Despite a 57 per cent correction on the stock year-to-date, JM Financial still finds valuations rich for Nazara, but said there is limited downside potential for the stock from current levels. On thursday, the scrip rose 2.9 per cent to Rs 1027. JM FInancial’s target a potential 4 per cent upside on the counter.
“Any potential adverse regulation on real-money gaming (RMG) would not only reduce competitive intensity but also increase scarcity value for Nazara – this would make us more constructive on the business’ outlook and on the stock,” it said.
On the positive side, JM Financial said Nazara, has morphed into a diversified gaming company with presence across eSports, gamified learning, simulation as well as real money games.
This has given it a toehold across India’s $1.8 billion online gaming market, the brokerage said, adding Nazara’s prudent capital allocation strategy has meant that this opportunity has come at a reasonable cost.
“Besides, unlike other gaming platforms, Nazara’s disjointed gaming assets limit its ability to broaden its acquisition funnel and maximise gamers’ wallet share, in our view,” it said.
The brokerage estimated a 32 per cent revenue CAGR over FY22-25 for Nazara against 54 per cent in the past three years, led largely by eSports and ramp-up in recent acquisitions, translating into 28 per cent EPS CAGR expectation over the same period.
Its target of Rs 1,070 is based on 18 times FY24E EV/Ebitda and 83 times FY24 PE.
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