Buy Meesho Limited for the Target Rs.210 by Choice Institutional Equity Limited
Meesho reported a strong Q3 FY26 operating performance, with Annual Transacting Users scaling up to 251 Mn (up 34% YoY), cementing its position as India’s largest e-commerce platform in terms of users. The seller ecosystem continues to scale-up rapidly, with annual transacting sellers (ATU) rising 81% YoY to 846k, supported by product improvements, streamlined onboarding and the enablement of non-GST sellers. Contribution margin declined to 2.3% in Q3FY26, reflecting temporary logistic inefficiencies from the accelerated Valmo scale-up following the exit of a key third-party logistics partner (3PL), a conscious trade-off to protect service levels during the festive period. Management expects these inefficiency to unwind over the next two quarters as network optimisation progresses and the Valmo–3PL mix normalises, with margin guided to revert to Q1FY26 levels on the back of better pricing discipline and operating leverage. User additions remains the key growth lever in the medium term, while transaction frequency is expected to improve progressively as cohorts mature & platform stickiness increases. We see the current phase as an inflection point from scale-building to margin recovery, with EBITDA losses peaking in Q3 and a credible path to EBITDA breakeven by end-FY27E. Against this backdrop, we maintain our BUY rating with a Target Price of INR 210, valuing the company at 4.0x FY28E EV/Revenue.
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