Nazara Tech reported its earnings for the quarter ended March. ICICI Securities in its review note said that the company’s revenue was in line, and earnings beat the brokerage firm’s estimates.

The Nazara Tech Analyst: The Abhisek Banerjee-led analyst team at ICICI Securities maintained their ‘buy’ rating on the stock with a price target of ₹700 – implying a close to 20% upside from the stock’s last closing price of ₹588.60.

The Nazara Tech Thesis: The gaming company saw its revenue jump up 65% year-over-year to ₹289.3 crore in the March quarter. The company’s EBITDA increased by 86% to ₹27.7 crore as against ₹14.9 crore in the same quarter last year. Net profits of the Rekha Jhunjhunwala invested company surged 94% YoY to ₹9.4 crore. As of the latest shareholding data, Jhunjhunwala owns a 9.96% stake in the company.

The brokerage firm attributed the earnings beat to a sharp rise in the company’s eSports EBITDA margin. The eSports segment saw revenue going up 52.9% to ₹140.1 crore. The firm also noted that Kiddopia's EBITDA margin expanded 680bps sequentially.

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Going forward, the analysts expect the company to post 35% YoY revenue growth in FY24E (April 2023- March 2024) led by 45% YoY growth in eSports and 25% YoY growth in GEL (gamified
early learning).

However, the brokerage firm also highlighted some key risks in its views. The first risk would be if the company is unable to establish its gaming accessories business leading to lower margins. The second is a possible increase in competition/ slowdown in US markets. No/delay in regulatory clarifications on Real Money Games.

Price Action: Nazara Tech shares were down 2.33% to trade at ₹574.90 in the early hours of trading on Wednesday.

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