Shares of FirstCry-operator Brainbees Solutions climbed as much as 4% on Friday to Rs 630 on BSE after brokerage firm JM Financial initiated coverage on the stock with a ‘buy’ rating at a target price of Rs 692, implying potential upside of 9.8% from current levels.
The brokerage highlighted FirstCry’s dominant position in India’s childcare market, commanding over 24% of the online segment and holding significant offline traction with 1,124 physical stores across 500 cities.
The company’s strategic focus on home brands such as BabyHug, coupled with its COCO (company-owned, company-operated) store expansion, is expected to drive gross margin improvements of about 6.5% by FY28, the brokerage said.
JM Financial also shed light on FirstCry’s international growth potential, noting its success in the UAE and Saudi Arabia. “The UAE business is already profitable at the adjusted EBITDA level, and the KSA business is likely to follow suit within two years,” JM Financial said.
The brokerage underscored the potential of the company’s Globalbees platform, describing it as “the largest and only profitable D2C roll-up play in India.”
Brainbees Solutions reported robust financial growth with a 38% revenue CAGR from FY21 to FY24, turning EBITDA profitable in FY21. JM Financial forecasted a 20% CAGR in revenue and a 51% CAGR in adjusted EBITDA from FY24 to FY29, underpinned by increased operational efficiency and strategic investments.In the quarter ended September 2024, the company narrowed its consolidated net loss to Rs 50 crore versus Rs 101 crore in the year ago period. The losses were also down from Rs 57 crore from the previous quarter and attributable to the owners of the company.However, JM Financial flagged risks such as cannibalization from COCO store expansion, execution challenges in international markets, and increased competition from platforms like Meesho.
Despite these risks, the brokerage said it remains optimistic about the company’s ability to sustain long-term growth, driven by its replicable playbook, innovative product portfolio, and experienced founder-led management.
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