Rating: BUY (Initiation)
Target price: USD42.74
Share price (10 Aug): USD26.62
Market Cap (USDm): 540.3
Up/downside: 60.6%
We initiate coverage with a BUY call and PT of USD42.74 (60.6% upside potential). Founded in 2016, Agrify specializes in advanced and proprietary precision hardware and software indoor farming solutions. It has become the only company to offer indoor farming automation with fully integrated solutions. 2020 revenue rose 196% yoy to USD12.09m and GPM lifted 10.7ppt to 4.7%.
Sufficient resources for industry capacity lift; indoor farming enters the fast lane
Technological innovations have sped up industry transformation, while high-quality and high-yield crops highlight the advantages of indoor farming: higher per-unit yield with vertical stack structures and a more precise control of the environment. According to Global Market Insights, the global vertical farming market could grow from USD3.16bn in 2018 to USD22.07bn in 2026E, a CAGR of 27.77% over 2019-26E. With gradual cannabis legalization across the US, the current global indoor cannabis cultivation market is more than USD100bn, where the US is the main consumer market. Joint forecasts by BDSA and Arcview Market Research as of 4 April 2020 suggest that legal cannabis sales in the US would amount to about USD34bn by 2025E, accounting for 72% of global sales of USD47bn. Our calculations indicate a long-term penetration rate of 100% for the indoor cannabis cultivation market, with a corresponding global market for indoor cannabis equipment at USD12.8bn.
Agrify’s advantages include being the leading integrated solutions provider
The company is currently the only provider of end-to-end integrated hardware-and-software solutions for indoor farming. At the same time, its proprietary standard operating procedures (SOP) customize solutions for different clients. Its 「hardware + software + services」 business model enhances customer stickiness. Agrify’s 「total turnkey」 (marketed as TTK) solutions provide clients with capital, construction, equipment and other support services. Under its revenue-sharing model, Agrify charges USD500-700 per pound of recurrent crops, based on the client’s crop price; this greatly boosts the company’s profitability.
Precise planting data raises Agrify’s competitive barrier and advantages
With accurate planting data and accumulated experience in the early phase, the company helps clients improve crop yield and quality, while increasing crop stability and crop quality consistency. Relative to the use of traditional indoor planting equipment, the company says its vertical farming units (VFU), which are located in a fixed facility area, generate about 4x the annual income while reducing unit cost by more than 30%. In July 2021, Agrify inked a long-term R&D cooperation agreement with Curaleaf, one of the largest medical cannabis multi-state operators (MSO) in the US.
Tie-up with Inventronics enriches supply-chain resources
In March 2020, Inventronics subscribed to Agrify’s newly issued USD400m A-series preferred convertible shares and brought supply chain synergy into play. We believe that tying up with leading upstream suppliers synergizes the industry’s advanced LED technology with Agrify’s farming equipment to develop products that help the company lower cost and boost the competitive effectiveness of its equipment.
Valuation and risks
We expect revenue of USD50.02m/86.74m/139.74m in 2021/22/23E, up 314%/73%/61% yoy, and net profit of USD -11.42m/-0.76m /20.45m, up 45%/93%/2,779% yoy. Along with the US federal-level cannabis legalization process, especially in terms of vertical indoor farm to farm, we expect Agrify’s high-quality, high-yield, low-cost business to keep growing fast. We consider it to be the only company that provides full automation in the indoor farming market. We recognize the investment scarcity of this integrated farming solutions company. We assign a PS of 10x in 2022E, corresponding to our target price of USD42.74. We initiate coverage with a BUY rating. Risks include: market developments worse than expected; policy risks; industrial hemp being strictly distinguished from intermediate hemp material, recreational cannabis and drugs, with firm opposition to the legalization of recreational cannabis; business developments worse-than-expected; and cross-market valuation risks.
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評級:買入(啟動)
目標價:42.74美元
股價(8月10日):26.62美元
市值(美元):540.3
上漲/下跌:60.6%
我們以買入買入和42.74美元的PT開始覆蓋(60.6%的上行潛力)。Agrify成立於2016年,專注於先進和專有的精密硬件和軟件室內耕作解決方案。它已成為唯一一家提供室內農業自動化完全集成解決方案的公司。2020年收入同比增長196%,至1209萬美元,GPM增長10.7%,至4.7%。
工業產能提升資源充足;室內養殖進入快車道
技術創新加快了產業轉型,而優質高產作物突出了室內耕作的優勢:垂直堆疊結構的單產更高,環境控制更精確。根據Global Market Insights的數據,全球垂直農業市場可能會從2018年的31.6億美元增長到2026年的220.7億美元,2019-26e年的複合年增長率為27.77%。隨着美國各地大麻逐漸合法化,目前全球室內大麻種植市場超過1000億美元,其中美國是主要消費市場。BDSA和Arcview Market Research截至2020年4月4日的聯合預測顯示,到2025年,美國合法的大麻銷售額將達到約340億美元,佔全球470億美元銷售額的72%。我們的計算表明,室內大麻種植市場的長期滲透率為100%,相應的全球室內大麻設備市場為128億美元。
Agrify的優勢包括成為領先的集成解決方案提供商
該公司目前是室內農業端到端集成硬件和軟件解決方案的唯一提供商。同時,其專有的標準操作程序(SOP)為不同的客户定製解決方案。其“硬件+軟件+服務”的商業模式增強了客户粘性。Agrify的“總交鑰匙”(TTK)解決方案為客户提供資金、建築、設備和其他支持服務。在其收入分享模式下,Agrify根據客户的作物價格收取每磅再生作物500-700美元的費用;這極大地提高了公司的盈利能力。
精準種植數據提升Agrify的競爭壁壘和優勢
憑藉準確的種植數據和前期積累的經驗,該公司幫助客户提高作物產量和質量,同時提高作物穩定性和作物質量一致性。相對於使用傳統的室內種植設備,該公司表示,其位於固定設施區域的垂直耕作單元(VFU)每年產生約4倍的收入,同時將單位成本降低30%以上。2021年7月,Agrify與美國最大的醫用大麻多州運營商(MSO)之一Curaleaf簽署了一項長期研發合作協議。
與Inventronics的合作豐富了供應鏈資源
2020年3月,Inventronics認購了Agrify新發行的4億美元A系列優先可轉換股,發揮了供應鏈協同效應。我們相信,與領先的上游供應商合作,將行業先進的LED技術與Agrify的農業設備相結合,開發出有助於公司降低成本並提高其設備競爭力的產品。
估值和風險
我們預計2021/22/23年營收為500.2萬美元/8674萬/1.3974億美元,同比增長314%/73%/61%,淨利潤為-1142萬美元/-76萬美元/2045萬美元,同比增長45%/93%/2779%。隨着美國聯邦一級的大麻合法化進程,特別是在垂直室內農場到農場方面,我們預計Agrify的高質量、高產量、低成本的業務將保持快速增長。我們認為它是唯一一家在室內農業市場提供全自動化的公司。我們認識到這家綜合農業解決方案公司的投資稀缺。我們在2022年將PS指定為10倍,對應於我們的目標價42.74美元。我們以買入評級開始承保。風險包括:市場發展比預期差;政策風險;工業大麻與中間大麻原料、娛樂用大麻和毒品嚴格區分,堅決反對娛樂用大麻合法化;業務發展比預期差;跨市場估值風險。
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