A lighter topline than expected over the last quarter has analyst Matt Bottomley of Canaccord Genuity lowering his FY2018 estimates for The Hydropothecary Corporation (Hydropothecary Stock Quote, Chart, News: TSXV:THCX).

But with its market leading purchase order from Quebec’s province-wide cannabis retailer, the company is still set to post big revenue numbers once the recreational marijuana sector opens up, says the analyst, who in a note to clients on Thursday maintained his “Speculative Buy” recommendation and $5.75 price target for Hydropothecary.

On Wednesday, Gatineau, Quebec’s The Hydropothecary Corp. reported its fiscal second quarter of 2018 financial results, which featured a nine per cent increase in sales of medical cannabis from the previous quarter and a 45 per cent year-over-year increase.

But revenues for the quarter were $1.2 million, just $0.1 million above the previous quarter and below both the consensus estimate of $1.5 million and Bottomley’s $2.9 million.

“Although somewhat light compared to our forecasts, we note that Hydropothecary is still trending in the right direction (with a premium price averaging $8.99 per gram and one of the lowest cash cost bases in the industry at $0.97 per gram),” says the analyst. “Further, QoQ fluctuations are not as meaningful as the potential material upside from recreational sales in the back half of 2018.”

The letter of intent from Quebec retailer the SAQ calls for 20,000 kg of supply from THCX, more than any other supplier so far lined up by the province, which is a win for the company, says Bottomley.

“We believe the company’s lead purchase order from the SAQ in Quebec confirms that location and provincial relationships matter,” the analyst says. “We believe this relationship provides increased visibility over the medium term, and we estimate the 20,000 kg order could translate into wholesale revenues of $80 million to above $100 million.”

Bottomley has trimmed his 2018 forecast for THCX’s revenue to $17 million (down from $25 million) and its Adj. EBITDA to negative $0.2 million (down from $6.9 million).

The $5.75 target price represents a 51.3 per cent return on investment at the time of publication.