InterCure Navigates Challenges, Poised for Resilient Growth

Despite facing significant obstacles, InterCure Ltd. (INCR) has demonstrated remarkable resilience in its H1 2024 performance, according to equity research by Pablo Zuanic of Zuanic & Associates. The company's ability to adapt and overcome adversity has positioned it for a promising future in the dynamic cannabis industry.

Weathering the Storm: InterCure's Resilient Performance

Navigating Disruptions and Restoring Operational Capacity

InterCure reported revenues of 126 million NIS ($33.97 million) in H1 2024, surpassing the estimated 121 million NIS. However, this figure remains below the pre-October 2023 levels of 414 million NIS, primarily due to the ongoing disruption at its southern Israeli facility, which has been occupied by the IDF. The company has invested heavily in restoring this facility and expects it to return to full operational capacity in the coming quarters, signaling its commitment to overcoming these challenges and regaining its pre-pandemic momentum.

Balancing Cash Reserves and Government Compensation

InterCure's EBITDA for H1 2024 stood at 17.6 million NIS, significantly higher than the 5 million NIS estimate. However, this figure includes government compensation for damages caused by the conflict, making direct comparisons difficult. The company ended June with 21 million NIS in cash, down from 111 million NIS in December 2023, and its net debt increased from 60 million NIS to 112 million NIS over the same period. Despite these financial pressures, the company maintains access to an unused credit line of over 22 million NIS, providing a cushion for its ongoing operations.

Charting a Course for Double-Digit Growth

Looking ahead, InterCure is guiding for double-digit sales growth in H2 2024, with revenues expected to reach around 140 million NIS, lower than previous estimates of 180 million NIS. The company's expansion strategy includes launching more than 30 new GMP SKUs in collaboration with renowned brands such as Cookies, Binske, and Organigram (OGI). Furthermore, InterCure plans to introduce Cookies products in Germany by Q4 2024, in addition to ongoing sales in the UK, demonstrating its commitment to diversifying its product portfolio and expanding its global footprint.

Weathering the Storm: InterCure's Resilient Performance

The stock has experienced a drop from its May 2024 peak of $3.12 to $1.97. Despite this decline, Zuanic notes that the company's valuation remains attractive, with the stock trading at 1x sales and 8x EBITDA for CY25. InterCure's enterprise value is currently estimated by Zuanic at $132 million, including $96 million in market capitalization and $36 million in net debt.

Navigating Challenges, Poised for Resilient Growth

InterCure's ability to navigate the challenges it has faced and maintain a resilient performance is a testament to its adaptability and strategic vision. As the company continues to invest in restoring its operational capacity, diversify its product offerings, and expand its global reach, it is well-positioned to capitalize on the growing demand in the cannabis industry and deliver sustainable growth in the years to come.