Can MariMed's $7.7M Illinois Cannabis Expansion Turn The Tide In A $496M Market?

In Zuanic & Associates' latest equity report, senior analyst Pablo Zuanic analyzes MariMed's MRMD performance across its core markets, with Illinois (IL) accounting for 40-45% of the company's sales. 

Despite overall market stagnation, MariMed aims to boost growth through capacity expansion, including a new 14,000 sq ft cultivation site expected to begin sales by early 2025. 

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Q3

In Q3, Illinois' cannabis sales reached $496 million, with 86% from recreational use. However, per capita spending remains at $160, lower than in states like Arizona ($178) and Michigan ($320). Retail flower prices fell 10% year-over-year to $8.87 per gram, and per-store revenue dropped from $17 million to $8.8 million annually.

"The Illinois market remains attractive due to high wholesale prices, but growth challenges persist, particularly for retailers without cultivation operations," Zuanic said. Despite these challenges, MariMed's in-house brands, launched in January 2024, performed well, generating $7.7 million in Q3, with vape sales leading at $4.9 million. Competitors like Green Thumb Industries GTBIF, Curaleaf CURLF, and Cresco Labs CRLBF also maintain strong positions in the Illinois market.

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MariMed's Playbook: Maryland, Massachusetts, Ohio   

MariMed's operations in Maryland continue to expand, contributing $292 million in Q3, an 8% year-over-year increase. Per capita consumption reached $192, exceeding figures in Illinois, New Jersey, and Connecticut. Maryland's retail flower prices averaged $8.62 per gram, providing better margins for retailers compared to Illinois. 

Conversely, Massachusetts faced deflationary pressures, with retail flower prices falling 18% year-over-year to $4.85 per gram. This led to a 17% decline in MariMed's branded sales in Q3, even though the market grew by 1%.

In Maryland, MariMed's Betty's brand led the edibles segment with an 11.3% market share, while in Massachusetts, branded products like Nature's Heritage flower saw a sales decline. “The state regulator has issued 101 store licenses. Average annualized revenue per store of $11.6Mn is among the best in the US, and now above that of Illinois. We calculate gross margins at >46%, so this means >$5.3Mn gross profit per store. Companies with vertical operations like MariMed are in a strong position to benefit both from grower margins as well as retailer margins,” Zuanic wrote. Meanwhile, competitors such as Trulieve TCNNF continue to expand their footprint across Maryland's market.

Ohio's recreational market is experiencing different pricing dynamics. Flower prices increased from $5.84 per gram in Q4 2023 to $8.62 per gram in Q3 2024, contrasting with price drops in Illinois and Massachusetts, underscoring the varied maturation of cannabis markets across states.

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Valuation And Stock Performance

MariMed's valuation continues to be a focal point, trading at 1x CY24 sales compared to the multi-state operator (MSO) average of 1.9x. According to Zuanic, over the past year, MariMed’s stock underperformed (-52%) relative to the MSOS ETF (+21%). 

However, in the last month, MariMed gained +4%, while the MSOS ETF rose +18%. Zuanic notes, "We believe the discount is overdone," emphasizing the company's strong balance sheet and growth potential.

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