Prabhudas Lilladher has given Buy recommendation for Nazara Technologies with a target price of Rs. 1012 in its research report issued on Oct 21, 2022
Prabhudas Lilladher’s research report on Nazara Technologies
While Nazara’s top-line was 16% above our estimate, EBITDA margin of 8.1% was below our expectation due to continued investments to fund growth initiatives of Nodwin and the gaming accessories business. For FY23E, revenue growth guidance has been revised upwards (70-75% on YoY basis versus an earlier target of 50%+) largely led by acquisition of WildWorks and strong traction in Nodwin. However, EBITDA margin guidance has been revised downwards to 10%+ (earlier guidance of 12-13%) as the growth pedestal has been accelerated further which would require higher investments in the interim. In light of 2QFY23 performance, we raise our FY24E/FY25E sales estimates by ~9% odd but cut our EPS estimates by ~4-5% as we fine tune our growth and margin assumptions for Nodwin.
Overall, we expect sales/PAT CAGR of 41%/52% respectively over FY22-25E and retain our BUY rating with a DCF based TP of Rs1,012. The stock trades at PEG ratio of 0.9x (FY25E PE over 3-year PAT CAGR) and we maintain our positive stance on Nazara as there is huge runway for growth ahead since it operates in a sun-rise industry.