Prabhudas Lilladher has given Buy recommendation for Nazara Technologies with a target price of Rs. 1747 in its research report issued on May 16, 2022

Prabhudas Lilladher’s research report on Nazara Technologies

We cut our EPS estimates by 6%/18% for FY23E/FY24E respectively as subscriber acquisition continues to remain a challenge in Kiddopia. While management is exploring additional marketing channels and has ear-marked a higher sum of US$1.5-1.6mn per month for 1QFY23E; achieving pre-Apple policy era’s subscriber addition figures will be difficult in near term. Though Kiddopia is facing growth headwinds, E-Sports and Real Money Gaming (RMG) is expected to grow at a strong pace due to consolidation of OML and OpenPlay respectively. Overall, we expect revenue/PAT CAGR of 28%/52% respectively over FY22-24E and the growth story remains intact despite near term challenges.

Outlook

Consequently, we retain our BUY rating on Nazara with a DCF based TP of Rs1,747 (earlier Rs2,550). The stock currently trades at EV/sales multiple of 3.9x/3.2x our FY23/FY24 estimates and post recent correction, valuation is now more in sync with global peers like Electronic Arts and Zynga which trade at 1 year forward multiple of 3-4x.

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