On Thursday, BofA Securities began coverage of BrainBees Solutions Ltd (: FIRSTCRY:IN), commonly known as FirstCry, with a Buy rating and a price target of $770. The firm's analysis suggests FirstCry is well-positioned in the Indian mother and baby care (MBK) market, which is less competitive, to achieve a 21% compound annual growth rate (CAGR) in revenue.
BofA Securities highlights the company's omni-channel strategy, which spans both online and offline sales, as a key factor in reducing customer acquisition costs and increasing average order value (AOV) and order frequency, contributing to consistent growth.
The firm also anticipates FirstCry to experience a 500 basis points margin improvement over the next three years, leading to an adjusted EBITDA CAGR of 57% from fiscal years 2024 to 2027. This forecasted improvement in margins is expected to be driven by a better mix of high-margin private labels, an increasing number of company-owned and company-operated stores, scale economies, and the company's ability to negotiate with third-party brands.
According to BofA Securities, FirstCry is projected to reach net income positivity by the fiscal year 2026 and become free cash flow positive by the middle of the same fiscal year.
The firm believes that like its Indian peers, FirstCry will be able to command a premium valuation compared to global averages due to its stronger EBITDA growth prospects, lower competitive pressures, and the absence of specific regulatory challenges. Currently, FirstCry is trading at 31 times its projected FY27 enterprise value to adjusted EBITDA.
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