- Macquarie maintains Underperform rating on Meesho with Rs 125 target price implying 30% downside
- Meesho's GMV expected to grow at 21% CAGR between FY26 and FY29, unchanged from earlier forecasts
- Brokerage highlights need for significant order frequency improvement to boost platform economics
Macquarie has maintained an 'Underperform' rating on Meesho with a target price of Rs 125, implying a 30% dopwnside from current levels. The brokerage argued that while the e-commerce platform continues to post healthy growth, it will require a significant improvement in customer order frequency before its business model can generate sustainable economic profits.
In a research note, the brokerage said it expects Meesho's gross merchandise value (NMV) to grow at a 21% compound annual growth rate between FY26 and FY29, broadly unchanged from its earlier forecasts. It also projects a 300-450 basis point improvement in contribution margin and adjusted EBITDA margin over the same period.
Despite those improvements, Macquarie believes the company's valuation remains difficult to justify because of structural limitations in its business model.
ALSO READ: Asset-Light, Cash-Rich: Why Motilal Oswal Is Betting Big On Meesho With Rs 240 Target
The brokerage said Meesho's integrated commerce ecosystem, which combines social commerce, logistics and content, creates a defensible competitive position in India's fast-growing value e-commerce market. However, it added that the platform's low average order value (AOV) continues to constrain monetisation, limiting its ability to generate meaningful profitability.
According to Macquarie, a "significant inflection in order frequency" is necessary for Meesho to improve the economics of its platform. Without customers placing substantially more orders over time, the company may struggle to achieve the scale needed to deliver attractive long-term returns.
The brokerage also noted that its NMV growth forecast remains around 400 basis points below Visible Alpha consensus estimates, while its contribution margin projections are broadly in line with consensus. However, Macquarie's adjusted EBITDA margin estimate is about 80 basis points lower than the Street's expectations, reflecting a more cautious view on the pace of profitability improvement.
Macquarie made no material changes to its earnings estimates on an adjusted EBITDA basis following its latest review.
Looking ahead, Macquarie said investors should closely monitor several operational indicators, including platform order frequency, progress toward the company's growth objectives and the performance of newer initiatives such as Meesho Mall and Content Commerce.
ALSO READ: Can Meesho Keep Its Growth Streak Alive? Analysts Say Q2 Could Test The Momentum
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.