Topic: With the approval of the "Cannabis Act", which is now expected to take place at the beginning of April, Germany is seen to take a big leap forward in regards to legalizing cannabis. This should translate into a significant tailwind for players such as Cantourage.

As per consistent and reliable German media reports from ZEIT, dpa and Berliner Morgenpost, the governing coalition of SPD, Greens and FDP has finalized the specifics for the legalization of cannabis. The legislation is scheduled to take effect on April 1st.

Once the “Cannabis Act” becomes effective, Germany will not only allow adults to own 25 grams of cannabis, grow up to three plants and establish non-profit cannabis clubs but cannabis will also loose its narcotic drug status. Cantourage should particularly benefit from the latter as it significantly simplifies the process of getting a prescription for medical cannabis. In fact, it should get as easy as getting one for ibuprofen 600.

With this, the number of patients should remain on a stellar growth path at the expense of the black market (~4m cannabis users as of 2021) and in favour of established players such as Cantourage. In Canada, the number of medial cannabis patients grew from 24k in 2015 to 330k in 2018, the year of the full legalization. Thanks to its broad global supplier network with more than 60 grower partners, its own recently launched telemedicine platform, telecan°, and a growing distribution network across Europe, we regard Cantourage as well positioned to benefit from this change. In fact, the company looks set to grow sales at a 59% CAGR (2022-25e) while at the same time reaching a high single-digit EBITDA margins thanks to the resulting operating leverage.

Ending FY23e on a high note. Following 9M results with € 17.2m sales (+85% yoy) and EBITDA of € -0.4m, the forth quarter looks set to remain on a strong growth trajectory: sales +54% yoy to € 7.5m and EBITDA of € 0.6m. Above all, this should be carried by the ongoing ramp-up, i.e. a gradually increasing number of fully onboarded cultivators having a product deployed at pharmacies.

We confirm our BUY rating with an unchanged € 11 PT, based on DCF.