This Rakesh Jhunjhunwala-backed stock surges 42% in 4 sessions; did you miss the rally?

Shares of the mobile gaming company Nazara Technologies have rallied nearly 42% in just four trading sessions, as compared to a 3.5% gain in the BSE benchmark Sensex. The stock, which is a part of ace investor Rakesh Jhunjhunwala's portfolio, jumped nearly 15% in intraday trade on Tuesday, after surging 20% in the previous session as investors cheered the gaming firm’s June quarter results. Big bull Jhunjhunwala owns 65,88,620 shares, or a 10.03% stake, in the company as of June 30, which is valued at around ₹400 crore.

Continuing its gaining spree for the fourth straight session, the Nazara Technologies stock opened 2.18% higher at ₹650, against the previous closing price of ₹636.15 on the BSE. During the session, the stock soared as much as 14.67% to hit an intraday high of ₹729.5 amid strong volume. At the time of reporting, 6.33 lakh shares changed hands over the counter as compared to the two-week average volume of 0.75 lakh stocks.

Despite the recent rally, the gaming stock trades 56% lower than its 52-week high of ₹1,677.20 touched on October 11, 2021. The stock hit its 52-week low of ₹484 in intraday trade on June 22, 2022. The market capitalisation of the smallcap currently stands at ₹4,727.52 crore.

Recently, Nazara shares gained buying momentum and turned ‘mildly bearish’ from ‘bearish’, trading higher than 5-day, 20-day, 50-day, and 100-day moving averages, but lower than the 200-day average. The stock has gained 40% in a week and 11.5% in the past one month. However, the share of gaming and sports media platform has fallen more than 40% since the beginning of the calendar year 2022, and 25.5% in the past year.

On July 29, Nazara Technologies reported 22% year-on-year (y-o-y) growth in its consolidated net profit at ₹16.5 crore for the April-June quarter of 2022 (Q1FY23), compared with ₹13.5 crore in the same period last year. On a sequential basis, the profit grew 237% from ₹4.9 crore in March quarter of 2022 (Q4 FY22). Its revenue from operations jumped 70% y-o-y and 27% on a sequential basis to ₹223.1 crore during the quarter under review.

On the operating front, earnings before interest, taxes, depreciation and amortisation (EBITDA) was flat at ₹30.1 crore in Q1 FY23, as compared to the same period last year. On the q-o-q basis, EBITDA grew 102% from ₹14.9 crore in Q4 FY22. The EBITDA margins stood at 13.5% versus 22.9% for Q1 FY22 and 8.5% for Q4 FY22.

“On the operating margin front, we have made investments in our business segments that will provide us with robust growth opportunities in the years to come. The company will continue to look for growth opportunities both organically and inorganically. In particular, we are looking to augment presence in the Freemium segment especially in developed markets,” the company said in its earnings report.

According to Manish Agarwal, CEO at Nazara Technologies, the company’s multi-pronged approach to capture opportunities has been yielding positive traction and it is in line with its target growth plans for FY23. “The traction across businesses; e-sports and real money gaming witnessed strong growth while addition of a new growth engine in the form of Datawrkz has augmented well for the business. We have also seen stabilisation of unit economics for our gamified early learning business,” he said.