Target: ₹1,747

CMP: ₹1,242.75

We cut our EPS estimates by 6 per cent/18 per cent for FY23/FY24 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 $1.5-1.6 million per month for Q1-FY23E; 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 per cent/52 per cent respectively over FY22-24 and the growth story remains intact despite near term challenges.

Consequently, we retain our Buy rating on Nazara with a DCF based TP of ₹1,747 (earlier ₹2,550). 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.

Key points: Kiddopia lost ~19K subscribers in 4QFY22 and management is exploring additional marketing channels to boost growth; Board recommends bonus in the ratio of 1:1.

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