Brokerage firm Motilal Oswal Financial Services has initiated coverage on Meesho with a 'Buy' rating and a target price of Rs 240, citing the e-commerce platform's asset-light business model, negative working capital and significant free cash flow (FCF) potential as key drivers of long-term value creation.
The brokerage values Meesho at 30x FY31 estimated adjusted marketplace Ebitda, discounted back to September 2028. The target implies an enterprise value (EV) to net merchandise value (NMV) multiple of around 1.4x FY28 estimates, representing a roughly 10% premium to Eternal's FY28 valuation multiple.
According to Motilal Oswal, Meesho deserves this premium due to its capital-efficient business model, which requires limited investment in physical infrastructure or inventory while benefiting from negative working capital that generates substantial cash float.
Strong Growth Outlook
The brokerage expects Meesho to deliver a 25% compound annual growth rate (CAGR) in marketplace NMV between fiscal 2026 and fiscal 2031, driven by continued customer acquisition and increasing platform adoption. It estimates that adjusted marketplace Ebitda and reported profit after tax (PAT) will break even by the end of fiscal 2028, supported by improving contribution margins and operating leverage.
Over FY26-FY31, Motilal Oswal forecasts adjusted marketplace Ebitda margins to expand by nearly 660 basis points. This, coupled with rising float income, is expected to help Meesho generate meaningful free cash flow from FY27 onwards, with FCF expected to exceed 4% of NMV by fiscal 2031.
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The brokerage projects adjusted Ebitda of around Rs 4,800 crore by fiscal 2031, translating into a margin of approximately 3.75%.
Asset-Light Model Sets Meesho Apart
Unlike traditional retailers and several internet platforms, Meesho operates a marketplace model that requires minimal capital expenditure on warehouses or inventory. Its business also operates with negative working capital, estimated at around 25 days of NMV, which enables the company to earn float income while maintaining a cash-rich balance sheet.
Motilal Oswal believes this combination of an asset-light structure, improving unit economics and strong cash generation makes Meesho a unique platform business with a long runway for profitable growth.
The brokerage also highlighted Meesho's scale, with 274 million annual transacting users (ATUs) and over 2.8 billion orders placed over the last twelve months.
Margin Expansion To Drive Profitability
Meesho does not charge sellers commissions for listing products. Instead, it monetises the platform through logistics recovery charges, advertising revenue and seller data services.
While contribution margin declined to around 3.5% in FY26 due to consolidation among third-party logistics providers, higher customer acquisition costs and increased technology investments, it has already recovered to around 4.6% in the first quarter of fiscal 2027.
Motilal Oswal expects logistics spreads to normalise over the medium term, with logistics contribution returning to around 2.5% of NMV.
The brokerage also sees advertising as Meesho's biggest monetisation opportunity. Advertisement revenue currently contributes roughly 3% of NMV despite sellers allocating nearly 9% of their marketing budgets to advertising. Greater adoption of Meesho's advertising platform, along with increased traction for Meesho Mall and financial services offerings, is expected to further improve profitability.
Overall, the brokerage expects contribution margins to expand by around 400 basis points to 7.5% by FY31, while operating leverage on largely semi-fixed indirect costs should further boost profitability.
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