Original-Research: SynBiotic SE (von NuWays AG): BUY

Classification of NuWays AG to SynBiotic SE

Company Name:	SynBiotic SE
ISIN:	DE000A3E5A59
Reason for the research:	Update
Recommendation:	BUY
from:	17.09.2024
Target price:	EUR 12.40
Last rating change:
Analyst:	Henry Wendisch

SynBiotic transformation: Reaching new operational high(t)s

Topic: The new CEO Daniel Kruse has been in charge for roughly one year now. The implemented structural changes to the company coupled with regulatory changes in Germany, especially the loss of the narcotic drug status of medical cannabis, should become visible in strong improved financials.

Today, SynBiotic is a Buy-and-Build operator in the European hemp, cannabis and cannabinoid market with an objective to establish a fully integrated platform-company with activities across the entire value chain from cultivation to production and retail, essentially from the field to the shelf.

Dynamic market growth. SynBiotic is active across three end markets, recreational cannabis, industrial hemp and medical cannabis. All three markets should benefit from favourable trends. Demand for industrial hemp is seen to 4x until 2030, carried by regulatory changes and novel food classification of CBDbased products. At the same time, demand for medical cannabis should 10x vs 2023, thanks to the Cannabis Act, which took effect in April. While recreational cannabis (regulated commercial market for cannabis sales) has so far not been approved, the market for i. a. cannabis seeds and gardening equipment is now a legally growing.

SynBiotic looks set to strongly benefit from those favorable market dynamics. Until the end of FY27e, we expect group sales to reach € 40.8m (vs. € 3.9m in FY23), implying a roughly 80% CAGR. Above all, this is seen to be carried by the medical cannabis segment, which should contribute some € 29m.

Additional pockets of growth could come from further acquisitions as per its Buy and Build strategy. In fact, we would expect another add-on until the end of the year.

More importantly, with strongly growing sales, SynBiotic should be on track to reach break-even by FY25e. This should also be possible thanks to the new CEO’s implemented cost-saving measures such as significantly reduced personnel expenses (FY23 -55% yoy; FY24e -19% vs FY22). During the subsequent years, the company looks set to reach double-digit EBIT margins (eNuW: by 2027e).

With only a few listed players in the German cannabis space, SynBiotic offers a unique opportunity to invest into a vertically integrated company that is also active in a variety of different end markets. We reinitiate the coverage with a BUY rating and a € 12.40 PT (old: € 9) based on DCF.

You can download the research here: http://www.more-ir.de/d/30801.pdf
For additional information visit our website: www.nuways-ag.com/research

Contact for questions:
NuWays AG - Equity Research
Web: www.nuways-ag.com
Email: research@nuways-ag.com
LinkedIn: https://www.linkedin.com/company/nuwaysag
Adresse: Mittelweg 16-17, 20148 Hamburg, Germany
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Offenlegung möglicher Interessenskonflikte nach § 85 WpHG beim oben analysierten Unternehmen befinden sich in der vollständigen Analyse.
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