German market dynamics remain challenging, yet manageable. Germany is in the midst of changing its current cannabis laws. The most likely outcome would require a physical doctor's visit in order to receive a prescription. As large numbers of patients would have to re-qualify their current prescriptions, it is expected that this would lead to a temporary demand shock as well as a certain "wash-out" of less active patients. Germany is also considering restricting online pharmacies from dispensing medical cannabis.
In our view, Cantourage is well positioned to weather potential regulatory changes. For one, the company is already adapting its product mix toward higher-margin premium strains which are typically less exposed to demand shocks. Cantourage is also strengthening its cooperations with offline pharmacies and adapting its telemedicine platform's, telecan, operational set-up (i.e. connecting patients with physical doctors).
UK and Poland to show strong growth. Next to Germany, the UK and Poland are Cantourage's most important end markets. As both markets are seen to remain on a strong growth path (broadening product offering + focus on premium strains), they should be able to partially offset the stagnating/slightly decrease sales in Germany, in our view.
Driving European expansion. Cantourage should be entering additional promising European markets such as Spain and Italy, which are gradually emerging markets following regulatory changes. In October of last year, Spain has officially integrated medicinal cannabis into its healthcare system under strict pharmaceutical rules, allowing only standardized THC/CBD extracts prescribed by specialists and dispensed through hospital pharmacies. While we don't expect notable revenue contributions for FY26e, the company should define go-to-market strategies and realize first small sales volumes (eNuW).
Corporate governance improvements are imminent. As previously announced, Cantourage's new CFO assumed office at the beginning of the year. Coupled with the extension of the CEO's contract by five years and additional hires, the group took the necessary steps to significantly enhance leadership continuity, reinforce internal control structures, and improve the quality and timeliness of financial reporting, ultimately establishing a stronger governance platform to support future growth. The outstanding FY24 consolidated annual report is expected to be published shortly, eNuW.
We confirm our BUY rating with a € 10 PT based on a DCF.
ISIN: DE000A3DSV01
