What you need to know: • CEA has recently acquired Fat Panda, a leading Canadian vape retailer, supported by a vertically integrated manufacturing and e-commerce presence. • Fat Panda has posted consistent growth over the last five years, growing revenue at a 38% CAGR and Adj. EBITDA at a 71% CAGR. • CEA paid $12.6M for the acquisition, equating to 2.1x Adj. EBITDA. • The market has not yet digested this transformation, and as management executes, we expect the stock to re-rate. CEA Industries Inc. (VAPE:NASDAQ) is a growth-oriented company focused on building category-leading businesses in regulated consumer markets. With a focus on the high-growth, Canadian nicotine vape industry, one of the fastest-expanding segments of the global nicotine market, VAPE targets scalable operators with strong regulatory alignment, defensible market share, and high-margin business models. Through its Fat Panda brand, the Company operates a national platform of 33 retail stores, a dedicated e-commerce channel, and in-house production. Fat Panda has ~50% market share in central Canada and a scalable expansion model. The Company has posted consistent topline and Adj. EBITDA growth, taking advantage of the secularly growing industry. We are initiating coverage on CEA Industries with a BUY rating and a target price of $29.00/share. Investment Thesis Summary Positioned to Scale in a Fast-Growing, Regulated Vape Market. Fat Panda has a strong track record of growth, including revenue growing at a 38% CAGR and Adj. EBITDA growing at a 71% CAGR over the last five years. We expect this to continue due to various organic and inorganic growth initiatives backed by industry tailwinds and footprint expansion. Well-Structured Acquisition. CEA paid $12.6M for Fat Panda, through a combination of cash, debt, and shares. This equates to 2.1x Adj. EBITDA and 0.4x sales compared to public peers at 21.1x 2024A Adj. EBITDA and 2.6x 2024A sales. Expansion Opportunities. CEA operates a capital-efficient retail model, with plans to strategically launch new locations at modest start-up costs and pursue targeted acquisitions. Strong margins from in-house manufacturing of e-liquid disposables and pod products support fast payback periods. Coupled with consistent revenue growth and untapped capacity, VAPE is well-positioned to scale profitably. Industry Tailwinds. Canada’s vape market is growing rapidly, projected to expand from $1.2B in 2023 to $8.4B by 2030 at a 32% CAGR. Growth is driven by rising demand for nicotine alternatives, while regulatory tightening is pushing consolidation. As barriers to entry increase, market share is expected to concentrate among vertically integrated players with scale and retail reach. Management & Ownership. CEA is led by CEO Tony McDonald, a former private equity and cleantech executive, and the Fat Panda team is joining CEA to operate its assets. Insiders, including management and the board, collectively own 5.5% of the shares outstanding. Cheap Valuation. CEA currently trades at 2.0x 2026E Adj. EBITDA compared to its peers at 16.8x. The attribute the discount to the lack of public operating history for Fat Panda and expect this to reverse as the market gets comfortable with its quarterly financial results.