Nazara Technologies Research Report

Recommendation: Upgrade to BUY (earlier HOLD)

Target Price: Rs336 (earlier Rs276)

Key Highlights:

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• We believe the combination of Nazara Technologies' game development capabilities through BT Games and user acquisition capabilities through BP Systems will lead to better consumer engagement and monetization opportunities.
• The deferred ownership plan, with a balance of 50% stake to be acquired by 2028, and earn-out incentive, including a payout of US$98mn, reflects a balanced risk-reward framework without front-loading capital or assuming undue integration risk.
• We expect BT Games and BP Systems to report revenue and EBITDA CAGR of 15% and 20% over the next 2 years, respectively.

Valuation:

• We have valued the casual gaming business at an EV/sales multiple of 1.5x over FY28E, implying an implied EV/EBITDA multiple of 7.6x.

Outlook:

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• The acquisition of BT Games and BP Systems will enhance Nazara Technologies' capabilities, leading to improved consumer engagement and monetization opportunities.
• We believe the company's growth prospects justify an upgrade to BUY with a target price of Rs336.