Topic: Cantourage released strong Q1 prelims, which underpin the ramp-up of its unique platform that enables cannabis cultivators from around the world to easily enter the European medical market. With further sequential growth around the corner and profitability already achieved, we upgrade to BUY.

Preliminary Q1 sales increased by 95% yoy to € 4.8m (eNuW: € 4.7m) as Cantourage’s “Fast Track Access” platform is quickly gaining traction. Mind you, Cantourage enables producers from around the world to become part of the growing European medical cannabis market faster, easier and more cost-effectively. As a result of the consequent positive operating leverage, the company achieved a net income of € 0.1m (FY22p with € -2.4m).

For the next quarters, we expect further sequential growth stemming from the gradually increasing number of cultivators being fully onboarded on the platform, i.e. having a product deployed at pharmacies. So far, Cantourage should have been able to sign roughly 50 individual cultivators from across the world (eNuW). While Cantourage sold cannabis from 7 cultivators at the end of FY22, this number looks set to increase to more than 20 by the end of H1 (eNuW). Mind you, individual craft strains such as the recently introduced LOT420 have a higher price point but are also low-volume and hence not available year-round. The rising number of available strains should hence allow for a constant supply of a wide range of cannabis products, which puts Cantourage on track to outperform our profitability estimates for FY23e of € 0.2m net income.

Cooperation with PURIZE Filters to increase the total addressable market. Since the introduction of medical cannabis in 2017, the number of patients has grown to more than 100k, which is still small compared to the total number cannabis consumers in Germany of roughly 4m. A large proportion of which is expected to buy cannabis for self-medication purposes on the black markets. Here, Cantourage and PURIZE Filters are educating by promoting telemedicine providers, specialized online pharmacies and other sources of information.

Following the recent share price weakness coupled with sequentially growing sales and the potential to outperform our profitability estimates for FY23e, we upgrade to BUY (old: HOLD) with an unchanged PT of € 12 based on DCF.