Following the UN’s decision in December 2020 to remove cannabis from the list of hard drugs and the subsequent European Commission’s acknowledgement of cannabidiol (CBD) – an active ingredient derived from the hemp plant – as food rather than narcotic, the European cannabis market seems ready for further regulatory easing, particularly in Germany, resulting in substantial growth potential during the coming years and consequently for substantial growth in the coming years.

Among only a few other listed European cannabis players, Cantourage is leading the European cannabis revolution in a unique way. Founded in 2019, Cantourage is one of the fastest growing players in the European medical cannabis market. The company is applying a holistic approach, thereby disrupting the dynamics of the market via its B2B platform. The Fast Track Access Platform enables cannabis cultivators from around the globe to sell their product on the European market.

Its business model grants Cantourage some significant competitive advantages over most of its peers. In contrast to competitors with own production sites, Cantourage is operating an asset light business model, allowing for maximum flexibility concerning new market trends. Moreover, the company is able to cater additional demand without the need for significant capex. Unlike peers, that act as a pure wholesaler with corresponding margins (<10%), Cantourage looks set to achieve double-digit EBITDA margins going forward (eNuW 11.4% in 2026e).

Overall, Cantourage looks well on track to grasp the promising growth opportunities of the European (medical and potentially recreational) cannabis market. Thanks to its unique approach, group sales are seen to reach € 158m by 2026e, implying a 78% CAGR (2022-26e). As a result of the scalability of its business model, Cantourage should be able to reach EBITDA beak-even already in 2023e.

Cantourage went public six weeks ago via a direct listing with an initial valuation of € 81m or € 6.48 per share. The stock had a sensational debut, as it created a hype among investors surging almost 700% to € 42 per share on the second day of trading, before levelling stable within the € 16-20 per share range.

The current valuation of 8.7x EV/sales 2023e is seen to adequately reflect the company's strong growth prospects during the mid-term. We hence initiate with HOLD and a PT of € 18.00 based on DCF (15% TY EBIT margin, 2.5% LT growth and 10.5% WACC).