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Monday, December 11, 2023

‘Gaming industry may grow 3-4x by FY27’: Why Nazara Tech, Delta Corp shares have huge upside potential — Zee Business decodes


Nazara Technologies, Delta Corp: Gaming industry is likely to grow 3 to 4 times its current size by the financial year 2026-27 (FY27), Zee Business senior research analyst Kushal Gupta said quoting TeamLease Digital’s report. He believes gaming-related stocks like Nazara Tech, Delta Corp, and OnMobile Global may witness big upward movement. 

According to Gupta, the gaming sector has been growing by 2-2.5 times in the last 3-4 years and by the end of FY23, it may add another 20-30 per cent growth. He said that the gaming market which at present is valued between Rs 15,000-Rs 20,000 crore may surge to Rs 70,000-75,000 crore in the next few years.  

The sector had over 30 gaming companies in 2017, but it has experienced 3,000% growth since and now has over 900 plus companies in 2022, the analyst said. Besides, the mobile game downloads have grown 1.5 times from 1000 crore downloads in FY21 to 1500 crore downloads in FY22, he added. 

Shares of gaming-related companies such as Nazara Technologies jumped nearly 7 per cent to Rs 606.3 per share, while Delta Corp slipped by nearly 1 per cent to Rs 217.45 per share and OnMobile Global up around 2 per cent to Rs 102.7 per share on the BSE. 

Even YES Securities believes that the sector is expected to achieve $3.5 billion in 2023 from $1.5 billion in 2020 at a CAGR (Compound Annual Growth Rate) of 32.6 per cent led by increasing smartphone penetration, a rise in the number of mid/hardcore gamers and gradual increase in in‐app purchases.  

Image Source: Stockedge

With respect to Nazara Tech, the brokerage said that the revenue base of the company has become more diversified across business segments, thus helping reduce the overall risk.  However, the high cost of content and higher marketing cost continues to weigh down on the operating margin of Nazara, it added.

YES Securities maintains a Neutral rating on Nazara Tech stock with a target price of Rs 687 a share, based on EV/EBITDA of 18x on FY24E. The stock trades at EV/EBITDA of 32.6x/17.9x on FY23E/FY24E. 


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