Neptune Wellness Solutions Inc.

Neptune Wellness Solutions Inc. (NASDAQ: NEPT) is a fully integrated and varied health and wellness firm. The company is working to develop a line of natural, plant-based consumer goods. Neptune provides corporate customers with complete product development and supply chain solutions in various health and wellness sectors, including legal cannabis and hemp, nutraceuticals, and consumer packaged goods. The company is involved in cannabis and hemp operations, emphasizing cannabinoids in household items for research, development, and commercialization.

Key Highlights

• The company reported YoY growth of 455.55% in revenue to CAD 18.45 million in Q3FY22 (ended December 31, 2021) compared to CAD 3.32 million in Q3FY21.
• In Q3FY22, NEPT net loss reduced to CAD 20.94 million from CAD 74.88 million in Q3FY21.  
• As of December 31, 2021, the company had cash and cash equivalents of CAD 16.65 million and total debt of CAD 17.91 million.
• NEPT’s net margin for FY21 was -360.2%, significantly lower than the industry median of 9.8%.
• Low ROE of -115.4% in FY21, whereas the industry median stood at 15.8%.
• Relatively high liquidity, Current ratio was 3.68x in Q3FY22 vs. the industry median of 2.12x.
• On March 14, 2022, NEPT announced that it had completed the previously announced registered direct offering with a single strategic consumer-focused institutional investor to purchase and sell 1)18,500,000 common shares of the Company and 2) 6,500,000 pre-funded warrants, each Pre-Funded Warrant exercisable for one Common Share. The Pre-Funded Warrants and Common Shares were sold jointly, along with Series A Warrants to purchase up to 25,000,000 Common Shares and Series B Warrants to purchase up to 25,000,000 Common Shares.
• Stock is currently trading below its crucial short-term (50-day) and long-term (200-day) SMA support levels, a bearish indicator.
• The stock is leaning towards the lower end of its 52-week range of USD 0.16 to USD 1.49.

Conclusion: Considering the company’s solid topline performance, improvement in liquidity, technical indicators, and associated risks. We recommend a "Watch" rating on the stock at the closing price of USD 0.175, down 3.47%, as of May 05, 2022.

Technical Price Chart (May 05, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

*Closing price as of May 05, 2022

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.