Disclosure: Delivra Health Brands Inc. has paid FRC a fee for research coverage and distribution of reports. See last page for other important disclosures, rating, and risk definitions.
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Price and Volume (1-year)
Overview
DHB’s product portfolio consists of sleep aid/anxiety relief formulations, and pain relief products
The company is also trying to license its patent-pending proprietary transdermal delivery technology to pharma companies
Follows an asset-light model by outsourcing manufacturing and packaging to entities in North America
Two Primary Brands: Dream Water (sold in the U.S./Canada/the Middle East), and LivRelief (sold in Canada)
Available at 30k+ outlets in the U.S., and Canada, including major retailers and pharmacy chains
Financials (Year-End: June 30th)
FY2025 revenue rose 8% YoY, beating our estimate by 3%, due to stronger than expected Dream Water sales in the U.S., and Middle East. Canadian revenue remains pressured by softer sales of cannabis-infused LivRelief topical creams, with management developing a refreshed marketing strategy to boost performance
Gross margins fell 4 pp, driven by a higher share of low-margin products, missing our estimate by 1 pp. SG&A expenses fell 3% YoY, 4% below our estimate.
Marketing expenses were up 2 pp YoY to 15% of revenue, compared to 10%-20% for industry peers (Source: S&P Capital IQ)
Higher marketing expenses weighed on EBITDA, EPS, and free cash flow Adjusted EPS fell 12% to ($0.02) but comfortably beat our estimate of ($0.04), driven primarily by higher revenue and lower costs
No outstanding options/warrants are in-the-money. With FY2025 revenue beating expectations, we are raising our FY2026 estimates
As a result, our DCF valuation increased from $0.87 to $0.92/share
DHB remains one of the most undervalued stocks on our list within the Personal Care products sector The average sector forward EV/Revenue is down 3% since our previous report in May
DHB is trading at a 57% discount to comparables Using the average sector EV/Revenue, we arrived at a comparables valuation of $0.62/share (previously $0.57/share), driven by our higher revenue forecast
We are reiterating our BUY rating, while adjusting our fair value estimate from $0.72 to $0.77/share (the average of our DCF and comparables valuations). We believe DHB’s robust revenue growth and strategic initiatives position the company for sustained long-term expansion. Continued market penetration, geographic growth, and targeted M&A are expected to enhance product reach and profitability. Valuation metrics suggest DHB remains modestly priced relative to peers.
Risks
We are maintaining our risk rating of 3 (Average)v
We believe the company is exposed to the following key risks (not exhaustive):
