Zuanic & Associates has initiated protection on Village Farms Worldwide VFF, assigning an “Chubby” ranking. What are the important thing elements that contribute to the bullish stance on Village Farms Worldwide?
Market Positioning and Monetary Stability
Senior analyst Pablo Zuanic notes Village Farms as a standout within the Canadian Licensed Producers (LPs) market, valued notably at 0.6 occasions gross sales.
The corporate’s sturdy market share and model presence are bolstered by its worthwhile operations and constructive money movement.
Strategic Progress and Worldwide Enlargement
Zuanic highlights Village Farms’ methodical and conservative progress technique, contrasting it with the speedy and sometimes unsustainable enlargement of different gamers within the subject.
The corporate’s strategy has been characterised by gradual steps, resembling transitioning from B2B (white label) to branded market entry with a restricted however targeted product vary.
Internationally, Village Farms is making important strides by increasing into markets resembling Australia, Israel, and Germany, whereas additionally proudly owning a majority stake in Leli Holland, a key licensee within the Dutch authorized leisure market, indicating potential for substantial progress in Europe.
Aggressive Value Benefit
A key think about Village Farms’ success is its value benefit in hashish manufacturing, attaining roughly 35% gross margins. This effectivity is attributed to the corporate’s three many years of expertise in managed atmosphere agriculture, initially with produce like tomatoes, now adeptly utilized to hashish.
“Village Farms Worldwide (Village Farms), a large-scale low-cost producer based mostly in British Columbia (the corporate has shifted tomato greenhouses into hashish) is the [third] largest producer; flower accounts for 80% of firm gross sales,” reads the report.
Hashish As Tomatoes
The report additionally sheds mild on the potential of Village Farms’ Texas greenhouses, which may play a pivotal position if hashish laws within the U.S. turns into extra favorable.
This “Texan optionality” presents a considerable alternative, doubtlessly permitting the corporate to seize a major share of the U.S. hashish market.
“Village Farms’ Texas greenhouses, capturing simply 1% of the U.S. market beneath legalized interstate commerce, may attain a valuation of $1.05 billion by 2027, with gross sales doubtlessly hovering from US$40 billion to US$70 billion upon federal legalization,” Zuanic wrote.
“Factoring in a 20% likelihood and discounting to current worth at a ten% fee, this selection may be price roughly US$160 million, surpassing the corporate’s present enterprise worth.”
Canadian Market Dynamics and Village Farms’ Positioning
In Canada, Village Farms has managed to keep up its prime three place within the leisure market, attaining this largely organically, a stark distinction to opponents who typically depend on acquisitions.
“Throughout the September-November interval, Hifyre experiences that Village Farms held a 6.6% share within the whole leisure market, rating second within the flower phase with 12.4% nationally, behind Tilray’s 14.9%, and notably outperforming in Quebec with an 11% share,” in accordance with the evaluation.
“In 2Q23, Tilray (inc. HEXO) TLRY had a 14.0% flower share, Village Farms VFF 13.1%, Organigram OGI 8.6%, BZAM (inc. TGOD) 5.8%, Cronos CRON 5.5%, and Auxly XLY 5.0%, Cover Progress CGC 4.5%, with others together with Sundial SNDL at 3.9%, Cannara Biotech LOVE 2.8%, Weed Me 2.7%, and Aurora ACB 2.3%.”
Valuation and Future Prospects
Zuanic’s evaluation means that Village Farms’ hashish unit is undervalued, particularly when in comparison with its friends. Whereas Zuanic & Associates doesn’t set particular value targets as a coverage, they categorical confidence in Village Farms’ future progress and upside potential.
Photograph: AI-Generated Picture.
