Confident of being profitable at PAT level – Nazara Tech

Update on the Indian Equity Market:

On Monday, NIFTY closed at 14,485 (+1.0%). Top gainers in NIFTY50 were Axis Bank (+4.2%), JSW Steel (+3.4%), and Ultratech Cement (+3.3%). The top losers were Cipla (-2.9%), Britannia (-2.8%), and HCL Tech (-2.7%). The top sectoral gainers were REALTY (+3.4%), METAL (+2.0%), and PVT BANK (+1.8%) and the only sectoral loser was PHARMA (-0.9%).

Excerpts of an interview with Mr. Manish Agarwal, CEO, Nazara Tech (NAZARA) with CNBC -TV18 dated 23rd April 2021

• The Company’s EBITDA numbers are a good indication of the health of the operations. In terms of Gamified Early Learning, e-Sports and Freemium, he said that they are very positive about these three segments. 
• These three verticals are being driven by the massive consumer trends and have accelerated since the last year because of the pandemic.
• He believes all three segments will continue to drive growth. According to him, the paying subscribers for Gamified Early Learning segment have grown 172 percent from April 2020 to March 2021.
• In the e-Sports business, Nazara Technologies is a market leader with an 80 percent share. Their attempt & aspiration is to innovate more and grow in this market.
• They are very gung-ho about Freemium because in-app purchase – the habit of buying virtual items is going to increase in India and that will become a very strong growth driver.
• On Real Money gaming, the company has a strategically cautious approach. Telco Subscription business is a mature business. 
• It is a cash cow for them. This business generates around 20-28 percent EBITDA, hence the opportunity is big.
• They do not have any debt on their books, they are a cash-rich company. So, there is no interest to be paid out.

Asset Multiplier comments:

• As Nazara operates in high-growth business segments such as gaming, gamified learning, and Esports, they will continue to drive profitable growth. The management is prioritizing growth over profit maximization at this stage so that they can achieve and maintain market leadership in the segments they operate in.
• E-sports, which contribute ~37% to the total revenue is disrupting traditional sports worldwide. It is an outcome of sports and gaming intersecting to create fast-paced spectator entertainment content.

Consensus Estimate: 

• The consensus estimates and price targets are not available for NAZARA.

 Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”