This Rakesh Jhunjhunwala stock may rally 33%, already up 57% from IPO price; Jefferies says ‘buy’

Rakesh Jhunjhunwala owned Nazara Technologies has zoomed 57% from its IPO price to now trade at Rs 1,723 per share, but the rally may not be over. The stock could rise another 33% from current levels and reach the target price of Rs 2,300 pegged by global brokerage and research firm Jefferies. Initiating the coverage of Nazara Technologies, Jefferies said that Nazara Technologies is a diversified play on the gaming ecosystem with multiple growth drivers ahead. Big Bull Rakesh Jhunjhunwala is a pre-IPO investor in Nazara Technologies and continues to hold a 10.82% stake in the company, according to the latest shareholding pattern available with stock exchanges.

Diversified play on gaming ecosystem

Nazara Technologies offers a piece of every aspect of the gaming ecosystem. The firm caters to Gamified Early Learning, eSports, Freemium, Telco Subscription, and Real Money Gaming. Gamified Early Learning and eSports result in most of Nazara Technologies revenue. “Over the last 3-4 years, Nazara has diversified its business through several key acquisitions and added three new segments to its portfolio – gamified early learning, eSports and real money gaming. While these markets are growing at a rapid pace, Nazara’s focus is currently on the first two segments,” Jefferies said.

Growth drivers ahead

Going ahead the gaming and eSports industry has the potential to help the company grow. Jefferies said that the two segments are expected to register CAGRs of 38% and 25% to $3.1 billion and $209 million, respectively, over 2020-23, led by rising smartphone/internet penetration and change in media consumption habits. According to Jefferies, the eSports market in India is set to grow, driven by the increasing number of hardcore/mid-core mobile gamers and rise of several OTT/media platforms, which is in turn, driven by rising smartphone penetration and improved network connectivity. 

Jefferies added that Nazara Technology’s presence in these markets positions it to deliver 28% CAGR in revenues and 46% CAGR in EBITDA over the financial year 2021-2026.

Upside scenario make take stock to Rs 2,300 per share

Nazara Technologies is seen as an investment vehicle focused on making strategic acquisitions across the gaming ecosystem. In the base case scenario, Jefferies has a target price of Rs 2,030 per share for Nazara Technologies with a ‘buy’ rating. In an upside scenario, the brokerage firm expects the stock to rally to Rs 2,300 per share, using 1 year forward FY26E multiples discounted back at 15%.

Rakesh Jhunjhunwala owns 10.82% of Nazara Technologies, translating to 32,94,310 equity shares. The current value of the big bull’s stake in the company is Rs 567.6 crore.