The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E. Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.
Prabhudas Lilladher's research report on Nazara Technologies
We cut our EPS estimates by 6%/18% for FY23E/FY24E respectively as subscriber acquisition continues to remain a challenge in Kiddopia. While management is exploring additional marketing channels and has ear-marked a higher sum of US$1.5-1.6mn per month for 1QFY23E; achieving pre-Apple policy era’s subscriber addition figures will be difficult in near term. Though Kiddopia is facing growth headwinds, E-Sports and Real Money Gaming (RMG) is expected to grow at a strong pace due to consolidation of OML and OpenPlay respectively. Overall, we expect revenue/PAT CAGR of 28%/52% respectively over FY22-24E and the growth story remains intact despite near term challenges.
Outlook
Consequently, we retain our BUY rating on Nazara with a DCF based TP of Rs1,747 (earlier Rs2,550). The stock currently trades at EV/sales multiple of 3.9x/3.2x our FY23/FY24 estimates and post recent correction, valuation is now more in sync with global peers like Electronic Arts and Zynga which trade at 1 year forward multiple of 3-4x.
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