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Brokerage Prabhudas Lilladher expects Nazara Technologies' revenue/profit after tax (PAT) CAGR of 28%/52% respectively over FY22-24E and the growth story remains intact despite near term challenges. 

While management is exploring additional marketing channels, achieving pre-Apple policy era’s subscriber addition figures will be difficult in near term, as per the brokerage. It has retained its Buy rating on Nazara Tech shares with target price of 1,747.

“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," the note stated.

Given the infancy stage of the gaming industry in India with Average Rev Per Gamer of just $10 p.a. (versus US/China at $73/$35), analysts at brokerage Dolat Capital believe that the company can compound its revenues by 10x over a decade. 

“We have currently factored in revenue compound annual growth rate (CAGR) of 39% (unchanged) over FY22-25E in its hyper-growth stage and gradual deceleration to 26% CAGR (earlier 25%) over FY25-30E, Average EBIT margin of 15.6% (earlier 17%) and terminal growth rate of 4%," the note stated. 

Based on these parameters, the brokerage house has arrived DCF based fair value of 2,100 apiece, implying nearly 70% upside from current stock level, and assign Buy rating to the tech stock.

As per BSE shareholding pattern, Indian ace investor and stock market trader Rakesh Jhunjhunwala owns 10.10% stake in the gaming tech company as of March 2022.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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