OrganiGram Exceeds All Facts Expectations: “Stock Represents Good Value,” Analyst Says

Thursday, Organigram Holdings Inc. (OGI.TO) OGIa cannabis company focused on producing high-quality indoor grown cannabis for patients and adult recreational users in Canada, released its results for the third quarter ended May 31, 2022, revealing that net revenues increased by 88 % to reach $38.1 million (compared to $20.3 million in the third quarter of fiscal 2021).

After publication, Cantor Fitzgerald’s Pablo Zuanic provided insight into the company’s valuation and performance.

The analyst kept a Overweight note for OGI but lowered its 12-month price target at CA$2.90 instead of CA$3.70 due to “sector downgrading”.

“Rated at 1.6x CY23 EV/sales vs. 5x for Tilray (TLRY/N) and Canopy Growth (CGC/N), we believe the stock represents good value given the rec share and momentum , improving earnings trends and the optionality of the

“Organigram, the only major LP that continues to gain entertainment market share in Canada, (…) announced May quarter (3Q22) results that exceeded FactSet sales expectations (by 13%) “, Zuanic added. “The company’s guidance for fiscal year 4Q22 (August) implies that the FactSet consensus needs to rise.”

Meanwhile, the analyst also acknowledged that: a) OGI remains dependent on ‘flower ground’; b) it recorded a further 10% drop in average prices; and, c) its export model remains primarily B2B in nature to Israel and Australia, while other companies may be better positioned for European market growth.

About 3T22

Strong points:

  • Sales beat ($38.1 M versus $33.7 M) but Missed EBITDA ($0.6M vs. $1.9M), vs. FactSet consensus.
  • Total net sales of $38.1 million increased 20% sequentially and +88% year-over-year.
  • Net Recreational Sales grew 39% sequentially to $34.5 million (vs. 7% growth implied by Hifyre).

Zuanic noted that shipments to Australia in 3Q22 were $1.3 million and total exports of $1.4 million “were well below the $3.4-4.4 million of two previous quarters.

Although reported sequential gross margins improved to 22.8% from 21.6%, the analyst pointed out that after adjustments, gross margin per gram actually improved to C$0.54/gram in 2Q22. at C$0.46/gram in Q3, while total grams sold increased 17% sequentially. .

“The reported SGA of $17.5 million was almost 2 times the adjusted gross profit of $9.3 million. The company’s so-called Adjusted EBITDA metric of $0.58 million includes a number of adjustments that we do not rule out (ERP installation, acquisition costs, R&D); by our calculations, EBITDA would have been -$3.6m (-9% of sales) (…) Management’s implied sales and sales are in sync, but we believe filling the pipeline ( new SKUs) also helped the quarter,” said Zuanic.

Additionally, Zuanic noted that while growth, market share momentum and portfolio diversification remain “encouraging”, average realized prices for dried flowers still fell 10% sequentially to 1. CA$88/gram, while the company’s flower business remains dependent on “crushed flowers”. ”.

He wondered if this trend was sustainable in the long term.


Zuanic considered that OGI expects higher sequential sales for 4Q23 (August) due to leisure and exports. In the recreational segment, the analyst predicts continued market growth and further market share gains, “partly aided by increased capacity/flexibility and new SKUs.” OGI projects gross margin improvement sequentially (on scale, automation, brand/product mix, new SKUs and growth techniques) and improving EBITDA trends.

Hifyre Scanner Data Data

Although flowers and pre-rolls remain the largest categories for Organigram (66% and 16% of sales respectively), according to Hifyre, most of their quarterly growth can be attributed to the edibles category. OGI’s edibles category increased sales 62% sequentially, from $6.9 million (8% of company sales) in the February quarter to $11.1 million ( 13% of company sales) in the May quarter.

“OGI was one of the few LPs that was able to gain market share while still having below average prices. For the May quarter, OGI’s average flower price per gram was $4.65 , 63% and 18% of flower sales came from the Shred brand ($4.14 per gram retail) and Big Bag O’Buds ($4.44 per gram) respectively,” Zuanic concluded.

Image by Ilona Szentivanyi.

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