Meesho shares jump 8% as UBS initiates coverage with 'Buy', sets target price of Rs 220

Shares of Meesho climbed 8 per cent in Wednesday's trade after foreign brokerage UBS reportedly initiated coverage the stock with a 'Buy' rating and a target price of Rs 220 apiece, saying the company operates an asset-light model with negative working capital, ensuring positive cash flows unlike other internet companies. The Meesho stock rose 8.45 per cent to open at Rs 195.55 apiece on BSE. UBS' target on the stock suggests an 12.50 per cent potential upside over this price.

UBS reportedly expected Meesho’s net merchandise value to grow at a 30 per cent CAGR between FY25 and FY30. The brokerage estimated that contribution margins and adjusted Ebitda margins, as a share of net merchandise value (NMV), would improve steadily to 6.8 per cent and 3.2 per cent, respectively, by FY30. UBS said the growth was likely to be driven by a sharp increase in annual transacting users, which it projected to rise from 19.90 crore to 51.8 crore over the same period.

UBS' thumbs came after Choice Institutional Equities said it is best-placed to monetise this shift via its zero-commission, low-AOV, discovery-led platform serving Tier-2/3 users. Long-tail depth, content-led demand and logistics integration enable superior unit economics, with rising ad/fintech/fulfilment monetisation makes Meesho the most leveraged play on the next 10–15 crore mass-market users.

"We initiate coverage on Meesho with a BUY rating and a target of Rs 200, valuing the company at 4x FY28E EV/Revenue, with a three-stage DCF performed purely as a sanity check. Meesho remains in the high-growth phase of the platform lifecycle and is expected to deliver 31 per cent FY25–28E revenue CAGR, supported by deep value-commerce penetration and logistics efficiencies as Valmo scales. Ebitda is projected to turn positive by FY27E on operating leverage and improving unit economics. Despite this outlook, Meesho trades at 2.4x FY28E EV/Revenue versus the peer average of 5.4x, indicating substantial upside potential as fundamentals strengthen," Choice said earlier.

Choice said Meesho’s improving unit economics and scale advantages underpin a strong monetisation runway and a clear path to profitability. "The platform commands 29–31 per cent of India’s ecommerce shipment volumes, with NMV expected to grow at 31 per cent CAGR over FY25–28E, supported by category leadership in Fashion, Home, Kids and BPC. Order frequency has risen from 7.5 times (FY23) to 9.7 times (LTM FY26), while Customer Acquisition Cost (CAC) continues to decline, driving contribution margin expansion from 2.9 per cent (FY23) to 5 per cent (FY25), with 5.8 per cent expected by FY28E," it said.

"Logistics leverage through Valmo, fulfilment cost compression and stable take rates (30–31%) strengthen profitability visibility. Meesho is on track for Ebitda breakeven in FY27E, with operating leverage accelerating thereafter," it added.