Jamieson Wellness Inc. (TSX: JWEL) is engaged in the manufacturing, distributing, and marketing of branded natural health products like vitamins, minerals, and supplements.

Key Updates:

• Robust Profitability margins: In FY21, the company reported its EBITDA and operating margins of 21.2% and 16.9%, respectively, which is higher than the industry median of 15.8% and 13.4%, respectively. This indicates an improved cost structure on an operational level. The company reported its net margin of 11.5% in FY21, as compared to the industry median of 8.8%.

• Consistent Growth in Performance Metrics: The company showed a consistent growth in its top-line and as well as profitability, which is a key positive. Notably, the company’s top-line and adjusted EBITDA grew at 10.6% and 13%, respectively on a CAGR basis in FY17 to FY21. This indicates constant demand for the company’s products along with improved revenue-mix.

Source: Company Presentation

• Solid Guidance: The company expects its total revenue of CAD 474 to 491 million in FY22, which is higher than CAD 451 million in FY21. Adjusted EBITDA is likely to grow by 8% to 12% at CAD 108 – 112 million. The group expects its Jamieson Brands Segment to grow in between 6% – 10% over FY21, while Jamieson International is expected to report a growth rate of ~20% over FY21.

Source: Company Presentation

• Result Update: The company will disclose its Q1FY22 results on May 05, 2022.
  

Risk Associated with the investment:

The demand of the company’s product might erode due to the arrival of new players in the industry, which might further lead to a decline in the market share.

FY21 Financial Highlights:

Income Statement Highlights (Source: Company Report)

• JWEL declared its full-year result, wherein the group posted revenue of CAD 0 million, jumped from CAD 403.6 million in the previous year. The increase was driven by strong growth from both Jamieson Brands and strategic partners.

• Gross profit climbed to CAD 4 million, from CAD 144.7 million in FY20, supported by higher revenue, partially offset by the increased cost of sales
• Earnings from operations came CAD 0 million, jumped from CAD 63.5 million in FY20. The quarter was marked by slightly higher selling, general and administrative expense and an increase in share-based compensation.
• Net income was recorded at CAD 0 million, soared from CAD 41.5 million in FY20, supported by higher earnings from operations and lower interest expense, partially offset by a higher provision for taxes.
  

Valuation Methodology (Illustrative): Price to Earnings

Analysis by Kalkine Group

Stock Recommendation:

The company reported its quick ratio and current ratio at 1.41x and 2.84x, respectively, in FY21, as compared to the industry median of 1.39x and 1.98x. This indicates that the company can meet its current liabilities with its short-term assets. We have valued the stock using the Price to Earnings-based relative valuation approach and arrived at a target price offering double-digit downside potential (in % terms). We have considered peers like Recipe Unlimited Corp, Hamilton Thorne Ltd etc. Hence considering the aforesaid facts, we recommend a ‘Hold’ rating on the stock at the last closing price of CAD 34.26 on April 21, 2022.

One-Year Technical Price Chart (as on April 21, 2022). Analysis by Kalkine Group

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