Research Capital Corporation analyst Venkata Velagapudi is all about Aleafia Health (Aleafia Health Stock Quote, Chart, News, Analysts, Financials\u00a0 TSX:AH), initiating coverage on the company with a \u201cBuy\u201d rating and target price of $0.75\/share to imply a projected return of 111 per cent in an update to clients on September 20. Founded in 2007 and headquartered in Concord, Ont., Aleafia Health is an integrated cannabis health and wellness services company with a diverse portfolio of products, including dried flower and pre-rolls, oil drops and capsules, oral sprays and cannabis-infused sublingual strips. The company operates a network of 25 Canabo medical marijuana clinics and it sells products under multiple labels. \u201cWe believe that Aleafia\u2019s revenue growth will be mainly driven by its adult-use cannabis segment, which has a large addressable market for LPs in Canada,\u201d Velagapudi said of the company\u2019s future projections. \u201cWe estimate the addressable market for LPs to reach $5.1 billion by 2025.\u201d Velagapudi also believes the company is set to increase its Canadian market share to two per cent from its current 0.6 per cent hold, with Velagapudi noting that the estimates area driven by Aleafia\u2019s recent launch of value brands, the ability to manufacture cannabis derivatives to create value through its low cost structure, long-term expansion of its distribution network and an expectation that the company will allocate a higher quantity of raw material to its adult-use cannabis segment instead of providing cultivation and extraction services to other licensed producers. Since achieving its first cannabis revenue in 2018, Aleafia has been busy across the board, investing in Australian operator CannaPacific and gaining an export license in Australia in July 2019, shortly after merging with Emblem, which is one of the labels Aleafia sells.\u00a0 From there, the company made inroads into the German market through a joint venture with Acnos Pharma in May 2019, completing its cannabis export in June 2021. Aleafia, through the Emblem brand, completed an EU-GMP application in May 2020, and also has made strides in the Israeli market through a letter of intent with Equinox in December 2020. Most recently, the company launched two premium cannabis brands, Nith and Grand, in August. Meanwhile, Aleafia has also entered into a ten-year agreement with Unifor, Canada\u2019s largest private sector union,\u00a0 to provide medical cannabis insurance coverage through collective bargaining agreements, potentially representing a $315 million opportunity. The company\u2019s most recent quarterly financial report was headlined by $9.6 million in cannabis net revenue for sequential growth of 53 per cent, which the company attributed to increases in the sale of cannabis across the adult-use, medical and bulk wholesale sales channels, with each sales channel providing near equal contributions ($3.3 million in net medical cannabis revenue, $3.2 million in net adult-use cannabis, and $3.1 million in net bulk wholesale revenue received from sales to cannabis licensed producers). \u201cThis quarter clearly demonstrates the success of our expanded product portfolio, with strong sequential growth across all sales channels and a shift towards a more balanced mix with sizable contributions from both the medical and adult-use cannabis markets. Credit goes to our management team and employees for delivering record adult-use, and medical cannabis revenue this quarter,\u201d said Aleafia Health CEO Geoffrey Benic in the company\u2019s August 12 press release. \u201cDespite industry-wide price compression, we have maintained robust gross margins on cannabis revenue when compared to other Canadian licensed producers, based on most recently reported quarterly results. This was achieved through our twin pillars of low-cost cultivation and high-quality, differentiated cannabis derivative formats.\u201d After reporting $45 million in revenue in 2020, Velagapudi projects a slight dip to $41 million for 2021, followed by a near 50 per cent potential year-over-year increase to $61 million in 2022, with another 50 per cent jump to a projected $93 million in the works for 2023. The company\u2019s gross margin is expected to dip in that timeframe, falling from 53 per cent in 2020 to a projected 43 per cent in 2021, then to 41 per cent in 2022 before settling in at a projected 40 per cent in 2023. Meanwhile, Velagapudi projects the company\u2019s EBITDA to turn positive in 2023 at a projected $1 million following projected losses of $14 million and $16 million in 2021 and 2022, respectively. Velagapudi believes the company will need to reach a revenue base between $25 and $30 million to generate positive operating cash flow, with an expectation that the company will reach that benchmark by 2023. \u201cConsistent improvement in adult-use cannabis market share, maintaining strong gross margins along with expanding revenue base, and visibility over positive operating cash flow may be key for improving the valuation multiples for Aleafia,\u201d Velagapudi said. Overall, Aleafia\u2019s stock price is down 40.6 per cent for the year to date, declining steadily since reaching its high point of $1.27\/share on February 10.