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Hydropothecary is still undervalued, Echelon Wealth says

Hydropothecary Corp

Hydropothecary CorpThe Hydropothecary Corp. (The Hydropothecary Corp. Stock Quote, Chart, News: TSXV:THCX) has plenty of upside to offer investors, Echelon Wealth Partners analyst Russell Stanley says.

This morning, THCX announce it secured a license for its greenhouse expansion, bringing total production capacity to $1.3-million square feet.

“Receiving licensing for the first two zones demonstrates our team’s outstanding execution,” CEO Sebastien St-Louis said. “This planned expansion allows us to continue to ramp up production in preparation for the adult-use recreational market, as Quebec’s preferred supplier, while continuing to serve the growing medical market.”

Stanley notes that Hydropothecary isn’t simply expanding without a plan to sell, in fact he says the company has more visibility in that area than most.

“Relative to Hydropothecary’s announced capacity plans, we believe THCX has pre-sold more of its stated production than any of the major producers,” the analyst says. “The Year 1 commitment to the SQC amounts to almost 20% of stated capacity of 108,000kg, and supply commitments are expected to rise significantly thereafter. We also expect strategic investment and M&A activity in this space to continue, and THCX’s well advanced, fully-funded capacity expansion plans, pole position in Québec and high level of sales visibility should make it an increasingly attractive candidate.”

In a research update to clients today, Stanley maintained his “Speculative Buy” rating and one-year price target of $6.75 on The Hydropothecary Corp. implying a return of 36 per cent at the time of publication.

Stanley thinks the company will generate Adjusted EBITDA of negative $12.0-million on revenue of $10.3-million in fiscal 2018. He expects those numbers will improve to EBITDA of positive $15.1-million on a topline of $97.1-million the following year.

“Further potential catalysts include supply contract developments, expansion progress updates, product development news, approval for a TSX graduation, and improved financial results,” the analyst adds.

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.
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