Morgan Stanley Starts Meesho Coverage – Valuation Concerns Emerge

What Analysts at Morgan Stanley Like About Meesho: A Summary

Here’s a breakdown of what Morgan Stanley analysts like about Meesho, based on the provided text:

Key Positives:

* Scale & Growth: Meesho has achieved meaningful scale in the value e-commerce segment wiht 234 million annual transacting users and over 700,000 sellers. They project a strong 26% CAGR in net merchandise value (NMV) from FY26-FY28.
* Unique Positioning: They believe Meesho faces limited competition in the value commerce segment.
* Asset-Light Model: Meesho operates an asset-light marketplace,leading to strong capital efficiency.
* Personalization & Recommendations: A high percentage (74.57%) of orders are driven by personalized feeds and platform recommendations, indicating effective technology.
* Proven Business Model: Meesho’s model is comparable to successful global platforms like PDD (China) and Shopee (Southeast asia).
* Strong Leadership: Backed by a strong founder and management team.
* India Consumption Story: Positioned to benefit from India’s growing consumption.
* Improving Margins: Projected to move from -3.2% adjusted EBITDA margin in FY26 to 0.5% in FY28, with a steady-state margin of 3.8% of NMV by FY31.

Valuation & Price Target:

* Currently trading at 1.14x FY28 EV to NMV, considered fair.
* Price target of Rs 169 (implying 1.2x FY28 EV to NMV).
* Bull case scenario: If monetization accelerates,the stock could re-rate to over 40x FY31 estimated EV to EBITDA,with a potential upside to rs 239 (a 45% increase from current levels).