HEXO Corp Ramp Up Looks to Be on Track

In this market news, HEXO Corp. (TSX:HEXO), one of the Canadian marijuana stocks, said it reached its expansion goal on time and on budget

SmallCapPower | January 8, 2019: HEXO Corp. (TSX:HEXO), one of the Canadian cannabis stocks, announced recently that it has reached a construction and licensing milestone for the first phase of its one million sq. ft. greenhouse expansion. The milestone would help HEXO ramp up its annual production capacity to 108,000 kg of dried cannabis. Initially, HEXO announced the expansion in December 2017, and reached its goal on time and within the stipulated budget.

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HEXO Corp’s CEO and Co-founder Sébastien St. Louis said, “Receiving initial licensing on our 1,000,000 sq. ft. facility is a huge accomplishment for the entire HEXO team. We are proud that the construction project is hitting all its milestones while respecting aggressive timelines and staying on budget. The new production facility allows us to continue to scale-up which, once fully operational, will give customers across Canada access to HEXO products. Our team has been hard at work for the past couple of months nurturing new mother plants and preparing cuttings. We will start moving plants into the new facility with the pre-prepared mother plants and cuttings in alignment with our continuous harvest methodology.”

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The expansion would allow HEXO to position itself as a prominent cannabis producer in Canada. The Company already has a 35% market share in Quebec, in accordance to the supply agreement signed with Société Québécoise du Cannabis, in which the Company would supply ~200,000 kg of cannabis over a five-year period along with supply agreements in British Columbia and Ontario. HEXO Corp also has a strategic investment in the private cannabis retailer Fire & Flower as well as a partnership with Molson Coors Canada to create cannabis-infused beverages once regulations permit.

HEXO also reported recently its Q1 2019 financial results, in which gross revenue for the quarter surged to $6.7 million from $1.1 million during the same period last year. The Company registered gross revenue per gram of $5.45 in the adult-use market and $9.12 in the medical market. HEXO Corp., however, saw its net loss for the quarter balloon to $12.8 million from $0.4 million, which the Company attributed mainly to higher expenses (marketing & promotion and general & administration) in line with the expanding scale of operations in preparation for the legalization of the adult-use market.

HEXO stock trades at a market capitalization of C$1.2 billion with a price-to-book multiple of 3.13x.

Disclosure: Neither the author nor his family own shares in the company mentioned above.

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