CLSA maintained an Underperform rating on Meesho with a ₹150 target price, citing stretched valuations and optimism around advertising monetisation, order frequency and logistics savings. According to reports from The Economic Times, the target implies a 29% downside from Meesho's previous close of ₹210.30. The stock has gained 18.76% year-to-date, outperforming the Nifty 500 which declined 3.90% over the same period. As per The Economic Times, CLSA believes the stock's valuation already reflects overly optimistic expectations for advertising revenue, order growth and logistics savings, despite the recent rally.
CLSA believes the market is assigning a higher probability of success to three key growth drivers than warranted. As reported by The Economic Times, investors are factoring in advertising revenue equivalent to about 5% of net merchandise value by FY30, compared with CLSA's estimate of 3.9%. The brokerage noted that Meesho already operates at a take rate of 17.8%, compared with 5.1% for Chinese ecommerce company PDD. Meesho's sellers generate only about one-tenth of the merchandise value generated by an average PDD seller, while its seller base is about 5% of PDD's. According to The Economic Times, weaker seller-level economics could restrict advertising budgets and make it harder for Meesho to scale ad revenue, potentially limiting the company's ability to achieve the market's optimistic expectations.
CLSA expects Meesho's annual order frequency to rise from 10.1 in FY26 to 13.4 by FY29 and about 17 by FY32. According to The Economic Times, a significant increase beyond these estimates would require Meesho to expand into categories such as fast-moving consumer goods and daily essentials, potentially weakening the company's asset-light model. The brokerage also questioned whether logistics capacity would remain readily available as Meesho grows, noting the company accounts for about 39% of India's ecommerce shipments, up from around 3% five years ago. As more volumes shift to Meesho's Valmo logistics network, third-party partners may have less incentive to invest in additional infrastructure, potentially creating capacity constraints.
CLSA expects Meesho to remain loss-making through FY27, with a projected net loss of ₹357 crore. As reported by The Economic Times, the brokerage forecasts a profit of ₹651 crore in FY28 and ₹1,483 crore in FY29. The stock trades at about 149 times CLSA's estimated FY28 earnings and 66 times FY29 earnings. The ₹150 target is an equal-weighted blend of CLSA's relative-valuation estimate of ₹172 and discounted cash-flow valuation of ₹128. Faster advertising growth, stronger order frequency and greater logistics efficiencies remain key upside risks to the brokerage's cautious view, as reported by The Economic Times.
