Shares of Nazara Technologies Limited declined 2 per cent to Rs 660 in morning trade on May 28 after the company’s weak fiscal fourth-quarter results.
Nazara Technologies reported a net profit of Rs 0.18 crore, a sharp decline from Rs 9.4 crore in the same quarter last year. This drop was primarily due to a Rs 16.87 crore loss from discontinued operations, resulting from write-offs in several of the company’s legacy businesses, including its real-money gaming business, Halaplay.
As part of its restructuring efforts, Nazara announced that it is either merging or closing entities that do not align with its future vision, including Nazara Bangladesh and NZ Mobile Nigeria.
Rekha Jhunjhunwala holds an 8.5% stake in the gaming company.
What should investors do?
CLSA has given it a sell call and cut the target price to Rs 525, implying it expects a downside of 23 per cent in the stock from the closing price of May 27. The brokerage pointed to a subscriber loss in Kiddopia, one of Nazara Tech’s key three segments, alongside a decline in ad tech revenue. It also noted that during the January to March 2024 quarter, there has been a slowdown in the firm’s e-sports segment, specifically the Nodwin revenue.
The analyst has cut estimates for the gaming platform’s revenue and earnings before interest, taxes, depreciation, and amortisation or EBITDA by 6-13% for 2025-26. It added that the stock is expensive at 39x CL25 PE.
CLSA also highlighted that promoters’ ownership is down to low 10 per cent.
Jefferies, on the other hand, has a hold call on Nazara Tech shares but sees a potential downside of 5 per cent following an “all round Q4 miss” due to continued weakness in Kiddopia, Datawrkz and RMG segment.
The brokerage has cut its FY25/26 estimates by 18-21 per cent, it said.
Jefferies added that a pick-up in organic growth for Nazara Tech will be key for re-rating. It expects the company to deliver CAGR 10 per cent revenue and 27 per cent EBITDA growth over FY24-27.
Nazara Tech shares traded 2.3 per cent lower at Rs 656.65 at 9:23 am on NSE on May 28.
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