A capacity expansion at Aphria (TSX:APH) should solidly position the LP as the the second largest producer in Canada, but it’s still not enough for GMP Securities analyst Martin Landry to recommend the stock at these levels.

On Monday, Aphria announced a new effort called GrowCo, a joint effort between it and an Ontario greenhouse grower named Double Diamond Farms. The company said the deal would provide it with an extra 120,000 kg of annual cannabis production, meaning it expects to have 220,000 kg of production for sale by January, 2019, pending Health Canada approvals.

“Since the Aphria journey began in early 2014, a key pillar to the Aphria success story has been our unwavering commitment to powered by the sun, and nowhere is that more effective than in Leamington, Ont., where average daily sunlight hours, intensity of optimum lighting and moderate climate provides for ideal greenhouse growing,” said CEO Vic Neufeld. “Building on our Leamington advantages, I am very excited to announce that Aphria has entered into another acquisition of Dutch greenhouse campus in the Leamington area. Partnering with Double Diamond, a major local greenhouse grower, Aphria will have access to almost 32.0 acres (just less than 1.4 million square feet of greenhouse) plus 72,000 of infrastructure to service not only the almost 32 acres, but a future build of another 32 acres. Double Diamond is an industry-recognized leader in growing various produce using the greenhouse technology advancements, and brings solid talent and a labour pool necessary to support the annual incremental capacity of over 120,000 kg.”

Landry says the huge run-up in shares of Aphria make it hard to recommend, despite this significant development.

“While GrowCo provides a significant boost to the outlook, we believe this is already reflected in APH’s stock price, which has increased 63% in one month,” the analyst argues. “Our target price increases to reflect our higher forecasts, and is based on a DCF assuming; 1) discount rate of 8.5% (unchanged), 2) avg. recreational market share of 10% (9% previously), 3) avg. EBITDA margin of 29% (28% previously), and (3) a terminal growth rate of 3%.

In a research update to clients Wednesday, Landry maintained his “Hold” rating, but raised his one-year price target on the stock from $10.00 to $20.00, implyign a return of negative nine per cent at the time of publication.

Landry thinks Aphria will generate EBITDA of $10.6-million on revenue of $38.5-million in fiscal 2018. He expects those numbers will improve to EBITDA of $99.8-million on a topline of $257.0-million the following year.

The analyst says he is now projecting increased international sales for Aphria, which he regards as a positive.

“With the receipt of a dealer license in Nov. 2017 permitting export of cannabis oils, and international expansion being highlighting as a use of proceeds from APH’s recent $115m financing, we expect a growing proportion of the company’s now larger capacity with GrowCo could be destined for global medical markets. Hence, we have begun incorporating international sales into our forecasts, which also carries a positive margin impact,” Landry says.