Buy Meesho Ltd For Target Rs.220 by Choice Institutional Equities Ltd
User Growth and Monetisation Strengthen Long-term Outlook:
Q1FY27 results reinforce our constructive medium-term view on Meesho, with user-led scale-up and continued expansion of the seller ecosystem driving strong underlying growth. Monetisation of advertising remains a key focus area, with over two-thirds of sellers (by GMV) now actively leveraging the platform, providing a strong base for scaling up ad revenues. We also view initiatives such as Meesho Mall and the company’s long-term plans to expand into the grocery segment as important long-term growth drivers, expanding Meesho's total addressable market (TAM) and creating incremental opportunities for user engagement and advertising monetization. Accordingly, we raise our FY28 revenue estimates to reflect the stronger growth outlook and upgrade the stock to "BUY" with a target price of INR 220, based on 4.0x FY28E EV/Revenue.
Strong Topline Growth Continues; Investments Weigh on Earnings
* Meesho reported Q4FY26 revenue of INR 35,312 Mn (vs CIE est. INR 36,145 Mn), up 0.4% QoQ and 47.1% YoY driven by 42.6% YoY growth in Net Merchandise Value (NMV).
* EBITDA came in at INR -2,247 Mn (vs CIE est. of INR -1,501 Mn) while EBITDA margin came in at -6.1% (vs CIE est at -4.2%), improving by 450.7 bps YoY.
* PAT came in at INR -1,328 Mn (vs CIE est. of INR -788 Mn), while PAT margin came in at -3.6%.
User-Led Scale-up Drives NMV Growth; Grocery Expands TAM
Meesho reported a strong Q1FY27 operating performance, with Annual Transacting Users (ATU) scaling to 274 Mn (+28.5% YoY) and Annual Transacting sellers to 1.04 Mn (81% YoY) reinforcing its position as India’s largest E-commerce platform by user base. Order volumes grew 29.0% YoY, while order frequency improved to 10.3x during the quarter, indicating rising user engagement. NMV increased by ~34% YoY to INR 116.1 Bn, supported by an improvement in the GMV-to-NMV conversion ratio to 61.0% (vs. 57.3% last year). Through the Kirana Club acquisition and the development of local supply chains, Meesho is positioning itself to capture the massive grocery and staples market. Over the long term, we believe this initiative could enable the company to replicate its asset-light, low-cost logistics model (similar to Valmo) in grocery delivery, significantly expanding its total addressable market (TAM), particularly in value-conscious and underserved regions.
Contribution Margin Improves as Logistics Efficiency Scales-up
Contribution margin improved to 4.6% of NMV in Q1FY27 (vs. 4.0% in Q4FY26), driven by continued logistics efficiencies through Valmo, Meesho’s in-house logistics network, and also through third-party logistics partners. Monetization of ad revenues also supported the improvement, with more than two-thirds of sellers (by GMV) now actively utilizing the platform's advertising solutions. Factoring in an improvement in contribution margin from current levels, we now expect Meesho to achieve EBITDA breakeven by H2FY28E, supported by logistics normalization and steady progress in ad monetisation.
For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer
SEBI Registration no.: INZ 000160131
