Organigram is a clear industry leader, Paradigm Capital says

Expansion plans by cannabis LP Organigram Holdings (Organigram Holdings Stock Quote, Chart TSX:OGI) are more proof of the company’s abilities, says analyst Rahul Sarugaser with Paradigm Capital, who in an update to clients on Tuesday reiterated his “Buy” recommendation and target range of $11.50 to $17.50.

Moncton-based Organigram on Tuesday announced it has received expanded licensing from Health Canada for an additional 163,000 square feet of cultivation space, which will go towards opening up 63 additional cultivation rooms as part of the company’s planned Phase 4A and 4B expansion. The expansion will allow for an additional 53,000 kg of annual growing capacity to the company’s current 36,000 kg per year capacity.

Saruagser views the event as further proof of Organigram’s strengths.

“We see this as testament to OGI’s foundation of operational and technological excellence. OGI’s established and escalating medical and adult-use consumer base, its multiplicity of forward-thinking strategic partnerships and collaborations, its innovative and meticulous cultivation methodologies, and its industry-leading product quality, cost of goods, and pricing, in our view, set this company in bold relief against its peers in the cannabis arena,” says Sarugaser.

The analyst says that while his conservative estimate has OGI’s expansion coming fully online by the fourth quarter of 2020, management has guided for full production by the end of 2019. Sarugaser thinks Organigram will generate revenue and EBITDA in fiscal 2019 of $65.2 million and $32.7 million, respectively and revenue and EBITDA in fiscal 2020 of $177.3 million and $73.5 million, respectively.

His target range translates to a potential return of 49 per cent at the time of publication.