Meesho shares rally 20% after UBS initiates 'Buy' call, market cap nears Rs 1 lakh crore

Meesho share price

The newly-listed shares of Meesho jumped 20 percent to hit the upper circuit on December 17 after UBS initiated coverage on the stock with a ‘Buy’ call and a target price implying strong upside potential from current levels.

Meesho shares rose to Rs 216.34 apiece in the morning trading hours of Wednesday, the highest level seen by the stock since its strong market debut The shares of the popular e-commerce platform have now surged around 95 percent from its IPO price in just six sessions since debut.

The company's market capitalisation currently stands at Rs 97,637.08 crore. The company had a market capitalization of more than Rs 73,000 crore during its much-awaited market debut on December 10.

This implies that Meesho's market cap has surged by nearly Rs 25,000 crore in just six sessions of trading.

 UBS on Meesho:

UBS initiated a ‘Buy’ call on the shares of Meesho, with a target price of Rs 220 per share. This implies an upside potential of more than 22 percent from the stock’s previous closing price of Rs 180.29 apiece.

Meesho operates in an asset-light, negative working capital business model, while ensuring positive cash flows, UBS said. It noted that the firm’s net merchandise value is estimated to grow at a CAGR of 30 percent over FY25-30.

The international brokerage sees contribution margin and adjusted EBITDA margin reaching 6.8 percent and 3.2 percent of NMV by FY30. It added that Meesho’s growth is driven by Active Transacting Users (ATU) rising from 19.9 crore to 51.8 crore.

UBS further sees order frequency increasing from 9.2x to 14.7x. However, average order value may decline from Rs 274 to Rs 233 as logistics efficiencies are passed on.

UBS expects Meesho's focus on lower to middle income consumers in India's tiers 2 and 3 cities to provide a growth runway, given that adoption accelerates among these consumers.

Meesho's bumper market debut:

The stock had made a strong market debut on December 10, listing at Rs 162.50 apiece on NSE. This marked a premium of more than 46 percent from the IPO price of Rs 111 per share.

This came after the Rs 5,421-crore IPO of the e-commerce platform was subscribed 79 times. The stock is currently around 32 percent higher than its listing price.

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