Markets

Nazara Tech jumps 20 per cent after stock turns ex-bonus

K. S. Badri Narayanan | | Updated on: Jun 24, 2022

Prabhudas Lilladher turns bullish, while JM Fin remains cautious

Shares of Nazara Technologies, in which ace investor Rakesh Jhunjhunwala holds a little over 10 per cent stake, zoomed nearly 20 per cent after they turned ex-bonus on Friday.

The stock closed at ₹622.10, up 19.90 per cent against the previous day's close of ₹522.50 (adjusted from ₹1,045 for 1:1 bonus) on the BSE.

1:1 bonus

The company had fixed June 27 as the record date for the proposed 1:1 bonus shares. Trading volume, too, jumped from two-week average of 33,000 shares to over 2 lakh shares on the BSE.

However, analysts are divided over the performance of the company. For the quarter ended March 2022, it posted a loss of ₹18.70 crore on revenues of ₹3.50 crore; for FY22, the loss stood at ₹33.80 crore on revenues of ₹20.40 crore.

Prabhudas Lilladher, after hosting its management official, came out with a Buy on the stock with a target price of ₹1,183 (cum bonus price), on Friday.

"We hosted Manish Agarwal, CEO of Nazara Technologies, for a NDR recently. Management indicated that Battle Grounds Mobile India (BGMI) Master Series IP which is to be telecast on Star Sports from June-24 to July-17 is likely to be profitable from first year itself," it said.

With respect to off-line events in ESports, incremental revenue addition is expected to be ₹60-70 crore (more or less in-line with the guidance given earlier) in FY23. "Overall, we have increased our EPS estimates by 2-3 per cent and expect sales/PAT CAGR of 35 per cent/54 per cent respectively over FY22-24. Though growth challenge in Kiddopia persists, Esports is likely to emerge as key growth lever as TV broadcasting during prime time will help increase viewership and popularity multi-fold in future," Prabhudas Lilladher said while increasing the price target to ₹1,813 (earlier ₹1,747 - cum bonus price).

However, another domestic brokerage, JM Financial, has initiated its coverage on Nazara Tech with a Hold rating and target price of ₹1,070 (ex-bonus ₹535).

"Nazara, through its acquisition-led growth model, 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.

‘Disjointed gaming assets’

Further, Nazara’s prudent capital allocation strategy has meant that this opportunity has come at a reasonable cost. That said, barring eSports, Nazara is not a dominant player in any of the other segments. More conspicuous is its absence/sub-scale presence in Fantasy Sports (FS), the fastest growing, and realmoney gaming (RMG), the highest revenue pool, segments.

"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," JM Financial said.

Published on June 24, 2022
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