Zuanic & Associates‘ chief analyst, Pablo Zuanic, has conducted a comprehensive assessment of MariMed Inc. with a focus on its potential to emerge as a leading Multi-State Operator (MSO) in the cannabis industry.
“We estimate MariMed’s spot EV at $213 million, which is 1.4 times current sales and 1.2 times CY24 FactSet consensus, compared to the MSO average of 2.2 times and 1.9 times,” Zuanic wrote.
“With a CY24 EBITDA of 5.6 times against an 8.7 times group average, we foresee the stock re-rating and narrowing its discount through scalable and financially stable growth. Our stance remains Overweight.”
The Company’s Outlook and Market Position
MariMed Inc. (MRMD), a publicly traded cannabis company, is primed for substantial expansion in the near future, particularly in the states of Illinois, Maryland, and Massachusetts.
Despite a cautious 4Q23 forecast, MRMD is projected to achieve above-average growth in CY24.
The company’s advancements in Illinois and Maryland, coupled with the gains in market share in Massachusetts, are pivotal drivers of this anticipated growth.
According to Zuanic, MariMed is on course to join the top 10 Multi-State Operators (MSOs) by 2025, supported by its resilient financial foundation and significant capital expenditure.
The company’s financial strength is noteworthy, holding one of the most robust balance sheets among MSOs. Furthermore, its current valuation is appealing, trading at 1.4 times EV/Sales compared to the MSO average of 2.2 times, as highlighted by Zuanic. This discount, given the company’s solid position and growth momentum, can be seen as unjustified.
Financial Performance And Future Expectations
Sales in 4Q23 are anticipated to be at the lower end of the guidance, ranging between $38 million and $40 million, affected by the delayed commencement of wholesaling in Illinois in January 2024. Expansion plans in Illinois, including a new kitchen and cultivation facilities, are expected to be major growth catalysts in CY24. The company’s retail and wholesale expansion in Massachusetts and Maryland is also anticipated to significantly contribute to its progress.
Additionally, MariMed recently refinanced its debt, leading to considerable cost savings. The refinancing involved securing a $59 million mortgage loan, enabling the company to pay off higher-cost debts and fund its expansion in Maryland.
Market Dynamics in Illinois and Massachusetts
In Illinois, MariMed’s dispensaries have been outperforming its peers, with sales approximately 30% higher than the state average. The company’s recent foray into edibles and vape production, along with the opening of a fifth store, is expected to elevate revenues and margins. The Illinois market presents significant growth potential for MariMed, especially in terms of wholesale capacity within its close to $2 billion industry.
In Massachusetts, MariMed is not only a prominent wholesaler but also operates three stores under the Panacea Wellness banner. Despite the market challenges, the company is witnessing growth in this context, particularly in the edibles segment. However, the Massachusetts market is contending with challenges associated with diluted retail revenue due to the issuance of more licenses.
Market in Maryland and Expansion in Other States
In Maryland, MRMD is surpassing market growth, propelled by the introduction of its edible line and enhanced retail execution. The company is also exploring expansion prospects in Ohio and Missouri, with additional optionality in Delaware.
Strategic Position And Valuation
Zuanic emphasized that MariMed is strategically positioned for growth, with the potential to secure a position among the top 10 MSOs by 2025. The company’s focus on expanding its footprint and its entry into additional states through mergers and acquisitions or licensing applications is crucial. Despite its current undervaluation, Zuanic noted the company is expected to undergo a re-rating and narrowing of its discount as it scales up and solidifies its market presence.
Zuanic & Associates maintains an Overweight rating on MRMD, projecting a positive outlook for the company’s growth and market position.
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