Hemp Inc (HEMP)

[Det_Robert_Thorne]

Here's a first cut at decorticator plant economics.

Since I used to do market research for a semiconductor company, this is a little different, but I'm starting to look at the possible revenue the plant could generate.

First of all, we need to establish a what the plant is capable of producing.

Per Condor's data in the decorticator post in the stickies, the plant is capable of processing 100,000 lbs of kenaf/day, when running three shifts. Assuming that the amount of hemp would be similar, that's 50 tons/day, or two tons/hour.

Condor also calculates that with about 7000 U.S. tons of kenaf, this would be about 140 days of production.

Let's assume that HEMP can get enough hemp to run 280 days/year (double that) which means about 14,000 tons of hemp stalk processed per year at near maximum capacity.

I'm still going through it, but I found a Canadian study that looks at the economics of hemp, and estimates that the NPBT (Net Profit Before Taxes) for processing hemp fiber would run from $24 - $136 (Canadian/ton), that's $21 - $121 US/ton.

So the NPBT for 14,000 tons of hemp fiber would be approximately $290K - $1.7M / year.

IOW, if I'm reading this correctly, the plant will potentially generate profits of $290K - $1.7M/year.

By the time the plant is processing its first hemp crop in late 2015, HEMP will probably have 3.2B outstanding shares.

That means an EPS between $0.000092 and $0.00053.

Give those earnings a P/E of 30, and you're looking at a share price of $0.003 to $0.016

More research is required, but it looks like the plant alone won't be able to support a share price of more than $0.02.

See this report prepared for the Agricultural Department of Alberta, CA, page 30 for a breakdown on the economics of a processing plant.

BTW, this all assumes that the market grows fantastically, and that competition from Europe, China and Canada doesn't depress hemp prices.