Neptune Wellness Solutions Inc

Neptune Wellness Solutions Inc (NASDAQ: NEPT) is a diversified and fully integrated health and wellness company that provides turnkey product development and supply chain solutions across numerous health and wellness verticals.

Investment Highlights – Expensive at USD 1.34

• On a trailing 12 months, Price/Earnings, EV/EBITDA, and Price/Cash Flow multiples are currently in the negative zone as compared to the Pharmaceuticals industry's corresponding multiples.
• In Q3 FY21, the profitability margins and ROE were in the negative zone.
• The Company is also dependent upon funding through external sources to run its business operations.
• From the technical standpoint, shares were trading below the short-term support level of 50-day (USD 1.65) simple moving average price, which reflects a downtrend in the stock and can decline further.

Key Risks

• The growth trajectory of the business could be impacted due to existing as well as emerging risks and uncertainties.
• Also, the increased competition can lead to the market share decline and income shortfall.
• Adjacently, there are some operational risks arising from changing regulatory policies, loss of sensitive data through cyberattacks, and increased supply cost due to the Covid-19 outbreak.

Recent News

On 28 April 2021, the Company had entered into an agreement with Alberta Gaming, Liquor and Cannabis (AGLC), which extends its Canadian footprint to over 1,600 retailers across British Columbia, Alberta, Ontario and Quebec.

Q3 FY21 Trading Update (as on 15 February 2021)

• Total revenues declined by 64% YoY, with gross margin decreased to a loss of 268.3%.
• The net loss increased to $73,799 as compared with the corresponding period of the last year.
• In February 2021, it announced the acquisition with Sprout Foods.
• Neptune has increased its online presence, with greater online availability of products expected in the upcoming quarters.

One Year Share Price Chart

 (Source: Refinitiv, Thomson Reuters)

Conclusion

In the strategy update, the Company stated that it launched a disruptive plant-based Omega 3-6-9 product in the US region and planned to launch CBD beverages in the US. NEPT assumes that the shifting to the branded products and consumer-packed goods will result in lower risk and higher margins, while it will also enable the Company to generate positive adjusted EBITDA. The Company has shown a decline in financial performance in the third quarter of 2021. Both the top-line and the bottom-line performance decreased, while profitability margins remained in the negative zone. The Company is actively seeking other investment opportunities as well. Furthermore, the prolonged impact of the COVID-19 outbreak continued to affect its financial results, plans, operations, outlook, goals, reputation, liquidity and stock price. The stock made a 52-week low and high of USD 1.15 and USD 3.60, respectively.

Based on the headwinds faced by the Company, we have given an “Expensive” recommendation on Neptune Wellness Solutions Inc at the closing price of USD 1.34 (as on 4 May 2021), and we will keep a close watch on the current market dynamics to reconsider our stance in the near term.

MicroVision Inc

MicroVision Inc (NASDAQ: MVIS) is a US-based company that develops laser scanning technology for projection, 3D sensing, and image capture.

Investment Highlights – Avoid at USD 15.40

• The Company is still in the initial stages of business scalability, and the net margin and ROE were in the negative zone.
• On a trailing 12 months, Price/Earnings, EV/EBITDA, and Price/Cash Flow multiples are currently in the negative zone as compared to the Electrical Equipment & Parts industry's corresponding multiples.
• The company is exploring strategic alternatives to maximize the value for its shareholders, including the sale of a product vertical, strategic investment, or potential sale or merger.
• From the technical standpoint, 50-day SMA stood at around USD 14.90.

Key Risks

• The Covid-19 pandemic can pose a significant risk to the supply chain.
• Also, the increased cost of recycling and logistics operations can impact the profitability of the business.
• Moreover, there is a risk of potential changes in customer behaviour with Covid-19 impact on the wider economy.

Q1 FY21 Trading Update (as on 29 April 2021)

• Revenue for Q1 FY21 decreased to $0.5 million against $1.5 million in Q1 FY20.
• MicroVision's net loss stood at $6.2 million, an increase from a net loss of $4.9 million in Q1 FY20.
• On 31 March 2021, the Company had cash and cash equivalents of $75.3 million, an increase from the previous quarter (Q4 FY20: $16.9 million).

One Year Share Price Chart

 (Source: Refinitiv, Thomson Reuters)

Conclusion

As per the Q1 update, the Company stated that MVIS had completed its A-Sample lidar hardware and development platform, while it also saw on track in advancing the automotive lidar development program. Further, the Company expects a first-generation long-range lidar sensor to be available for sale in Q3 and Q4 of 2021. However, MVIS has reported a net loss in Q1 FY21. The Company is in the development stage, and it relied on the cash balances and fundraised from the stock market for all the operational activities. Overall, it remains difficult to provide forward-looking guidance due to the ongoing uncertainty. The stock made a 52-week low and high of USD 0.55 and USD 28.00, respectively.

Based on the various risk factors discussed above, we have given an "Avoid" stance on MicroVision Inc at the closing market price of USD 15.40 (as on 4 May 2021).

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