Rekha Rakesh Jhunjhunwala-held stock declines; Jefferies double-downgrades it to 'Hold'

Nazara Technologies, the Rekha Rakesh Jhunjhunwala-held stock, started Friday's session (November 10) on a weak note after the company missed estimates in its quarterly performance. 

In the opening deals, the stock slipped as much as 3.32 per cent lower. Last seen, it was trading with a cut of 1.62 per cent.

For the three months ended September 30, the company posted a rise in its topline to Rs 300 crore, up 17 per cent sequentially, but this was below the Street's estimates. The miss was on the back of lower ad-tech revenue, which declined 17 per cent sequentially and 37 per cent year-on-year (YoY).

Net profit at the small-cap company came in at Rs 19.82 crore, versus Rs 9.06 crore reported in the same period last year.

EBITDA increased by 30 per cent to Rs 27.9 crore as against Rs 21.4 crore in Q2 FY23. Correspondingly, EBITDA margin also registered an increase of 130 bps to 9.4 per cent in Q2 FY24 from 8.1 per cent in Q2 FY23.

"We recognize the substantial 'Make in India' potential within the gaming industry, where Indian developers have the opportunity to create top-tier games for both the domestic and international markets. Our newly launched initiative, 'Nazara Publishing,' is geared to offer capital and support services to empower developers in delivering high-quality games to the expanding consumer base," Nitish Mittersain, Founder, CEO, and Joint MD of Nazara Technologies, commented on the company's Q2 and half-yearly performance.

"During this quarter, we successfully secured fresh capital of INR 510 crore from investors like Nikhil Kamath, a prominent tech entrepreneur in India, and SBI Mutual Fund, the country's largest mutual fund. With a consolidated cash position of around Rs 1,300 crore, Nazara is exceptionally well positioned to seize acquisition opportunities and expedite our growth in the years ahead," he added.

Ace investor Rekha Rakesh Jhunjhunwala, wife of the late market mogul, has a 9.96 per cent stake in the counter as of the September quarter.

Brokerages downgraded the stock after the company's Q2 numbers

CLSA maintains a sell rating on the counter but has raised the target to Rs 590 from the earlier Rs 500. The brokerage pointed out that with Rs 1,340 crore, the company seeks acquisitions, including in RMG. "Stock valuation is expensive at 42x FY25CL PE, in our view," noted the global brokerage.

Jefferies, on the other hand, has double-downgraded the stock to a 'hold' rating from the earlier 'buy' call. The brokerage has slashed its target price on the gaming company to Rs 770. "Worsening outlook along with a 23 per cent rise in stock in the past three months leaves limited upside scope," noted the brokerage. For the brokerage, Nazara posted a strong performance in its e-sports segment, while weakness lingers at Kiddopia.