PL Sector Update - Gaming - Sector Update – BGMI is back with a BANG
Gaming - Jinesh Joshi - Research Analyst, Prabhudas Lilladher Pvt Ltd
Sector Update – BGMI is back with a BANG
After remaining under suspension for 10 months odd, BGMI made a comeback in India during May. Being a popular battle royale game, quite a few E-sports tournaments surrounding it have been lined up in near future. In fact, SkyEsports recently concluded a BGMI tournament with prize pool of Rs2.5mn. Nodwin, a subsidiary of Nazara Technologies (Nazara), is also currently conducting a BGMI tournament in partnership with Rooter that has a prize pool of Rs2.7mn. We believe BGMI’s comeback is a big boost to E-sports viewership in India as:-
♦ It has more than 100mn+ downloads so far, a reflection of its popularity
♦ India is a mobile first gaming market and nearly 50% of the mobile gamers had played BGMI 12 months prior to the ban
♦ Being an action game it has strong viewership appeal
♦ BGMI was telecast on TV (Nodwin had tied up with Star Sports for the same) prior to the ban which indicates game has potential to reach wider audience via non-OTT medium as well
What can be the impact on Nazara?
With BGMI making a comeback and Nodwin hosting an event surrounding it we expect media rights revenue and content views to get a fillip in FY24E. It may be noted that in FY23 share of media rights revenue fell to 21% (39% in FY22) amid ban on BGMI. Nazara typically enters into media rights licensing contracts with OTT players for 2-3 years with an annual escalation clause. Given BGMI has high viewership appeal and there was dearth of content; licensing revenues took a hit as some of the deals had to be dropped. Comeback of BGMI will not only aid media rights revenues but also elevate the EBITDA margin profile over time as steady state margin from licensing business can be in the band of 20-25%. We maintain our BUY rating on Nazara with a TP of Rs804.
Nazara Technologies (NAZARA IN)
Rating: BUY | CMP: Rs698 | TP: Rs804
Key Financials - Consolidated
| Y/e Mar | FY22 | FY23 | FY24E | FY25E |
| Sales (Rs. m) | 6,217 | 10,910 | 14,672 | 17,616 |
| EBITDA (Rs. m) | 946 | 1,097 | 1,542 | 2,025 |
| Margin (%) | 15.2 | 10.1 | 10.5 | 11.5 |
| PAT (Rs. m) | 284 | 414 | 701 | 889 |
| EPS (Rs.) | 4.6 | 6.2 | 10.6 | 13.4 |
| Gr. (%) | 50.6 | 37.3 | 69.4 | 26.8 |
| DPS (Rs.) | - | - | - | - |
| Yield (%) | - | - | - | - |
| RoE (%) | 3.3 | 3.9 | 6.2 | 7.3 |
| RoCE (%) | 5.5 | 4 | 8.4 | 11.3 |
| EV/Sales (x) | 6.1 | 3.7 | 2.7 | 2.3 |
| EV/EBITDA (x) | 40.2 | 37 | 26.1 | 19.8 |
| PE (x) | 153.3 | 111.6 | 65.9 | 52 |
| P/BV (x) | 4.4 | 4.2 | 3.9 | 3.7 |