The stock has already delivered in 2020 but Paradigm Capital analyst Corey Hammill says there’s plenty more upside to Burcon NutraScience (Burcon NutraScience Stock Quote, Chart, News TSX:BU).
In an update to clients on Tuesday, Hammill reiterated his “Buy” rating and 12-month target of $3.00,
which at press time represented a projected return of 45 per cent.
Burcon, which has over 20 years of experience developing and patenting processing technologies and product applications for crop proteins, formed joint venture Merit Functional Foods in 2019 which is currently building a protein production facility near Winnipeg, Manitoba. Burcon announced in May that Merit had secured an $85-million debt financing package which was furthered by $10 million in June through a ten-year interest-free loan from Agriculture and Agri-Food Canada, all going towards completing
its protein production facility.
“Merit has further strengthened its financial position as it drives forward to complete its state-of-the-art plant protein production facility in Winnipeg,” said Johann F. Tergesen, Burcon’s president and CEO in a June 22 news release, “Merit fully anticipates future increases in demand and is well positioned to increase planned capacity when the time is right.”
Burcon’s share price shot up last year in tandem with US plant protein company Beyond Meat’s going public, and while the stock has had its ups and downs, it finished 2019 up 470 per cent and is currently up 112 per cent for 2020.
Hammill said Burcon offers a unique opportunity for investing in a growing industry that currently has a lack of public players.
“With growing consumer demand for plant-based foods expected, there will be a supply issue for plant-based proteins which are used to enhance and increase nutrition profiles of plant-based foods. Burcon has entered a joint venture with Merit Foods; together, their commercial production facility is underway. With the backing of the joint venture and near-term commercial opportunity, we believe Burcon has the platform to be a top-tier protein developer,” Hammill said.
In his update, Hammill referred to a recent study on consumer purchasing habits which centered on meat-buying habits in lieu of the large number of COVID-19 outbreaks at meat plants. The survey found that 25 per cent of respondents indicated they would be less likely to buy animal-based meat from retail and 29 per cent reported they would be less likely to order animal-based meat dishes from restaurants, with younger generations Gen Z and Millennials leading the trend.
Hammill said, “We are continuing to see data which supports our thesis that the plant-based food market will continue to expand at a rapid rate. As plant-based eating becomes more common, there will be a need for plant-based protein ingredients. Burcon’s proprietary plant-based protein technologies will provide a key nutritional component for plant-based foods.”
“We expect there could be a supply shortage of plant-based proteins as additional capacity may struggle to keep pace. The clear winners will be those who can meet the demand sooner rather than later. Construction on the Merit Functional Foods Manitoba production facility is well underway; commercial production is expected to begin in Q4/20,” Hammill wrote.
On Burcon, Hammill thinks the company will generate EBITDA and EPS in fiscal 2021 (year ended March 31) of negative $3.3 million and negative $0.05 per share, respectively.