Argus Research Initiates Equity Research Report Coverage on Kaival Brands Innovations Group, Inc. (NasdaqCM: KAVL)

Rhea-AI Summary

Argus Research has initiated coverage on Kaival Brands Innovations Group (NasdaqCM: KAVL), highlighting its positioning in the vaping market with the BIDI^® Stick and upcoming BIDI^® Pouch launch. Since 2020, Kaival generated $100 million in revenue, capturing over 30% of the disposable ENDS market. The company is confident in achieving $1 billion annual revenue by 2023, bolstered by a recent uplist to NASDAQ, patent protections, and an expanding international presence, particularly in China. Argus estimates a fair value of $22 per share, suggesting significant growth potential.

Positive

• Generated $100 million in revenue since 2020 with over 30% market share in disposable ENDS.
• Expansion plans include the BIDI® Pouch launch and entry into international markets like China.
• Recent NASDAQ uplist enhances capital access for growth initiatives.
• Strong patent portfolio with 4 US patents and recent approvals in China.

Negative

• None.

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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SOURCE Argus Research

FAQ

What recent event occurred for Kaival Brands Innovations Group (KAVL)?

Argus Research has initiated equity research report coverage on Kaival Brands Innovations Group.

What are the expected revenue projections for KAVL?

Kaival Brands aims to achieve $1 billion in annual revenue by the end of 2023.

What products does Kaival Brands Innovations Group distribute?

Kaival Brands is the exclusive distributor of BIDI® products, including the BIDI® Stick and the upcoming BIDI® Pouch.

How much revenue has Kaival Brands generated since its inception?

Kaival Brands has generated $100 million in revenue since launching its products in early 2020.

What is the fair value estimate for KAVL according to Argus Research?

Argus Research estimates a fair value of $22 per share for Kaival Brands.