Stocks To Buy: Gaming & Sports Company Stock That Can Jump 50%

Stock markets in India have been trading in a tight range for the last few weeks. Broking firm, Prabhudas Lilladher has done a first cut analysis based on the quarterly numbers of Nazara Technologies, a leading gaming and sports company. The firm believes there could be an upside potential of nearly 50% on the stock and has hence recommended a buy.

Nazara Technologies: Buy the stock with a price target of Rs 1031

According to Prabhudas Lilladher, Nazara Technologies Esports segment drove revenue in the quarter ending June 30, 2022 and the net profits were largely in line with estimates.

The revenues at the firm increased 103.5% YoY to Rs 2,638 million (PLe Rs 2,268 million). E-sports revenue was up 174.3% YoY to Rs 1,366 , million while RMG sales was up 188.2%YoY to Rs147mn.

"Revenues from Telco subscription segment declined 29.5%YoY to Rs117mn whereas Kiddopia and Freemium revenue was up 11% YoY/31% YoY to Rs 598mn/55 mn respectively," the brokerage has said.

Net profits at the company remain flat

Nazara Technologies saw its EBITDA increase to 9.2%YoY at Rs 213 million (PLe Rs297mn) with a margin of 8.1% (PLe of 13.1%) vis-a-vis 15.0% in 2QFY22. Kiddopia EBIT margin stood at 12.9% while margin in E-Sports was at 3.1%. According to Prabhudas Lilladher, net profit remained flat at Rs 102 million (PLe Rs118mn) with a margin of 3.9% (PLe of 5.2%).

According to the company, Manish Agarwal will step down as CEO with effect from Dec 1, 2022 and Nitish Mittersain, founder & joint managing director will take over.

Cash flow from operations of the company were placed at Rs. 174 Mn (Rs. 17.3 Cr), while cash used for acquisitions of Rs. 1,136 Mn (Rs. 113.6 Crores) in H1FY23.

Rating and valuations of Nazara Technologies

According to Prabhudas Lilladher, Nazara Technologies trades at EV/Sales multiple of 3.8x/2.8x our FY23/FY24 sales estimates and currently the firm has a BUY rating on the stock. The shares of Nazara Technologies last closed trading at Rs 688 on the NSE.
Nazara Technologies is a gaming and sports media platform with offerings across the interactive gaming, eSports, , ad-tech and gamified early learning ecosystems. The company owns some of the most recognisable IP, including WCC and CarromClash in mobile games, Kiddopia in gamified early learning, Nodwin and Sportskeeda in eSports and eSports media, and Halaplay Technologies Private Limited ("Halaplay"), Openplay Technologies Private ("Openplay") in skill-based, fantasy and trivia games and Datawrkz in digital ad tech.

The shares of the company have hit a 52-week high of Rs 1471 and a 52-week low of Rs 475. The company had launched an IPO with a share price of Rs 1100 and considering the same, the shares are available at a good discount to the IPO price.

Disclaimer

The above stocks were picked from the brokerage report of Prabhudas Lilladher. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.