Haywood Capital Markets analyst Neal Gilmer continues to beat the drum on Canadian cannabis sector name Decibel Cannabis Company (Decibel Cannabis Company Stock Quote, Charts, News, Analysts, Financials TSXV:DB). Gilmer reviewed the latest quarterly results in a Tuesday report where he maintained a “Buy” rating and $0.40 target on the stock, which at press time translated to a projected 12-month return of 196 per cent.
Calgary-based Decibel, which has the Qwest brand of premium cannabis products and three facilities across Canada along with the Prairie Records retail stores in Alberta and Saskatchewan, reported its fourth quarter and full 2022 financials on Monday, after having released preliminary Q4 numbers earlier this month.
The company ended up with Q4 revenue increasing by 84 per cent year-over-year and 41 per cent sequentially to $25.8 million and adjusted EBITDA up 66 per cent year-over-year to $7.1 million. Both top and bottom lines were records for Decibel.
“Our fourth quarter results capped off a year of strong financial performance with record results including market share, net revenue, adjusted EBITDA and adjusted net income,” said Paul Wilson, CEO of Decibel, in a press release. “We have a number of 2023 catalysts that support an outlook where Decibel continues to build its market share and brand position in Canada and in turn leverage into international opportunities.”
Commenting on the results, Gilmer said the quarter arrived in-line with previously provided guidance and called the sequential growth and adjusted EBITDA margin expansion impressive — the Q4 EBITDA margin was 27.4 per cent, up over 400 bps from the Q3.
In terms of market share, Gilmer remarked that Decibel climbed from 4.7 per cent of the adult-use Canadian market in the third quarter to 6.0 per cent in the fourth, ranking it #3 overall. Even better, Gilmer said the Q1 2023 data shows Decibel ranking #2 overall for the month of March with a 6.6 per cent share for the quarter and on pace to surpass 7.0 per cent in April.
Operationally, Gilmer noted that Decibel launched 13 new products over the fourth quarter including five General Admission SKUs and eight Qwest SKUs, while late in the year, Decibel began selling branded products in Israel. Gilmer said Decibel expects to increase its distribution into several Canadian provinces including BC, SK, QC and the Maritimes and has several new product launches scheduled for the second half of 2023.
“The Company has established a consistent track record of reporting strong results. We expect Decibel to continue to be a leader in the Canadian market, increasing its adult-use market share and securing additional international sales,” Gilmer wrote.
“In our opinion, Decibel has demonstrated the quality of its brands by capturing strong market share relative to the peer group. As Decibel garners more awareness within the investor base, we believe the valuation will reflect this strong position in the market,” he said.