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This Gaming Stock Can Surge 54%, “Buy the stock”, Says PL
Broking firm Prabhudas Lilladher has a "buy" call on the stock of gaming company Nazara Technologies. Here are some details on why the brokerage has a "buy" call on the stock.
Revenue sees good increase
According to Prabhudas Lilladher, revenue increased 69.4% YoY to Rs 3,148 million (PLe Rs2,948mn). E-sports/Real Money Gaming revenue was up 39.5% YoY/41.1% YoY to Rs1,525mn/Rs151mn respectively. Revenues from Telco subscription segment increased 2.3% YoY to Rs132mn whereas Gamified early learning (GEL)/Freemium revenue was up 70.3% YoY/22.8% YoY to Rs804mn/Rs 70 mn respectively.
Con call highlights
According to the report, here are some of the highlights from the conference call:
1) Fresh hiring has been done recently and a 'special project's team' will aid in analyzing and executing new opportunities including tech trendsand M&A. 2) AdTech margins were low as 31 new clients were added (there is no pricing pressure) and EBITDA margins will be in the range of 8-10%. 3) As for Kiddopia, price hikes taken in December will reflect in rising ARPU over a period of time as old subscribers get weeded out from the system. 4) Margins in Nodwin are low due to creation of new IPs and expansion of D2C business 5) OpenPlay's MAUs have declined despite the app being available on Playstore due to KYC friction. 6) Currently, OpenPlay generates revenue of ~Rs50mn a month and the focus is on driving organic growth.
Buy Nazara Technologies with a price target of Rs 898
EBITDA increased 1.0% YoY to Rs306mn (PLe Rs277mn) with a margin of 9.7% (PLe of 9.4%) vis-a-vis 16.3% in 3QFY22. GEL/Esports EBITDA margin stood at 9.1%/9.0% respectively. PAT increased 75.7% YoY to Rs181mn (PLe Rs99mn) with a margin of 5.7% (PLe of 3.4%).
Overall, we expect sales/PAT CAGR of 27%/36% respectively over FY23E-25E and retain our BUY rating with a DCF based target price of Rs 898. "The stock trades at EV/Sales multiple of 2.8x/2.1x our FY23E/FY24E estimates and we maintain our positive stance on Nazara as there is huge runway for growth ahead since it operates in a sun-rise industry," the brokerage has said.
Disclaimer
The stock has been picked from the brokerage report of Prabhudas Lilladher. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.
