Buy Nazara Technologies; target of Rs 1080: ICICI Securities

December 06, 2023

Nazara Technologies (Nazara) has a cash balance of > INR8bn (standalone) post the preferential allotment of around INR 5.1bn (link). We believe this puts Nazara in a strong position to capitalise on the funding freeze in RMG space. Most platforms are not fully passing on the 28% GST rate to end user due to the fear of losing share to competition, which is intensifying their cash crunch. Our channel checks suggest most funding opportunities in the space are (>60-70%) down rounds. Given the steep correction in valuation and the belief that regulators could revise taxation in H1CY24, consolidation is getting delayed. However, we note there has been some correction in salaries and some conversations have begun regarding the potential buy-outs. This could benefit Nazara as it tries to buy/build a play in RMG space. Maintain BUY.

Outlook

We maintain our BUY rating on Nazara, with target price of INR 1,080. Our target multiple stands at 38x 1-yr forward EV/EBITDA (ex-minority). Key risks: 1) Impact due to increased competition/ slowdown in US markets, and 2) inability to identify and integrate acquisitions.

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