CLSA retained its 'SELL' rating on this gaming stock over revenue miss in June quarter
CLSA, in its report, expects the stock to plunge over 40% from12-month price target to ₹1,095
India's first gaming stock Nazara Technologies, backed by ace investor Rakesh Jhunjhunwala, has recently not been performing too well in terms of returns for the investors, despite having made a bumper market debut on the bourses in March.
The Warren Buffett of India, whose every stock move and investment strategy on Dalal Street are closely tracked by investors, holds around 10.8 per cent shares of the company and he has investments in the company much before it got listed at the Indian bourses, as per January to March 2021 quarter Nazara Technologies shareholding pattern.
On 30 March, the gaming company Nazara Technologies made a stellar market debut as the shares listed at ₹1,990 on NSE, a 80.74% premium over the issue price of ₹1,101. On BSE, the scrip got listed at ₹1,971, a 79.02 per cent premium.
However, global brokerage firm CLSA report released on 2 August retained its "SELL" rating on Nazara over revenue miss in June quarter, FY22.
Moreover, CLSA expects Nazara's stock to plunge over 40% from12-month price target to ₹1,095.
"Nazara’s Q1FY22 revenue was below our estimates. Both key businesses, eSports and gamified e-learning missed. The two account for 81 per cent of consolidated revenue," the brokerage firm said adding, "Nazara’s eSports revenue in 1QFY22 was ₹53 crore. Although up 10% QoQ, it was below our estimate likely due to lower media rights revenue, hit by a lower number of events. (We await data from management). Nodwin is 72% of Nazara’s eSports revenue and media rights contributed 49% in 1QFY22 vs 55% in FY21. Nodwin continued with eSports IP like ESL Dew Arena, but it was surprising that Nodwin is running tournaments of PUBG mobile in South Asian countries but not in India."
However, CLSA also highlighted that 1QFY22 Ebitda at ₹30 crore and PAT at Rs13.5 crore (vs estimate of Rs11.2 crore) were both ahead of estimates, mainly on the fall in advertising and promotion expenses, which are "expected to increase in the coming quarters."
Despite the miss, CLSA retained the forecast of 35-73% revenue CAGR by FY24CL. "However, even with revenue at US$117 million and Ebitda at US$ 23 million by FY23CL, the stock is expensive at 6x EV/sales and 32x EV/Ebitda," it added.