Meesho's logistics recovery and ad monetisation underpin a path to FY28 profitability

Investment View and Target Price

Motilal Oswal Financial Services' October 28, 2026 report on Meesho retains a Buy rating and raises the target price to Rs 265. The thesis is based on recovery in logistics spreads, increasing advertising monetisation and operating leverage as the marketplace scales.

The broker has raised contribution-margin assumptions by around 10 to 25 basis points for FY27E to FY29E. This results in approximately 2% and 23% upgrades to FY28E and FY29E adjusted marketplace EBITDA, respectively.

Growth Outlook and Marketplace Performance

Motilal Oswal forecasts around 25% NMV CAGR over FY26 to FY31, driven by additions to annual transacting users and higher platform adoption. It expects contribution margin to rise to around 7.8% by FY31 from 6% in 2QFY27. Adjusted EBITDA is expected to reach break-even in FY28E, with the adjusted EBITDA margin reaching around 4% by FY31.

Meesho's marketplace NMV grew 23% YoY to Rs 12,900 crore in 2QFY27 and increased around 12% QoQ. Growth was affected by the shift of the Mega Blockbuster Sale to 3QFY27 from 2QFY26. Motilal Oswal estimates that NMV growth would have been around 33% after adjusting for this timing effect.

Profitability, Cash Flow and Operating Leverage

Reported 2QFY27 contribution margin expanded 143 basis points QoQ to around 6%, ahead of Motilal Oswal's 5.3% estimate. The improvement was driven by recovery in logistics spreads through lower return-to-origin rates and higher order density.

Adjusted marketplace EBITDA loss narrowed to around 1% of NMV, better than the broker's expectation. However, the benefit was partly offset by higher customer-acquisition expenditure and server costs.

Meesho reported revenue of Rs 4,310 crore, a reported operating loss of Rs 230 crore and a reported loss of Rs 120 crore. The reported loss was lower than Motilal Oswal's estimated loss of Rs 150 crore.

Free cash flow was Rs 350 crore in 2QFY27 because of seasonal working-capital support, while the cash balance stood at Rs 7,050 crore. However, trailing 12-month free cash flow remained an outflow of Rs 570 crore.

Management Commentary and Execution Priorities

Management said festive demand exceeded expectations, supported by record traffic and first-time buyers entering new categories. Volatile crude prices, however, were disrupting sellers' supply chains.

• Management intends to reinvest part of the logistics-driven contribution-margin gains to improve affordability and accelerate near-term growth.
• It retained medium-term guidance for around 25% NMV CAGR over FY26 to FY31.
• Advertising monetisation, normalisation of server costs and indirect-cost leverage are expected to expand margins.
• Trailing 12-month free cash flow is expected to turn positive within the next few quarters.
• Artificial intelligence-led discovery is improving engagement, conversion, new-user activation and purchase frequency.
• Logistics cost per order is expected to decline through automation, software, middle-mile redesign, improved line-haul utilisation and sorting efficiency.
• Delivery speed improved around 15% YoY.

Valuation and Key Risks

Motilal Oswal values Meesho at 30 times FY31E adjusted marketplace EBITDA, discounted to December 2028. This implies around 1.4 times December 2028 enterprise value to NMV.

Key factors that could affect the thesis include:

• The planned reinvestment of contribution-margin gains.
• Elevated server costs.
• Supply-chain disruption caused by crude-price volatility.
• The need to sustain user, seller, order and advertising-monetisation growth while improving profitability.