Shares of FirstCry parent company—Brainbees Solutions dropped as much as 4% on May 27 as investors dumped the stock after the company’s losses widened on year in the March quarter.
The company’s net loss ballooned to Rs 111 crore in Q4, sharply more than the loss of Rs 43 crore that it had recorded in the year ago period. Losses widened much more from last quarter’s Rs 15 crore.
Meanwhile, revenue rose 16% on year to Rs 1,930 crore, up from the Rs 1,667 crore that it reported in the same quarter of the previous fiscal. However, it was down 11% on a sequential basis as compared to the previous quarter’s Rs 2,172 crore.
Truncated winter, soft offline traction, and store shutdowns for its COCO brand, drove the moderation in FirstCry’s Q4 growth, with offline business expanding just 5% on year.
Looking ahead, the management continues to focus on multi-channel strategy as 38% of GMV generated in top 20 cities is from cross-channel customers, transacting both online and offline. On the margin front, the management aims for steady state adjusted EBITDA margin in late-teens though the timeline for this goal is not yet specified.
Despite the weak earnings, brokerage firm JM Financial still holds on to some optimism, stating that it feels the company will be able to retain its deeply-moated position in its category and will be a key beneficiary of tax benefits and any recovery in discretionary spends. To that effect, analysts at JM Financial see Brainbees Solutions as a sustained compounding story with cheap valuations. On that account, the brokerage kept its ‘buy’ tag on the stock with a price target of Rs 488.
Echoing similar views, the company’s management also believes its existing moats (brand strength, customer trust, and network effects) will sustain its long-term positioning even though the near-term competitive environment remains uncertain. The management further stated that it will continue to focus on improving profitability by increasing home brands penetration and peak losses are now behind.
