Nazara Technologies - Diversified Play Into Indian Gaming Ecosystem: ICICI Securities Initiates Coverage

ICICI Securities Report

We initiate coverage on Nazara Technologies Ltd. on a positive note, given visibility of strong revenue growth in eSports and gradual profitability improvement in gamified early learning.

The stock has corrected ~70% from its peak (of Rs 1,601) and is now trading at its all-time low of Rs 486. At current market price, it is trading at 45 times one-year forward price/earning. We estimate ~37% YoY revenue growth in FY24E, led by ~45%YoY in eSports and ~25%YoY growth in GEL.

We estimate Ebitda growth of ~86% YoY in FY24E led by Ebitda margin improvement of ~250 basis points YoY as eSports IPs scale up and GEL profitability improves due subscriber additions and price increases.

Nazara has Rs 6.6 billion in cash (additional Rs 40 million in SVB). We believe this could be used to acquire scale through acquisition in real money gaming, once regulatory clarity emerges.

Also, Nazara could benefit from inexpensive acquisition opportunities in the current liquidity situation. In case these triggers play out, we see a bull case valuation of Rs 800 (for March 2024). In case growth slows or margin improvements do not play out, we see a bear case valuation of Rs 400 (for March 2024).

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