Why Brainbees Solutions, parent to FirstCry gained 4% in trade on Dec 20?

Brainbees Solutions, parent company of FirstCry, shares rose 3.9 per cent in trade, logging an intraday high at Rs 630 per share on BSE. The rally in the stock came after JM Financial has initiated coverage on the stock with a 'Buy' call. 

 

Around 11:41 AM, Brainbees shares rose 3.14 per cent at Rs 624.9 per share on BSE. In comparison, the BSE Sensex was down 0.25 per cent at 79,018.10. The market capitalisation of the company stood at Rs 32,443.82 crore. The 52-week high of the company stood at Rs 734.25 per share and the 52-week low stood at Rs 513.8 per share.

 

JM Financial believes that FirstCry has the potential to dominate the childcare segment in India with an improving gross margin. "FirstCry has an extremely dominant market positioning for the 0-4 year age group," the report said.

 

FirstCry’s revenue grew at a compound annual growth rate (CAGR) of 38 per cent in FY21-24, with the company turning adjusted Earnings before interest, tax, amortisation, and depreciation (Ebitda) profitable in FY21.

 

Furthermore, the company's focus on gross margin expansion of 6.5 per cent by FY28 since FY24 is remarkable on the backdrop of a rising mix of FirstCry home brands, COCO store expansion saving margins shared with franchisees, economies of scale enabling higher manufacturing margins, and better negotiations on take-rate with 3P brand partners.

 

The company's presence internationally,  since 2019,  in the UAE followed by KSA expansion in 2022, opened up a $ 10 billion opportunity by FY29 in these two countries with FirstCry benefitting from the lack of a specialised childcare platform.

 

With the mentioned pros of the company, JM Financial forecasts it to deliver 20 per cent revenue growth over FY24-29, while adjusted Ebitda CAGR would stand at 51 per cent, driven by sharp margin expansion across segments, aided by 440 basis points (bps) gross margin expansion and the consequential operating leverage, resulting in FY29E Adjusted Ebitda margin of 12 per cent. 

 

Shares of FirstCry were listed on bourses on November 13, 2024, with a premium of Rs 160 or 34.40 per cent at Rs 625 on the BSE against the issue price of Rs 465 per share. Currently, the stock is trading 30 per cent above its issue price.  

 

FirstCry is the largest specialised childcare platform in India online as well as offline with complete dominance in the 0-4 year age group. Founded in 2010, the company has since solved for its customers by launching carefully crafted home brands along with c.8k brand partnerships, which are distributed through its online platform and 1,124 physical stores.