Reduce Newgen Software Technologies; target of Rs 970: ICICI Securities

ICICI Securities research report on Newgen Software Technologies

Newgen reported a sharp miss vs I-Sec estimate on revenue, with growth of 1.9% YoY – much lower than company’s aspiration of 20%+ YoY growth. Revenue was impacted by lower large-license deals across its key vertical of banking (-5.2% YoY) and key markets of India (3% YoY) and the Middle East (0.3% YoY). Demand was impacted by macro headwinds in the Middle East and a pull-back in spends retail lending in India. We cut our EPS estimates by 4-5% led by a cut in revenue estimates. We model 7%/17%/15% revenue growth in INR terms in FY26/27/28.

Outlook

We continue to value Newgen at 35x on Q3FY27E to Q2FY28E EPS of INR 28 to arrive at a revised TP of INR 970. Maintain REDUCE. There is downside risk to margin estimates if revenue growth is lower than expected, as investments are front-loaded.