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Motilal Oswal Report
Domestic brokerage firm Motilal Oswal has initiated coverage on Meesho Ltd. with a Buy rating and has set a target price of Rs 240, implying a potential upside of 30% from the current levels.
Meesho's valuations are highly sensitive to net merchandise value growth and contribution margin expansion. The brokerage believes at current market price, the stock is pricing in ~25% NMV CAGR over FY26-31 (similar to its estimate) and ~6.7% contribution margin by FY31 (~80bp lower than our base case estimate of ~7.5%).
Stronger-than-expected NMV growth and/or sharper expansion in CM could fuel further upside risks to Motilal Oswal's target price, while lower NMV growth and/or weaker-thanexpected CM expansion pose downside risks(bull case: Rs 335; bear case: Rs 140).
The brokerage believes Meesho's asset-light model with negative working capital and improving unit economics makes for a unique combination of a scaled platform business with a long runway for growth and potential margin inflection.
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