Event:
On March 24 local time, the US House of Representatives plans to hold a new round of voting on the marijuana opportunity reinvestment and Elimination Act (hereinafter referred to as “more act”) next week. This is the second time in history that the bill related to the legalization of marijuana has entered the voting process. In December 2020, the US House of Representatives approved the plan for the first time, but it was finally rejected by the Senate.
Guoyuan view:
Under the high public support and the pressure of the mid-term election, the legalization process of marijuana in the United States has lasted for a century. At present, although about 40 states have legalized medical or recreational marijuana at the state level, it has not been fully legalized at the federal level. In recent years, the legalization trend of relevant policies has accelerated. The marijuana opportunity reinvestment and Elimination Act proposed in 2020 aims to remove marijuana from the controlled substances act and eliminate current criminal charges and future penalties for individuals who grow, distribute or sell marijuana.
We believe that the probability of passing the bill in the Senate and house of Representatives may increase due to the following two reasons: (1) the public support rate for the legalization of marijuana has been rising in recent years. Gallup survey data show that since the 1970s, the support rate for legalization of cannabis in the United States has increased from about 15% at that time to 68% in 2020. In recent years, it has shown an accelerated upward trend, and the end consumer demand has also continued to increase, with an obvious trend of legalization; (2) Compared with 2020, this year’s voting members are under pressure in the US mid-term election in the second half of the year, and their voting against the public opinion may affect their election results; In addition, when the house of Representatives voted on the bill for the first time in 2020, it passed with 228 votes: 164 votes, so there is a high probability of passing the same bill this time. At the same time, the Senate is also quite concerned about the marijuana legalization bill. It also proposed a similar marijuana legalization bill, the marijuana management and Opportunity Act (CAOA), in 2021. We believe that the Senate may pass the “more bill” and make some amendments this time. If the bill is passed and signed by President Biden, the United States may become the third country to fully legalize marijuana after Uruguay and Canada.
The industry has entered a period of development opportunities, and the U.S. market has entered a fast lane of growth
Industrial hemp refers to hemp with THC concentration less than 0.3%, which does not show spiritual activity and has high fiber content; It has a wide range of uses: seeds, flowers, leaves, skins, rods and roots can be used in textile, food, daily chemicals, medicine and other fields. Cannabinoids based on CBD have been added to more application scenarios in overseas mature markets. In terms of market size, under neutral assumptions, the market size of the global cannabis industry will increase to US $58.7 billion by 2024, and the CAGR can reach 18.88% from 2020 to 2024; In 2020, the scale of the global industrial cannabis market was about US $5.7 billion, which is expected to reach US $11.9 billion by 2024, with a CAGR of 20.00%. From the perspective of American cannabis market, in recent years, with the acceleration of policy legalization and the continuous progress of relevant technologies, the scale of American cannabis market is also accelerating. In terms of medical and adult marijuana, according to the data of advocacy partners, the market scale of adult use and medical marijuana in the United States was about US $16.33 billion in 2020, which is expected to reach US $35.86 billion by 2025 and 17% CAGR in 20202025. In terms of industrial marijuana, with the legalization of industrial marijuana in the United States since 2018, the development of industrial marijuana in the United States has also entered a fast lane. From the planting side, according to votehemp data, as of the first half of 2020, although affected by the epidemic and other factors, the licensed planting area of industrial marijuana in the United States was still as high as 465787 acres, an increase of about 5 times compared with 2018. In addition, according to the data of brightfield group, the total scale of related products including cannabinoid in CBD of American industrial cannabis reached US $4.746 billion in 2020, an increase of about 14 times compared with 2017.
It is recommended to pay attention to the subject matter
It is suggested to pay attention to overseas high-quality leading enterprises of vertical integration of the whole industrial chain, such as curaleaf, tilray and canopygrowth; Charlotte’s web, industry leader in CBD product production and distribution; Agrify, an integrated solution provider for indoor planting; The world’s leading LED driver supplier Inventronics (Hangzhou) Inc(300582) in deep cooperation with agrify and Guilin Layn Natural Ingredients Corp(002166) in forward-looking layout of industrial marijuana extraction plants in the United States.
Risk tips
The legalization process is less than expected, the industry regulatory policies are more than expected, the industry competition intensifies, resulting in a decline in profits, product innovation is less than expected, the financing of relevant companies is less than expected, and the planting scale and output are less than expected
