Gaming and sports-media platform Nazara Technologies was one of 2021's most successful IPO. However, the stock has lost over half of its investor wealth since hitting a high of ₹1,677 in November last year. On a year-to-date basis, Nazara Tech stock price is down 37 percent, meanwhile, in the last 1 year, it has shed nearly 30 percent.
However, the stock has been on a rebound recently, posting positive returns since August. It has jumped 24 percent in August and is up 11 percent in September so far.
On the back of a strong outlook of the real money games (RMG), global brokerage house Jefferies has raised the target price of the stock to ₹860 from ₹780 earlier citing a favourable risk-reward post the correction. The current target price implies a potential upside of around 18 percent.
The brokerage maintained its Buy rating on Nazara Tech with as it believes that the company is 'making the right moves'.
“While RMG remains an attractive market, Nazara Tech is unlikely to make a big play before regulatory clarity emerges," the note stated. Jefferies has raised its estimates by 5-13 percent for the stock.
The brokerage noted that the growth outlook for Nodwin and Sportskeeda remains strong. Also, the recent price increases in Kiddopia and acquisition of Wildworks will help drive growth in early learning segment, it added.
Nazara had acquired a 55 percent stake in Nodwin Gaming Pvt. Ltd. in 2018 through a cash-and-stock deal.
"The management said that since the acquisition, Nodwin has diversified from an e-sports event management firm to a company that drives gaming engagement. It has forayed into content creation around eSports (Playground) and offering accessories (Planet Superheroes, Brandscale) through its recent acquisitions. Nodwin's balance sheet still has over ₹40 crore cash which will be utilized to further build on these initiatives," stated the brokerage.
The management also expects healthy growth for Sportskeeda to continue over the next few years. Jefferies has raised Sportskeeda's revenue estimates for FY25/26 by 5-10 percent and expects compounded revenue growth of 47 percent until FY26 for this segment.
“Nazara acquired a 100 percent stake in Wildworks for $10 million implying 0.8x EV/sales. Wildworks is a game developer catering to kids aged 8-12 years with 'Animal Jam' as it's key IP. Nazara plans to revive growth by increasing spends on user acquisition and driving content updates. The acquisition will add $12 million revenue to Nazara's revenues and help solidify Nazara's presence in the Gamefied Learning segment in the US," Jefferies added.
The brokerage believes that Nazara Tech is a distinct play on the gaming ecosystem, offering exposure to diverse gaming segments, geographies, and revenue streams and strong growth prospects in eSports segment, driven by a strong pickup in gaming in India and price increases in Gamified learning to support subscriber acquisitions.
It sees stronger-than-expected revenue growth, particularly in early learning and eSports, improving unit economics in early learning, successful acquisitions, and easing regulations in real-money gaming as key catalysts.
Nazara Technologies is a gaming and sports media platform in India and internationally. The company operates through Gamified Early Learning, eSports, Freemium, Telco Subscription, and Skill-Based Real Money Gaming segments. Nazara is known for its games in the World Cricket Championship, Chhota Bheem, and the Motu-Patlu series. The late Rakesh Jhunjhunwala also owns a 10 percent stake in the company, which at its current market price is valued at nearly ₹500 crore.
In the June quarter, the firm reported over 22 percent year-on-year (YoY) growth in its consolidated net profit at ₹16.5 crore for the quarter ended June 2022 (Q1FY23), backed by strong revenue growth.
Its revenue during the quarter surged 70 percent to ₹223.1 crore compared to the corresponding period of the last fiscal.
"The multi-pronged approach to capture opportunities has been yielding positive traction and we are in line with our target growth plans for FY23," Manish Agarwal, CEO said post the earnings.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.