The brokerage said the company is a jack of all trades, but being the master of one, aside from eSports, Nazara is not a dominant player in any of the other segments.
Despite a 57 percent correction in the stock year-to-date, JM Financial still believes valuations for Nazara are high, but said there is limited downside potential for the stock from current levels. On Thursday, the scrip rose 2.9 percent to Rs 1027. JM Financial is targeting a potential 4 percent increase on the counter.
“Any potential adverse real money gambling (RMG) regulation would not only reduce competition intensity, but increase scarcity for Nazara – this would make us more constructive about the company’s prospects and about the stock,” it said.
On the bright side, JM Financial said, Nazara has turned into a diversified gaming company with a presence in eSports, gamified learning, simulation and real money games.
This has given it a foothold in India’s $1.8 billion online gaming market, the brokerage said, and Nazara’s prudent capital allocation strategy has meant that this opportunity has come at a reasonable price.
“In addition, unlike other gaming platforms, we believe Nazara’s disjointed gaming assets limit its ability to broaden its acquisition funnel and maximize gamers’ wallet share,” it said.
The brokerage estimated a revenue CAGR of 32 percent over FY22-25 for Nazara up from 54 percent over the past three years, largely led by eSports and increase in recent acquisitions, translating into an expectation of 28 percent EPS CAGR over the same period.
The target of Rs 1,070 is based on 18 times FY24E EV/Ebitda and 83 times FY24 PE.
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