Shares of Newgen Software witnessed a 4 percent jump in early trade on December 4, following an upward revision of the target price by global brokerage Jefferies. Jefferies, while maintaining its ‘buy’ call, raised the target to Rs 1,740 per share from Rs 1,275 per share.
The brokerage expressed increased confidence in Newgen’s growth outlook and adjusted revenue estimates by 2-3 percent, along with a 2-4% increase in earnings per share (EPS). Jefferies anticipates a robust 26 percent EPS Compound Annual Growth Rate (CAGR) over FY24-26E.
Jefferies highlighted that the management’s strong growth outlook, particularly in India and the Middle East, contributed to the positive assessment. The brokerage noted a significant increase in deal sizes of around 40% in the last year, driven by robust demand, a more comprehensive solution offering, and the ability to tap into Tier-1 accounts.
“Newgen has adopted a vertical-specific point-solution based approach to enhance sales among existing and new customers,” stated Jefferies. The company’s trade finance product secured nine large deal wins, providing strong growth visibility for the future.
Despite the potential for gross margin expansion by 10-12 percentage points once reaching a topline of $350 million, Jefferies cautioned that the firm might reinvest the margin improvement to scale up marketing efforts or invest in product development for accelerated growth. As a result, Jefferies expects FY24-26 margins to remain around the 22% range.
