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LOVE: Scalable Facilities, Record Profitability, and Re-Rating Potential

What you need to know:
• Cannara has maintained a solid growth trajectory, with expectations of ~20% going forward through its measured expansion plan.
• The Company has best-in-class profitability with adjusted EBITDA margins of 29%, benefiting from its footprint in Quebec.
• The launch of vape products in Quebec will serve as a growth driver for the Quebec segment, while distribution expands in the other provinces.
• While LOVE exhibits strong growth and margins, it trades at just 6.5x/5.3x FY26E/FY27E EBITDA. Given its elite metrics, low dilution, and clear path for growth, we make the case for multiple expansion.

Cannara Biotech Inc. (LOVE:TSX, LOVFF:OTCQX, FRA:8CB0) is a vertically integrated producer of premium-grade cannabis out of its two mega facilities in Quebec. The Company has strong and predictable revenue growth while offering industry-leading profitability. We believe that the Company is highly undervalued given its fundamentals and path to future growth. We are initiating coverage on Cannara with a BUY rating and a $3.00/share target price.

Investment Thesis Summary
Leading Growth and Market Share. Cannara is the 6th largest LP by sales, holding 4.1% market share in Q1/26 (ending November 30th) and 4.4% in December 2025. We believe that Cannara has been able to achieve this through scalable quality, customer loyalty, community engagement, and product innovation, generating an 111% sales CAGR since 2020. We believe Cannara can sustain strong growth moving forward, projecting 17% in FY26 and 16% in FY27.

Facilities Allow for Cost-Effective Expansion. Cannara’s Valleyfield facility was purpose-built for $250M by another operator before being purchased by Cannara for just $33M. The facility has 24 independent grow zones that can produce up to 100,000kg of cannabis (~$300M). Cannara has opened zones 11 and 12 recently and has a high ROI three-year capex plan of $30M in order to unlock the infrastructure required to activate the remaining zones.

Best in Class Profitability. LOVE has posted 19 consecutive quarters of positive adjusted EBITDA, with gross margins reaching 45% in Q1 and adjusted EBITDA margins reaching 29%. This is best in class for the cannabis industry, as the Company’s positioning in Quebec allows it to benefit from the low electricity rates.

Quebec Vape Launch. Quebec launched vape sales in November 2025, providing access to one of the largest category segments in most other provinces (15-25% of sales). LOVE quickly became the #1 player in Quebec with a 30% market share.

Management & Ownership. Cannara is led by CEO & Founder, Zohar Krivorot, who started the Company, and has focused on learning large-scale cannabis cultivation and has become the LOVE’s master grower. Major shareholders include Mr. Krivorot (26%) and Olymbec Investments (24%), which is affiliated with Director Derek Stern, with other management and insiders owning 1%.

Valuation. Cannara has leading growth and margins yet only trades at 6.5x/5.3x FY26E/FY27E EBITDA. This compares to large-cap LPs at 7.4x/11.6x and small-cap LPs at 4.0x/2.9x. We believe that there is a strong case for LOVE’s multiple to expand to a premium, given its superior growth and margins.