Target: ₹215
CMP: ₹193.05
Meesho is building India’s first discovery-led marketplace that acts as a long tail ad network with embedded logistics for a fragmented retail market.
We understand the key debate has been on logistics costs pullback — whether it has been a loss of economics or cyclical. We believe the Q2-Q3 drop in logistics monetisation was a one-off as a result of 3PL consolidation and should recover in FY27.
While we are sceptical of annual transacting user growth being constrained in the late teens, we think Net Merchandise Value (NMV) can be sustained at a 23 per cent FY26-31 CAGR. In addition, Mall & Content Commerce (about 5 per cent of NMV each), at a 50 per cent FY26-31 CAGR, brings down the burden of growth on the core platform to just a 16 per cent CAGR, which appears reasonable.
Meesho has been successful in monetising tier-3 and below markets that are complementary to mainstream e-commerce and quick commerce company target groups. With a broadening of SKU mix to Home & Kitchen and BPC from fashion it has the option of expanding its target group to include customers from Metro/tier-1 and premium segments through its Mall initiative.
Furthermore, we see EBITDA margins expanding to 4 per cent by FY31, thanks to under-monetised ad take-rates. This should drive EBITDA/FCF CAGR of 170 per cent/52 per cent over FY28-31 post break-even. We value it at FY30 EV/EBITDA of 35x, discounting back to FY28 at ₹215 price target
Key risks include growth misses and logistics cost overruns as it attempts to drop ASPs.