ICICI Securities research report on Newgen Software Technologies
Newgen reported strong revenue growth of 23.2% YoY in Q2FY25 led by license sales predominantly in APAC and healthy growth across other markets. We built in 24%/25% revenue/EPS CAGR over FY24-27E. We now value Newgen at 50x (earlier 40x) led by 1) improved growth visibility on continued traction in banking in India and EMEA markets, focus on building scale in health insurance and government segments, healthy orderbook (22% YoY in H1FY25), with growing deal sizes, 2) strong client-mining ability – INR 50mn+ client bucket grew 2.5x to 65 in 3 years, 3) potential revenue upside when US engine fires up and 4) steady EBITDA margin above 23%.
Outlook
We value the stock at 50x P/E on Q2FY26-Q1FY27E EPS of INR 25 to arrive at revised TP of INR 1,260. Maintain HOLD on stretched valuations.
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