Motilal Oswal Financial Services initiated coverage with a ‘Buy’ rating on Meesho and a target price of Rs 240, implying an upside of over 30% from the current market price. This came on the back of the platform’s unique combination of scale, an asset-light model, and a long runway for growth.
Vast scale and leadership in value e-commerce
Motilal Oswal said that Meesho has established itself as India’s largest e-commerce platform by user base and order volume, boasting 274 million Annual Transacting Users (ATUs) and over 280 crore orders placed in the last twelve months. Its value-led proposition is specifically designed for “Bharat,” with 88% of its users originating from Tier 2+ markets.
Also, there is still a big market to be penetrated in India as compared to globally, with online retail accounting for only 7% of total retail sales in CY24, significantly below markets such as China (34%), the US (17%), and even Indonesia (15%).
Despite rapid growth since 2016, India’s unique internet user penetration of 50% remains well below the more than 80% penetration in the US and China.
Unique asset-light model and negative working capital
Unlike traditional retailers, Meesho operates a truly asset-light business model that requires limited capital expenditure on physical infrastructure or inventory. Additionally, it operates on negative working capital (25 days of NMV), providing a large float income and enabling significant Free Cash Flow (FCF) generation.
Structural cost advantage and logistics flywheel
The company utilises a zero-seller-commission model and a low-cost logistics network to reduce onboarding friction. Its in-house logistics arm, Valmo, aggregates fragmented delivery providers to drive fulfilment efficiency and cost leadership, which further reinforces a self-reinforcing flywheel effect for platform adoption.
Path to profitability and strong growth projections
Motilal Oswal expects Meesho to deliver a 25% CAGR in marketplace NMV over FY26-31. While currently loss-making, the platform is projected to achieve adjusted EBITDA and net profit break-even by FY28, with an adjusted EBITDA reaching Rs 4,800 crore by FY31.
“We expect Meesho to achieve reported EBITDA break-even (after ESOP costs) by FY28-exit, while interest income on its growing cash holdings, zero debt, and limited assets on its books should drive net profit break-even by FY28,” said the brokerage house.
Monetisation levers and Horizon 2 initiatives
Beyond logistics, advertising remains the largest immediate monetisation opportunity, currently contributing 3% of NMV against a seller demand of 9%. The report also highlights “Horizon 2” initiatives such as content commerce, which generated over Rs 1,200 crore in NMV in H1 FY26, and potential expansion into financial services.
As more sellers adopt Meesho’s ads platform, we expect RoAS expectations to moderate, leading to better monetisation for Meesho. Increased adoption of Meesho Mall should provide additional tailwinds for contribution margin (CM) expansion. We build in a 400 bps improvement in CM over FY26-31 to reach 7.5% by FY31,” said Motilal Oswal.
Meesho share price performance
The share price of Meesho has remained unchanged over the past five trading days. The stock has dropped 4.3% in the last one month. However, the stock has surged 14% in the past six months. Meesho’s share price has increased 9.3% over the last one year.