Hold Newgen Software Technologies; target of Rs 1,010: ICICI Securities

ICICI Securities recommended hold rating on Newgen Software Technologies with a target price of Rs 1,010 in its research report dated July 19, 2024.

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July 25, 2024 / 12:32 IST

hold

26 Aug, 2025 12:21

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ICICI Securitie's research report on Newgen Software Technologies

YoY growth was at 25%, in line with Street’s estimates. Owing to weak seasonality in Q1, Newgen reported QoQ revenue decline of 16.1%, in-line with consensus estimate of a 16.2% dip. Q1 is a seasonally weak quarter led by ramp down of 41.3% in products and platforms business. Annuity-based revenue was down 4.2% QoQ. AMC/ATS, Support declined -2.2%/ -7.5%, while SaaS grew +2.5%. Banking saw the sharpest ramp down of 17.3% QoQ. Geography-wise, APAC grew the most at 64.9% YoY, followed by EMEA and Australia at 25% growth each. North America region saw 13% growth. EMEA commanded the highest margin of 47%, followed by 28.4% for India. Newgen has regrouped its verticals from six earlier, to four now. Healthcare and insurance have been grouped as one and BPO and others under others. Banking was up 34.4% YoY. 13 large orders came from retail and BFSI (Malayasia, Qatar, Indonesia, US and India).

Outlook

Newgen reported in-line revenue growth of 25% YoY. EBIT margin was at 12.7%, outperforming consensus estimates of 11.3%, despite increased hiring, employee cost and investment in sales and marketing. APAC continued to do well with 64.9% YoY growth. There is strong traction in lending, trade finance and supply chain financing. We believe 25%- plus growth could sustain in the near term. Newgen is on the path to boosting its annuity revenue and maintaining EBITDA margins in the 23–24% range. We introduce FY27 estimates and forecast 26%/24%/22% revenue growth for FY25/FY26/FY27. Rolling over valuations, our revised TP works out INR 1,010 with an unchanged target P/E of 40x; reiterate HOLD.

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