Original-Research: Cantourage Group SE (von NuWays AG): Buy

FY24 guidance issued, growth to remain stellar

Topic: Cantourage issued a bullish FY24 sales growth guidance, carried by strongly increased demand for medical cannabis following the partially legalization at the beginning of April.

Cantourage expects FY24 sales of € 37-43m (eNuW: € 43m). Above all, the strong growth is driven by the partial legalization of medical cannabis in Germany at the end of April. With this receiving a prescription for medical cannabis became as easy as for ibuprofen 600. Cantourage is also recording strongly accelerating demand in the UK. Since April the group recorded continued sequential improvements, putting the upper end of the FY guidance well in reach, in our view. In August alone, Cantourage recorded sales of € 4.9m, a 189% yoy increase. During the first eight months of FY24, sales stood at € 24.9m (+62% yoy).

While management has only stated to be expecting a positive FY24 EBITDA, we remain confident that the company will be able to meet our € 1.8m estimate. This should be driven by the positive operating leverage and despite needed investments to facilitate the strong growth, including increasing production capacities at its processing site, broadening of its supplier network and start up costs for the partnership with Portocanna, a Portuguese medical cannabis processor.

Cantourage looks well prepared for strong growth beyond 2024. During the past two years, the company completed several initiatives which should enable sales of € 100m. It’s global supplier network includes >60 growers, through which Cantourage can offer a broad set of flowers with little cluster risk. Thanks to the recently signed partnership with Portocanna, roughly 14t of flowers can be processed annually. Its own telemedicine platform, telecan°, puts the company in direct contact with patients, which can receive advice on cannabis therapies and obtain prescriptions in an uncomplicated manner.

Growth potentials supported by market developments. Several years after the legalization of medical cannabis in US states, the percentage of patients (vs. total population) reached roughly 4%. Applying similar assumptions to Germany, 3.3m patients seem possible (vs. 0.25m before April). Assuming consumption twice a week and an ASP of € 7.5/g, this would create a € 1.2-1.4bn market opportunity.

We confirm our BUY rating with an unchanged € 10 PT based on DCF.