In a March 12 research note, analyst George Ulybyshev reported that Clarus Securities initiated coverage on Rritual Superfoods Inc. (RSF:CSE), which is "expected to commence retail sales of its first line of products in the U.S. in Q2/21, followed by a rollout in Canada."
Clarus assigned Rritual a Speculative Buy rating and a 12-month target price of CA$1.50 per share. Currently, the company's share price is about CA$0.80.
"With an asset-light business model and a compelling go-to-market strategy, we believe Rritual is well positioned to rapidly scale its revenues, achieve profitability and become one of the leading premium brands within the functional food and supplements industry," Ulybyshev wrote.
Rritual develops and distributes premium plant and mushroom-based products featuring adaptogen ingredients providing specific therapeutic benefits. Currently, the company is selling three mushroom-based powdered products online as part of its soft launch. They are Chaga, which assists in boosting the immune system; Reishi, said to help relieve stress; and Lion's Mane, which reportedly improves cognitive function.
Ulybyshev highlighted three key strategies Rritual is employing as it moves forward.
One, in going after the mushroom adaptogen segment, it is "targeting a rapidly growing and highly fragmented market," he wrote. The market, characterized by numerous companies with single product lines, is expected to expand over the next several years, due to a consumer shift toward natural, functional foods and adaptogen-based products from processed foods.
This "presents an opportunity for Rritual to build a recognizable brand and emerge as one of the dominant players in the space," Ulybyshev noted.
Two, the Vancouver, British Columbia-based health and wellness firm is capitalizing on its senior management's expertise in building natural health products brands along with its relationships in the industry, to achieve rapid adoption of its products. During the first phase of its upcoming commercial product launch, Rritual plans to have its products in 3,700-plus retail stores in the U.S. and Canada and then in the second phase, potentially as early as 2022, in another 14,000-plus stores.
With this insider knowledge, Rritual should "achieve higher than typical store penetration rates, rapidly grow its revenues and potentially cross-sell additional products over time, giving it a substantial competitive advantage over its peers," indicated Ulybyshev.
Three, Rritual is "building a diversified and recurring revenue stream with a clear path to profitability," according to Ulybyshev, and Clarus expects it will become adjusted EBITDA positive by next year. Early in its product launch, the company intends to complement its retail presence with a comprehensive, omnichannel e-commerce marketing campaign. Subsequently, it will expand its customer base with additional product lines, geographical expansion and, perhaps, tuck-in acquisitions.
Clarus projects Rritual's sales in 2021 to reach CA$5.1 million and more than quadruple to CA$21.2 million in 2022, Ulybyshev relayed.
The company completed an initial public offering in March 2021 from which it generated $6 million in gross proceeds. It intends to use those funds to develop additional products, expand operationally and carry out various marketing initiatives to build brand awareness and garner sales. Rritual has about $6 million in cash, enough, Ulybyshev purported, to see it through 12 months of operations.
"Between additional North American store penetration, online expansion and the launch of new product lines, we see substantial upside potential to our current revenue estimates and view Rritual as an attractive growth story for investors looking to gain exposure to a large and rapidly growing functional food and beverages market," Ulybyshev concluded.
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