The brokerage firm JM Financial has reiterated its ‘Buy’ rating on Brainbees Solutions, the parent company of FirstCry and GlobalBees, even as the company’s fourth-quarter numbers for FY25 showed a mixed bag.
Although the offline sales lagged and seasonal factors like a late winter dampened momentum, the brokerage remains bullish in the long-term story.
As per JM Financial’s report, “the company retains its deeply-moated position in its category and will be a key beneficiary of tax benefits and any recovery in discretionary spends.”
The revised target price for March 2026 stands at Rs 488, slightly lower than the earlier Rs 510, factoring in slower growth in some segments.
JM Financial on FirstCry: India multi-channel business takes a hit, but fundamentals strong
FirstCry’s core India Multi-Channel (IMC) business, the biggest chunk of Brainbees, grew its gross merchandise value (GMV) by 13.5% year-on-year in Q4FY25. However, this was still a bit below expectations, especially since offline growth came in at a modest 5%, added the JM Financial report.
JM Financial points to a combination of factors – fewer winterwear sales, the closure of 38 company-owned stores, and a general offline slump as reasons for this soft patch.
Still, the brokerage highlights the strength of FirstCry’s private labels, which now account for around 55% of the GMV. “We also believe that moats for FirstCry remain intact with BabyHug being the largest childcare brand in the country,” the report notes.
JM Financial on FirstCry: GlobalBees shines with its focused strategy
If there was one bright spark in the quarter, it was GlobalBees, Brainbees’ digital-first consumer brand roll-up. The segment clocked a 33.4% growth in revenue over last year, touching Rs 4 billion.
As per the brokerage, “Adjusted EBITDA from core brands has been at ~7.5% while other brands are at minus 31% in FY25.”
JM Financial on FirstCry: International business hit by new rivals and price wars
The international operations, however, were less upbeat. GMV here grew 16.4% YoY but declined over 24% on a quarter-on-quarter basis. Revenue stood at Rs 2.1 billion, up 11.2% YoY.
According to the brokerage report, “higher promotional activity by two new entrants has impacted growth.” However, management’s strategy has been to avoid a price war and instead focus on long-term brand building.
While this meant a short-term margin squeeze. Adjusted EBITDA margin fell to minus 14.9%. However, the company believes its existing moats of brand strength, customer trust, and network effects will support future growth.
JM Financial on FirstCry: Margins improve, but GlobalBees shift lowers overall profitability
On the consolidated level, Brainbees reported a gross margin of 37.5%, which was an improvement of 80 basis points year-on-year. Adjusted EBITDA margin came in at 5.2%, a 20bps improvement over last year but down 120bps sequentially.
This dip was primarily due to a larger share of revenue now coming from GlobalBees, which carries a lower margin compared to the IMC business.
Still, management remains optimistic. “India Multi-channel is yet to reach its steady-state EBITDA margin,” the report quotes, with a long-term aspiration to reach ‘late-teens’ margin levels over the next four to five years.
JM Financial on FirstCry: Valuations look attractive despite headwinds
Despite the bumps, JM Financial sees Brainbees as significantly undervalued, particularly its India multi-channel business. The brokerage estimates that this segment alone is trading at about 27x FY27E Pre-IndAS EBITDA, lower than traditional retail peers despite stronger growth prospects.
“The slightest hint of growth recovery could be a significant re-rating event for FirstCry,” the brokerage adds. They expect the India multi-channel business to post a 3-year EBITDA CAGR of about 28% from FY25, with overall company revenues growing at an 18% CAGR through FY30.