Topic: The new CEO Daniel Kruse has been in charge for roughly one year now. The implemented structural changes to the company coupled with regulatory changes in Germany, especially the loss of the narcotic drug status of medical cannabis, should become visible in strong improved financials.

Today, SynBiotic is a Buy-and-Build operator in the European hemp, cannabis and cannabinoid market with an objective to establish a fully integrated platform-company with activities across the entire value chain from cultivation to production and retail, essentially from the field to the shelf.

Dynamic market growth. SynBiotic is active across three end markets, recreational cannabis, industrial hemp and medical cannabis. All three markets should benefit from favourable trends. Demand for industrial hemp is seen to 4x until 2030, carried by regulatory changes and novel food classification of CBD-based products. At the same time, demand for medical cannabis should 10x vs 2023, thanks to the Cannabis Act, which took effect in April. While recreational cannabis (regulated commercial market for cannabis sales) has so far not been approved, the market for i. a. cannabis seeds and gardening equipment is now a legally growing.

SynBiotic looks set to strongly benefit from those favorable market dynamics. Until the end of FY27e, we expect group sales to reach € 40.8m (vs. € 3.9m in FY23), implying a roughly 80% CAGR. Above all, this is seen to be carried by the medical cannabis segment, which should contribute some € 29m.

Additional pockets of growth could come from further acquisitions as per its Buy and Build strategy. In fact, we would expect another add-on until the end of the year.

More importantly, with strongly growing sales, SynBiotic should be on track to reach break-even by FY25e. This should also be possible thanks to the new CEO’s implemented cost-saving measures such as significantly reduced personnel expenses (FY23 -55% yoy; FY24e -19% vs FY22). During the subsequent years, the company looks set to reach double-digit EBIT margins (eNuW: by 2027e).

With only a few listed players in the German cannabis space, SynBiotic offers a unique opportunity to invest into a vertically integrated company that is also active in a variety of different end markets. We reinitiate the coverage with a BUY rating and a € 12.40 PT (old: € 9) based on DCF.