is seasonal character of the business and dependence on the weather. Thus, company’s results for the 1st half were affected by much cooler than normal temperatures, at the same time, the 2nd half should be intact with the company’s expectations assuming average weather.

Second quarter 2013 results.Net salesfor the quarter increased by 4,4% y/y to $790mn, SG&A expenses stayed more or less flat, however, cost of sales increased by 5,1% y/y to $562mn. Net income for the period grew by 2,4% to $67mn, net income margin slightly decreased by 0,2p.p. Lower margin was caused by the growth of lower margin percent discretionary items as well as lower sales of higher margin percent nondiscretionary items, the latter was not expected. POOL Corp expects their base business operating margin to expand in the second half.

Dividend growth is one more important positive factor: dividend per share for the 2nd quarter 2013 increased by 18,8% y/y to $0,19, dividend per share for the 1st half 2013 grew by 16,7% y/y to $0,35. According to the company data, dividend CAGR for 2004-2012 was 15%.

TP – $55,8, short-term goal - $61