Topic: Cantourage and Portocanna entered into a strategic partnership which offers Cantourage a capital light way to increase its production capacities significantly amid the surging demand for medical cannabis in Germany.

Legalization light is transforming the market. As of the beginning of April, cannabis is no longer being considered a narcotic in Germany, notably simplifying dispensing by pharmacies and prescriptions by doctors. Receiving a prescription for medical cannabis has become as easy as for ibuprofen 600. With its own telemedicine platform, telecan°, and the global supplier network consisting of more than 60 grower partners, Cantourage is well positioned to benefit from it. This change can also be seen in sales growth figures.

While Q1 (on preliminary basis) started out with “only” 26% yoy sales growth to € 6.2m, growth in April (the first month following the changes from the Cannabis Act) has already shown a significant acceleration to 160% compared to last year. While we do expect growth to somewhat slow down, it is seen to remain in the high double-digits throughout the remainder of the year; eNuW FY24e sales +81% yoy. As a result, EBITDA should turn positive following last year's € 500k loss (eNuW € 1.8m).

In order to facilitate the surged demand, Cantourage entered into a strategic agreement with Portocanna, a Portuguese medical cannabis processor. Thanks to its state-of-the-art production facility, Cantourage is increasing its annual processable capacities from currently 7-8t to roughly 14t without having to significantly invest. Assuming an average selling price of € 7.5 per gram, this should enables Cantourage to process products worth more than € 100m p.a., in our view. Importantly, this agreement also provides the company with additional flexibility in regards to further scaling production capacities if needed during the next few years.

Besides the additional production capacities, Cantourage is also able to exclusively distribute Portocanna's own production line "Hexacan", under which Portocanna brings together the products of numerous growers from Portugal and Spain. 

Cantourage remains a BUY with an unchanged € 10 PT based on DCF.