Quarterly numbers from Village Farms International (Village Farms International Stock Quote, Chart TSX:VFF) show an impressive ramp-up in the company’s cannabis production, which along with industry-leading margins and a recent pullback in VFF’s share price makes for a compelling entry point for investors, says Martin Landry, analyst for GMP Securities.

On Friday, the analyst reaffirmed his “Buy” recommendation and $22.50 target price.

Produce and cannabis grower Village Farms released its first quarter fiscal 2019 financials on Thursday, coming in with $14.4 million in revenue at its cannabis joint venture Pure SunFarms and EBITDA of $8.6 million, both ahead of Landry’s estimates of a $10.5 million top line and $4.8 million in EBITDA. (All figures in Canadian dollars unless noted otherwise.)

In a note to clients, Landry points to PSF’s EBITDA margin of 60 per cent, the highest among cannabis companies that GMP covers and similar to the gross margins of other licensed producers who have been in the industry for much longer than PSF, Landry says.

“The ramp up at Pure Sunfarms (PSF) has been impressive, having achieved sales of $14m in its second quarter of revenue generation. Despite being in production for such a short period of time, Pure Sunfarms is already generating higher revenue than some LPs,” says Landry.

The analyst says PSF is on track to meet its previous guidance for its 2019 hemp acreage in the US and to begin selling CBD oil wholesale in early 2020, followed by white label and branded products. He notes that Village Farms is exploring additional hemp opportunities in Mexico and Latin America. All told, Landry says that PSF is on track to be producing at an annualized run-rate of 75 tonnes by mid-2019.

Landry thinks VFF will generate 2019 EBITDA of US$23.1 million and 2020 EBITDA of US$49.0 million. His $22.50 target represents a projected return of 52.4 per cent at the time of publication.