Newgen Software Q1 Result Review - Strong Tailwind From License, Emerging Markets: IDBI Capital

IDBI Capital Report

Newgen Software Technologies Ltd. reported robust Q1 FY24 numbers registering 34% YoY growth in revenues and 57% YoY growth in profit after tax. This is despite Q1 being seasonally weak quarter.

This growth was broad based across regions and led by higher licence revenues. Newgen expects license revenues to be better this year due to shift in client preference.

The subsequent quarters of the company are expected to register improvement over Q1. Considering the macro we had kept our revenue estimates at 10% YoY in FY24E, however, we have revised the estimate to 26% YoY for FY24E.

This coupled with upward revision in margin estimates; we have revised earnings per share estimates upwards by 22% & 11% for FY24E and FY25E.

Hence, we upgrade the stock from 'Hold' to 'Buy' with a revised target price of Rs 840 (20 times FY25E EPS) (previous target price 660 and multiple of 18 times).

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