NEW YORK,
Aug. 19, 2021
/PRNewswire/ -- Argus Research, an independent investment research
firm, has launched Equity Research Report coverage on Kaival Brands
Innovations Group, Inc. (NasdaqCM: KAVL)
Click Here to view full Argus Equity Research Report.
COMPANY HIGHLIGHTS: Excerpts (as conveyed by Argus
Analyst Steve Silver) include:
KAVL: Innovative Vaping and Tobacco-Free Nicotine Delivery
Solutions
- In our view, Kaival Brands is well positioned to expand sales
of BIDI® nicotine delivery products. The company
launched the BIDI® Stick in the U.S. in early 2020 and
plans to launch a second product, the BIDI® Pouch, in
4Q21. The company is also expanding internationally, particularly
in China, and developing a line of
CBD products.
- Management believes that the BIDI® Stick is
superior to competing products, as its housing provides users with
feedback and gives them more control over the device. The
BIDI® Stick features a heating component and a
unique mouthpiece that deliver vapor at a safe and consistent
temperature, prevent the inhalation of condensation, and provide a
consistent experience for users. These features are covered by four
U.S. patents (as of July 2021).
- Kaival Brands/Bidi® Vapor are committed to
ensuring the appropriate use of their products, including
preventing sales to minors, and to selling only through retailers
who are compliant with FDA regulations. The companies have also
focused on environmentally friendly manufacturing. More than 85% of
product components can be recycled, including the
BIDI® Stick battery, which is ESC-compliant. The
products also use recyclable packaging.
- We expect the company to generate positive operating cash flow
going forward. We also believe that the recent uplist of the stock
to the NASDAQ will enhance the company's access to capital and help
it to execute its expansion strategy.
- We think that Kaival Brands' market cap near $150 million does not adequately reflect
prospects for the expanded market adoption and distribution of
BIDI® products. Based on our analysis using EV/sales
multiples, our fair value estimate for KAVL is $22 per share, well above current
levels.
INVESTMENT THESIS excerpts (Click Here to
view full Argus Equity Research Report):
Kaival Brands Innovations Group, Inc. is the exclusive global
distributor of products manufactured by Bidi® Vapor, a privately
held company founded and controlled by Kaival Brands' CEO Raj
Patel.
As a result, the companies are considered to be under common
control, and Bidi® Vapor is considered a related party. Bidi®'s
primary product, BIDI® Stick, is the U.S. market share leader in
disposable electronic nicotine delivery systems (ENDS), which we
believe account for 10%-15% of the overall e-cigarette industry.
BIDI® Stick is a closed, tamper-resistant system
with various flavor options, and is protected by patents that, in
management's view, help to resolve a range of industry "pain
points." A second product, BIDI® Pouch, is a
tobacco-free nicotine formulation containing natural fibers and a
chew-base filler in different flavors. It is expected to be
launched in 4Q21. Kaival distributes these products through retail
channel partners and to nonretail customers through a partnership
with Gopuff.com. As a distributor, Kaival Brands does not assume
risk over unsold or damaged inventory, which is under Bidi's
control.
Since launching its first products in early 2020, the company
has generated $100 million in revenue
and gained a 30%+ share of the more than $500 million disposable ENDS market. In
March 2021,
BIDI® Stick also became the top-selling disposable
ENDS product in the United States,
according to Nielsen data. We see strong prospects for further
growth as disposable products account for just 10%-15% of the
$4 billion U.S. e-cigarette market,
which is dominated by refillable products. The
BIDI® Stick may thus help to convert many adult
users to the disposable category, leading to further growth in
sales and market share.
Management believes that the BIDI® Stick is
superior to competing products, as its housing provides users with
feedback and gives them more control over the device. The
BIDI® Stick also features a heating component and a
unique mouthpiece that deliver vapor at a safe and consistent
temperature, prevent the inhalation of condensation, and provide a
consistent experience for users. These features are covered by four
U.S. patents (as of July 2021).
Bidi® Vapor has also been granted two patents in
China, which Kaival
Brands/Bidi® Vapor view as vital to competing in
the world's largest vaping market. The companies have applied for
additional patents in the United
States and abroad that will expand their IP moat and enhance
their reputation for innovation in the fast-growing vape pen
market, which Facts & Figures expects to reach $45 billion by 2026.
Statista estimates the combustible cigarette market in
China at more than $220 billion, with vaping products accounting for
a modest, but growing market share. As such, we see China as a much larger opportunity than
the United States, where Grandview
Research estimates a $7.4 billion
market for vaping products. The company has begun discussions with
potential distribution partners in China, and secured approval to distribute
Bidi® products in Europe, Australia, and Russia. In all, Kaival has obtained approval
to distribute its products in 11 countries thus far in 2021.
Kaival plans to launch a second product,
BIDI® Pouch, in the second half of 2021. The Pouch,
a proprietary, tobacco-free nicotine formulation packed in a
plastic can, uses a patented nicotine delivery system with enhanced
bioavailability and containing fewer impurities than pouch products
produced by industry leader Swedish Match. The company initially
delayed the launch of the Pouch due to COVID-related manufacturing
and supply-chain constraints and is now manufacturing in-house to
better control production. As of July
2021, it had 8,000 distribution points for the product. The
Pouch will compete in a category that has seen nearly 60%-unit
sales growth in U.S. convenience stores in the year ended
June 19, 2021, according to Nielsen
data. Growth is also expected to be strong outside the U.S.
MarketResearch.com expects the global market for nicotine pouch
products to approach $33 billion by
the end of 2026, implying compound annual growth of nearly 55%.
In 2021, Kaival Brands has signed several contracts with
retailers that have significantly expanded the distribution of
Bidi® Vapor products. We estimate that the products
are now available at more than 54,000 stores, up from approximately
10,000 at the end of 2020. Kaival has decided to pursue contracts
with large national retailers, wholesalers and distributors, which
are better able to ensure the appropriate use of its products,
rather than with smaller organizations. Toward that end, Kaival
entered into an agreement with Grocery Supply Warehouse, a
distributor with a combined network of more than 25,000 grocery and
convenience stores. With this expanding footprint and product line,
we believe that Kaival's annual revenue could reach $1 billion by the end of 2023.
We believe that Kaival Brands and Bidi® Vapor
are well positioned to use their distribution infrastructure to
launch additional product lines. In June
2021, the companies announced plans to launch a proprietary,
lab-developed portfolio of CBD vape products. Data Bridge Market
Research forecasts a total addressable CBD vape market of
$28 billion by 2027, while Global
Market Insights projects a global CBD market of more $100 billion by the end of the decade. Kaival
Brands recently identified a production partner, with whom it will
produce internally branded hemp products as well as white-label
products for other manufacturers.
Kaival Brands/Bidi® Vapor are committed to
ensuring the appropriate use of their products, including
preventing sales to minors. In 4Q20, the companies repackaged the
BIDI® product line to incorporate new product names
and designs that better align with FDA Enforcement Priorities
Guidance. This guidance calls for manufacturers to distinguish
their products from those that might appeal to and be marketed to
children, while also protecting adult consumers from potentially
hazardous counterfeit products.
About Kaival Brands Innovations Group,
Inc. (NasdaqCM: KAVL)
Kaival Brands Innovations Group, Inc. focuses on growing
innovative products into dominant brands. The company is the
exclusive distributor of all products manufactured by
Bidi® Vapor, a leader in disposable electronic nicotine
delivery systems (ENDS), and is poised to expand internationally.
Bidi® Vapor's products include
BIDI® Stick, a closed, tamper-resistant vaping
product, and BIDI® Pouch, a tobacco-free nicotine
formulation, which is set to launch in late 2021. Kaival Brands
distributes BIDI® products to retailers, and sells
directly to consumers through a partnership with Gopuff.com. Kaival
Brands Innovation Group was founded in 2018 and is based in
Grant, Florida.
For more information Please Contact:
Investor & Public Relations:
Inflection Partners,
LLC
New York | Philadelphia | New
Orleans
www.inflectionpartnersllc.com
Office: (504) 381-4603
investors@kaivalbrands.com
About Argus Research Corp. Headquartered in NYC,
Argus Research (www.argusresearch.com) is a leading independent
equity research firm (est. 1934) ̶ providing
fundamental and quantitative research coverage on more than 1,600
companies across all 11 sectors of the S&P 500, as well as
macroeconomic and equity market forecasts, thematic research, model
portfolios and pre-IPO research. In addition, Argus has
recently committed to providing a sponsored research solution for
small & mid-cap companies seeking coverage. Argus's
Equity Research/earnings estimates are available on major research
/ earnings estimate aggregator platforms, including Bloomberg,
Thomson Reuters, Factset and S&P Global.
For more Information please contact:
Darrell Stone
646-747-5438
dstone@argusresearch.com
Argus Research Co. has received a flat fee from the company
discussed in this report as part of a Sponsored Research agreement
between Argus and the company. No part of Argus Research's
compensation is directly or indirectly related to the content of
this assessment or to other opinions expressed in this report.
Please refer to the full Argus report and the disclaimer for
complete disclosures.
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