Reduce Nazara Technologies; target of Rs 2208: YES Securities
YES Securities recommended reduce rating on Nazara Technologies with a target price of Rs 2208 in its research report dated September 09, 2021.
September 13, 2021 / 03:02 PM IST
YES Securities' research report on Nazara Technologies
Medium Term looks promising: Nazara is expected to clock revenue of Rs11.4bn in FY24, at FY21-FY24E CAGR of 36.0%. Given the general gaming market frenzy, growing interest in platform businesses, and bright prospects of gaming industry in India, the stock can rise 20-50% from current levels. Our base case target price is for 23.8% upside in 12 months. Strong presence across subsegments of online gaming: Nazara has well recognized brands across 1) Gamified Early learning (Kiddopia); 2) eSports (Nodwin, Sportskeeda); 3) Freemium Games (WCC); 4) Online Real Money Games (Halaplay); 5) Telecom subscription business. Apart from legacy business of telecom subscription, other segments (especially eSports and Real Money Games) are expected to see sustained high growth, driven by rising popularity of online games among 18-35 years old. Planned expansion in the foreign market especially US has helped leverage its brand and IPs to promote growth.
Given the long term uncertainty in this business, we initiate coverage with REDUCE Rating and target price of Rs 2,208 at EV/EBITDA(FY24E) of 25x, taking into account valuation multiples of global peers like Electronic Arts, Activision Blizzard, and Tencent Holding, (adjusted for 30% growth in Indian market compared to 12-15% growth in the US and Chinese gaming markets). The stock currently trades EV/EBITDA of 19.4x
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