Brainbees Solutions shares slip 6%: JM Financial maintains 'Buy' despite wider Q4 loss; here's why

Shares of Brainbees Solutions, the parent company of baby products retailer FirstCry, fell nearly 6 per cent after the company reported a sharp increase in its fourth-quarter loss.

FirstCry's parent posted a net loss of Rs 111 crore in the January–March quarter (Q4 FY25), sharply higher than the Rs 43 crore loss recorded in the same period last year. On a sequential basis, losses also deepened from Rs 15 crore reported in Q3 FY25.

Revenue from operations stood at Rs 1,930 crore, marking a 16 per cent year-on-year (YoY) increase compared to Rs 1,667 crore in Q4 FY24. However, revenue declined 11 per cent sequentially (quarter-on-quarter), down from Rs 2,172 crore in Q3 FY25.

Despite the weak quarterly results, JM Financial has maintained its 'Buy' rating on the stock, citing strong long-term growth potential and attractive valuations.

JM Financial, in its post-results note, said the company's gross margin improved to 37.5 per cent, up 80 basis points (bps) YoY but down 50 bps QoQ. Consolidated adjusted EBITDA margin stood at 5.2 per cent, reflecting a 20 bps improvement YoY but a 120 bps decline QoQ, primarily due to a higher revenue contribution from the lower-margin GlobalBees segment.

The brokerage mentioned that FY25 was tough for FirstCry but expressed confidence that it will see a recovery going ahead. "FirstCry saw a quarter where its core India Multi-Channel (IMC) business delivered 13.5 per cent YoY GMV growth, despite challenges such as a late winter season and offline retail slowdown. The international segment grew 16.4 per cent, while GlobalBees reported a robust 33.4 per cent revenue growth," the brokerage stated.

The IMC segment's adjusted EBITDA grew 24 per cent in FY25, and JM Financial expects the business to deliver a 28 per cent CAGR in EBITDA over the next three years as growth rebounds in FY26.

Despite near-term pressures, the brokerage believes FirstCry retains a "deeply-moated position" in its category and will benefit from favourable tax incentives and a potential recovery in discretionary consumption.

JM Financial values the IMC segment at 27.3x FY27E adjusted EBITDA, which it notes is significantly lower than traditional retailers. It has maintained a 'Buy' rating with a revised target price of Rs 488.

While FirstCry's Q4 numbers reflect operating challenges and margin pressures, the brokerage expects a turnaround in FY26, backed by brand strength, digital and offline integration and improving consumer sentiment.

Meanwhile, Brainbees Solutions shares settled 5.94 per cent lower at Rs 352.95.