Zuanic & Associates‘ senior analyst Pablo
Zuanic offers a detailed analysis of MariMed Inc.
MRMD, underscoring its promising trajectory in the cannabis sector and its
potential to become a top Multi-State Operator (MSO).
“We estimate MariMed’s spot EV at $213Mn, which is 1.4x current sales and
1.2x CY24 FactSet consensus, compared to the MSO average of 2.2x and 1.9x,”
Zuanic wrote.
“With a CY24 EBITDA of 5.6x against an 8.7x group average, we foresee the
stock re-rating and narrowing its discount through scalable and
financially stable growth. Our stance remains Overweight.”
MariMed’s Strong Position in the Cannabis Market
MariMed Inc. (MRMD), a publicly traded cannabis company, is poised for
significant growth in the coming year, particularly in the states of
Illinois, Maryland, and Massachusetts.
Despite a cautious 4Q23 forecast, MRMD is expected to achieve
above-average growth in CY24.
The company’s expansion in Illinois and Maryland, along with market share
gains in Massachusetts, are key drivers of this anticipated growth.
According to Zuanic, MariMed is on track to become a top 10 Multi-State
Operator (MSO) by 2025, supported by its robust balance sheet and
substantial capital expenditure.
The company’s financial health is notable, with one of the healthiest
balance sheets among MSOs. Its valuation is currently attractive as well,
trading at 1.4x EV/Sales compared to the MSO average of 2.2x, Zuanic noted.
This valuation discount, especially when considering the company’s solid
position and growth momentum, can be seen as unwarranted.
Tangible Financial Performance and Future Outlook
4Q23 sales are projected to be at the lower end of guidance, between $38
million and $40 million, impacted by the late start of wholesaling in
Illinois in January 2024. Expansion plans in Illinois, including a new
kitchen and cultivation facilities, are expected to be key growth drivers
in CY24. The company’s retail and wholesale expansion in Massachusetts and
Maryland is also anticipated to contribute significantly to its growth.
Furthermore, MariMed recently refinanced its debt, leading to significant
cost savings. The refinancing included taking a $59 million mortgage loan,
which will allow the company to pay off higher-cost debts and fund
expansion in Maryland.
Market Dynamics in Illinois and Massachusetts
In Illinois, MariMed’s dispensaries have been outperforming its peers, with
sales approximately 30% above the state average. The company’s recent
initiation of edibles and vape production, along with the opening of a
fifth store, is expected to boost revenues and margins. The Illinois market
is close to a $2 billion industry, with robust growth potential for MariMed,
especially in wholesale capacity.
In Massachusetts, MariMed is a leading wholesaler and operates three
stores under the Panacea Wellness banner. Despite market
challenges, the company is seeing growth in this region, particularly in the
edibles segment. The Massachusetts market, however, is facing challenges
with retail revenue dilution due to the issuance of more licenses.
Growth in Maryland Market and Expansion in Other States
In Maryland, MRMD is outpacing market growth, driven by the rollout of its
edible line and improved retail execution. The company is also exploring
expansion opportunities in Ohio and Missouri and has an optionality in
Delaware.
Strategic Position and Valuation
Zuanic highlighted that MariMed is strategically positioned for growth, with
the potential to enter the list of 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 pivotal. Despite its current undervaluation, Zuanic noted
the company is expected to see a re-rating and narrowing of its discount as
it scales up and deepens 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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