Rakesh Jhanjhanwala Portfolio: Shares of Rakesh Jhanjhunwala-backed Nazara Technologies rose 16 percent to Rs 616 apiece in intraday trade on Monday. The increase comes after the mobile gaming company reported a year-on-year (YoY) increase of over 22 percent in consolidated net profit in the April-June quarter (Q1FY23). Meanwhile, revenue grew 70 percent year-on-year to Rs 223.1 crore from Rs 131.2 crore in the year-ago period.
The EBITDA of the company was Rs 30 crores on an annualized basis. However, sequentially, it grew to 102% from Rs 14 crore in Q4FY22. EBITDA margin, meanwhile, declined to 13.5 percent in the quarter under review from 22.9 percent in Q4FY22.
Segment-wise, e-sports contributed the most to total revenue of Rs 102.3 crore in Q1FY23, up 92% from Rs 53 crore in Q1FY21.
Gamified early learning and ed-tech businesses were the other top contributors to business revenue of Rs 52 crore and Rs 32 crore respectively. However, expenses increased to Rs 207 crore in Q1FY23 from Rs 114 crore in the same quarter last fiscal due to higher spending on advertising.
Going forward, the management is confident of fulfilling the growth plans formulated for FY23.
“The company will continue its growth journey both organically and inorganically. We want to expand our presence in the ‘freemium’ segment, especially in developed markets, going forward in this financial year,” said Nazara Technologies KC. EO Mohit Agarwal said.
During the quarter, the company acquired stakes in companies like Datawrkz Business Solutions, Paper Boat Apps, Nodwin Gaming, and Absolute Sports. Earlier, on May 13, 2022, the company’s board had approved the issuance of bonus shares to existing shareholders in the ratio of 1:1.
Jhanjhunwala held 65,88,620 shares or 10.03 per cent stake in the company as on June 30, worth around Rs 400 crore.
Share price history.
Despite today’s rally, Nazara Technologies stock is down more than 66% from the 52-week high of Rs 1,601 touched on October 11, 2021. So far this year, the stock is up more than 48 percent. In comparison, the Nifty50 and S&PSE Sensex have declined by over 2% during the same period.
Should you invest?
Analysts at JM Financial expect the company to report higher growth in FY23 due to acquisitions. However, they are cautious about their medium-term growth.
“With the exception of e-sports, we find it difficult to develop a coherent growth strategy from Nazara’s diverse, often disparate, assets. In addition, our conservative view also stems from the company’s limited presence in real money gaming (RMG). , which is the largest revenue pool in India’s online gaming space. While the Q1 beat should help reverse the stock’s recent correction, we await further evidence of growth in the fundamentals. Taking root,” the brokerage firm said, sharing a ‘hold’ stance, with a target price of Rs 540 per share.
For YES Securities, both revenue and EBITDA margin were in line with estimates. The brokerage said the sequential increase in revenue was driven by the consolidation of Adtech.
“Overall, it was an in-line performance for the quarter. We currently have an underweight rating on the stock. The business faces long-term risks due to low barriers to entry and an acquisition-driven growth strategy. . Stock trades at 12 times EV/Ebitda on FY24E,” said YES Securities.
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