'Reduce' Newgen Shares Maintains ICICI Securities Post Q1 Results; Sees Upto 6% Potential Downside

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ICICI Securities Report

Newgen Software Technologies Ltd. reported a sharp miss vs our 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.

We continue to value Newgen at 35 times on Q3 FY27E to Q2 FY28E EPS of Rs 28 to arrive at a revised target price of Rs 970.

Maintain Reduce. There is downside risk to margin estimates if revenue growth is lower than expected, as investments are front-loaded.

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