Zuanic & Associates‘ senior analyst Pablo Zuanic presents a comprehensive 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.”
The Bright Future of MariMed
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 driving the 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.
Promising Performance and Financial 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 Leadership 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.
Expansion in Maryland and 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.
Positioning 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.