Neutral Nazara Technologies target of Rs 598: YES Securities

YES Securities recommended Neutral rating on Nazara Technologies with a target price of Rs 598 in its research report dated May 10, 2023.

Broker Research

May 12, 2023 / 16:12 IST

Neutral

YES Securities' research report on Nazara Technologies

Nazara Technologies (NAZARA) reported inline financial performance for the quarter. Both, sequential revenue growth and EBITDA margin were broadly along expectation. It reported sequential revenue degrowth of 8.1% QoQ in a seasonally weak quarter for Nazara, led by 8.1% QoQ decline in revenue of esports( contributing 48.4% to revenue) and 0.4% QoQ decrease in the revenue of Gamified Early Learning(contributing 27.7% to revenue). There was sequential decrease in EBITDA margin(down 11 bps QoQ) led by sequential decline in revenue. Indian Gaming industry is expected to achieve $3.5bn in 2023 from $1.5bn in 2020 at CAGR of 32.6% led by increasing smartphone penetration, increase in the number of mid/hard core gamers and gradual increase in In‐app purchases. The revenue base of Nazara has become more diversified across business segments, thus helping to reduce the overall risk. High cost of content and higher marketing cost continues to weigh down on operating margin. Its acquisitions driven business strategy remains a risky one as such acquisitions often come at premium valuation.

Outlook

We estimate revenue CAGR of 27.6% over FY23‐25E with average EBITDA margin of 12.5% over the period. We maintain our NEUTRAL rating on the stock with revised target price of Rs 598/share based on EV/EBITDA of 14x on FY25E. The stock trades at EV/EBITDA of 18.8x/13.0x on FY24E/FY25E.

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