Nazara Technologies Gets ICICI Securities 'Add' Downgrade; Sees Limited Upside At Current Valuations

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ICICI Securities Report

Nazara Technologies Ltd.'s stock price is up ~55% over the past one year, with the company making a number of acquisitions recently. We thus think it is an opportune time to delve into the larger acquisitions and devise a framework to value the company.

We think Moonshine Technologies (Pokerbaazi) is now the most important asset in Nazara’s portfolio, followed by Nodwin Gaming. We use DCFs to value these two companies and employ EV/Ebitda multiples for the rest of the companies.

Our revised target price for Nazara now stands at Rs 1,500 (SoTP-based). We think, at its current market price, the upside is limited. We, therefore, downgrade the stock to Add.

In our view, in a bull case scenario where the regulatory challenges for Moonshine are resolved, the stock could re-rate to Rs 1,650. However, in case the tax demands are upheld by the courts, the stock could de-rate to Rs 1,100. This implies a reward: risk skew of 1.6:1.

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