scorecardresearchRakesh Jhunjhunwala-backed Nazara Technologies up 26% in 2 days: Brokerages

Rakesh Jhunjhunwala-backed Nazara Technologies up 26% in 2 days: Brokerages see further upside; Here's why

Updated: 03 Aug 2022, 01:32 PM IST
TL;DR.

Despite the earnings surge in this Rakesh Jhunjhunwala-backed online gaming company, the stock has declined 25 percent in the last 1 year. In 2022 so far, it has lost over 40 percent.

Despite the post earnings surge in the firm, the stock has declined 25 percent in the last 1 year. In 2022 so far, it has lost over 40 percent.

Despite the post earnings surge in the firm, the stock has declined 25 percent in the last 1 year. In 2022 so far, it has lost over 40 percent.

Shares of Nazara Technologies have surged over 26 percent in just 2 sessions of August on the back of strong earnings for the first quarter ended June 2022.

Despite the post earnings surge in the firm, the stock has declined 25 percent in the last 1 year. In 2022 so far, it has lost over 40 percent.

While the stock has risen nearly 50 percent from its 52-week low of 475, hit in June this year, it has still lost over 58 percent investor wealth from its 52-week high of 1,678, hit in October last year.

On the back of strong earnings, brokerages now see more upside in the stock going ahead. Domestic brokerage Prabhudas Lilladher (PL) retained its bullish stance on the stock with a target price of 911, indicating an over 40 percent upside; meanwhile, global brokerage house Jefferies upgraded the stock to buy with a target price of 780 apiece on strong growth prospects.

Article
Nazata tech stock price trend

Earnings

The Rakesh Jhunjhunwala-backed online gaming company's consolidated net profit in the June quarter rose to 16.5 crore against 13.5 crore net profit in the corresponding quarter of the previous fiscal. However, on a sequential basis, net profit zoomed 237 percent from 4.9 crore in the March 2022 quarter.

Revenue from operations also surged 70 percent to 223.1 crore in Q1 against 131.2 crore in the corresponding quarter of the last fiscal. On a sequential basis, revenue rose 27 per cent from 175.1 crore in the March 2022 quarter.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) also more than doubled on a sequential basis to 30.1 crore in Q1 against 14.9 crore in the March 2022 quarter.

As per the recent shareholding pattern on the BSE, Indian ace investor and stock market trader Rakesh Jhunjhunwala holds a 10.03 percent stake in Nazara Tech as of June 2022.

Why brokerages see more upside?

"Nazara reported strong 70 percent YoY growth in 1QFY23, driven by eSports and acquisitions. EBITDA margin declined 945 bps YoY, mainly due to cost pressure in early learning. Growth outlook in eSports remains strong, and price increases should support growth in Kiddopia," said global brokerage Jefferies in a note.

It has raised estimates by 6-24 percent and expects the firm to deliver 24 percent revenue/EBITDA CAGR over FY23-26E.

According to Jefferies, Nazara is a distinct play on the gaming ecosystem, offering exposure to diverse gaming segments, geographies, and revenue streams. Strong growth prospects in eSports segment, driven by a strong pickup in gaming in India and price increases in Gamified learning will support subscriber acquisitions and the stock offers upside post recent correction, it said.

Meanwhile, PL believes that the growth story remains intact as Nazara’s portfolio approach to gaming not only diversifies unforeseen risks (Apple’s privacy policy or regulatory uncertainty surrounding RMG) but also creates additional growth levers via the inorganic route.

It increased sales estimates by 2 percent and 6 percent for FY23 and FY24 respectively as it fine-tunes its assumptions for Esports and DataWrkz. Overall, PL expects revenue and PAT CAGR of 39 percent and 58 percent, respectively over FY22-24E.

"Nazara reported a decent set of numbers with a topline beat of 7.9 percent and an EBITDA margin of 13.5 percent which was partially impacted by continued investments to fund growth initiatives of Nodwin. Nonetheless, the key highlight was stabilization in unit economics of Kiddopia after taking a price hike of 13 percent in June. We believe further headroom exists as Kiddopia’s monthly subscription plan of US$8.99 is still at a discount to other players," said PL.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.

Article
A diversified portfolio neatly divides your assets into more than one asset class in order to reduce risk and maximize profits.
First Published: 03 Aug 2022, 01:30 PM IST