Topic: Cantourage issued solid FY23 and Q1 2024 prelims, which were impacted by slower patient growth amid the looming (at that time) regulatory changes. Sales figures for April (following legalization light) show a significant acceleration.  

FY23 sales grew by 67% yoy to € 23.6m (preliminary figures), slightly below our estimate of € 24.7m as Q4 grew "only" 30% yoy to € 6.4m vs the expected 50% to € 7.5m. To a large degree, this can be explained by a slower patient growth in anticipation of the at that time looming Cannabis Act. FY23 EBITDA came in at € - 0.5m following a roughly € 400k loss after the first nine months. The implied € 100k loss in Q4 is despite the slowed growth. Management guided for high double-digit percentage sales growth and and at least break-even EBITDA.

Legalization light tailwinds kicking in. While Q1 (on preliminary basis) started out with “only” 26% yoy sales growth to € 6.2m, April (the first month following the changes from the Cannabis Act) has already shown a significant acceleration to 160%, which can be traced back to cannabis no longer being considered a narcotic, notably simplifying dispensing by pharmacies and prescriptions by doctors. Receiving a prescription for medical cannabis has become as easy as for ibuprofen 600. While it is difficult to reliably access the detailed impact on FY growth, we feel comfortable with our estimated growth acceleration carried by Cantourage's broad global supplier network with more than 60 grower partners and its own recently launched telemedicine platform, telecan°.

Accordingly, we expect sequential growth during the coming quarters as the number of medical cannabis patients is seen to surge. Mind you, in Canada, the number of medial cannabis patients grew from 24k in 2015 to 330k in 2018, the year of the full legalization and Germany had roughly 4m cannabis users in 2021 with the majority buying from black markets.

While management has not issued a FY24 guidance yet, we expect them to do so once the company is able to better assess the sustainable impact from the Cannabis Act, likely with H2 figures, in our view.

We confirm our BUY rating with a € 10 PT (old: € 11), based on DCF.