Neptune Wellness gets “Top Pick” status at Echelon Wealth Partners

Some modest increases to his forecast have led to a price target raise on Neptune Wellness Solutions (Neptune Wellness Solutions News, Stock Quote, Chart TSX:NEPT) from Echelon Wealth Partners analyst Douglas Loe, who in an update to clients on Wednesday reiterated his “Buy” recommendation while upping his target from $9.50 to $10.50 per share for Neptune, a Top Pick for Loe.

Recently, Quebec-based Neptune closed on a US$41.4 million/$9.4 million share equity offering and introduced formal financial forecasts for its new acquisition, North Carolina-based cannabis oil extraction company SugarLeaf Labs.

Neptune Wellness is a buy, Echelon Wealth says…

Loe says that the two event haven’t altered his investment thesis on NEPT but prompt some revision of his forecasts.

“We are highly positive about Neptune’s ability to close on its previously-announced SugarLeaf Labs acquisition and over a timeframe originally predicted by the firm. The acquisition establishes a regional US footprint for the firm to provide ethanol-based cannabis oil-extracting capacity in a key growth market for the firm, and with abundant processing capacity (1,500 MTs, already at levels that Neptune is targeting with its proposed expansion in Sherbrooke) to drive future revenue/EBITDA growth, without need to invest any new growth capex,” writes Loe.

“We continue to derive our one-year price target by ascribing (unchanged) multiples to our F2021 adjusted consolidated EBITDA/fully-taxed EPS projections,” he adds.

Loe is now calling for fiscal 2020 consolidated revenue and adjusted EBITDA of $67.2 million and $18.6 million, respectively, and fiscal 2021 consolidated revenue and adjusted EBITDA of $173.8 million and $66.4 million, respectively.

His $10.50 target represented a projected 12-month return of 31 per cent at the time of publication.