This Jhunjhunwala stock zooms 9% to 3-month high ahead of Q4 results

Shares of gaming company Nazara Technologies surged over 9% in trade on Tuesday to its highest levels in over three months, suggesting that Dalal Street bulls are hoping for strong earnings.

The company, which counted late Rakesh Jhunjhunwala among its early investors, will release the numbers for the March quarter later today.

In the gaming company, Jhunjhunwala’s wife Rekha Rakesh Jhunjhunwala held nearly 10% stake as of March-end.

Earlier in the day, shares of Nazara surged 9.4% to hit an over three-month high of Rs 619.50 on the National Stock Exchange.

Brokerage ICICI Securities has estimated revenues to grow by a sharp 64% YoY in the March quarter, but said this will be broadly in line with the management’s full year guidance.

“In our view, this (revenue growth) will be led by sustained strong growth in eSports (97% YoY), gamified early learning (22% YoY) and ad-tech segments,” the brokerage said in its report.

However, profitability is likely to be under pressure as historically, the March quarter has been weak.

It expects EBITDA margin to decline to 5.2% in Q4 from as high as 9.7% in Q3, and remain flat on year.

Overall, the brokerage is bullish on the stock and has ‘buy’ rating with a price target of Rs 700, given its strong revenue growth trajectory in eSports business and gradual improvement in profitability in the gamified early learning segment.

In the last 3 months, the stock has net gained about 9%, outperforming benchmark Nifty 50 that gained 2%. However, it has corrected 68% from its peak of Rs 1,601.

At the current market price, the stock is trading at 46 times its 1-year forward P/E. “At current valuations, we believe risk-reward skew is compelling,” ICICI Securities said.

Last month, ICICI Prudential Mutual Fund raised its stake in the company by purchasing additional shares from the open market. As of March end, the fund house held 4.87% stake in the company.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)