ICICI Securities research report on Newgen Software Technologies
Newgen Software Tech (Newgen) reported revenue of INR 2,517mn, up 33.9% YoY (ISEC: 21.8%) in Q1FY24. Strong revenue growth in a seasonally weak quarter was driven by high growth in license revenue (up 184.6% YoY) and annuity revenue (up 26.3% YoY). Growth was strong across all markets - India grew 24.5% YoY, EMEA grew 38.4% YoY, APAC grew 45.7% YoY and US grew 35.8% YoY. EBITDA margin came in at 12.8%, +251 bps YoY (ISEC: 7%) driven by higher gross margin (+448bps YoY) led by higher mix of license and annuity sales. PAT at INR 302mn grew 57.2% YoY. Newgen management is witnessing strong demand, especially in banking and insurance verticals. In banking, trade finance solution is seeing good traction. Management has maintained ~20-25% YoY revenue growth and 20-22% EBITDA margin guidance for FY24.
Outlook
We retain our BUY rating on the stock with a revised 12-month target price of INR 859 (vs INR 797 earlier) based on 23x Q5-Q8 EPS of INR 37. This implies a potential upside of 21%.
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