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PL Capital Report
Nazara Technologies Ltd. reported muted operational performance with Ebitda margin of 7.9% (our estimate: 9.9%) led by higher-than-expected employee cost of Rs 676 million (our estimate:Rs 539 million) amid consolidation of project-intensive business of Freaks 4U and margin deterioration within FuseBox. Since the last three-four quarters, Nazara's topline growth has been under pressure due to challenges in Ad-Tech (loss of a large client), Kiddopia (subscriber loss since last six quarters), and Real Money Gaming (GST levy of 28% on full bet value).
However, we expect headwinds to subside with top-line CAGR of 19.6% over the next two years given-
acquisition of Space & Time, a UK based growth-marketing agency,
efforts to close IP partnerships in Kiddopia and
consolidation of FuseBox and Freaks 4U.
Further, we expect Ebitda margins to improve from 13.7% in FY25E to 15.7% in FY27E considering the measured approach on new user spends and better margin profile of the newly acquired entities. Nazara trades at EV/sales multiple of 4.7x/3.7x/3.2x on our FY25E/FY26E/FY27E estimates, unadjusted for minority.
We maintain our Buy rating on the stock with an SoTP-based target price of Rs 1,182.
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