Newgen Software Technologies Q2 Results Review - Strong Tailwind From Emerging Markets: IDBI Capital

IDBI Capital Report

Newgen Software Technologies Ltd. reported robust Q2 FY24 numbers registering ~30% YoY growth in revenues and 58% YoY growth in profit after tax. This is despite Q2 being seasonally weak quarter. This growth was broad based across regions.

Newgen Software is seeing healthy traction in order book (higher than 30% YoY) and higher deal size in insurance and banking and financial services.

We believe in the near term growth will be led by emerging markets like India and Middle East and mature markets in long term.

Further, we expect H2 (average 36% YoY growth) to be better than H1 (average 32% YoY growth). We now expect profit after tax compound annual growth rate of 33% over FY23-25E.

We have revised our earnings per share estimates upwards by 14% & 8% for FY24E and FY25E.

Hence, we maintain 'Buy' rating on the stock with a revised target price of Rs 1,220 (27 times FY25E EPS) (previous target price 840 and multiple of 20 times).

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