The brokerage house has thus maintained its Buy rating on the IT stock with a revised target price of ₹470 per share (from ₹430 earlier). Newgen Software shares have declined over 37% in a year’s period.

Revenue growth was driven by a strong 38% YoY growth in Annuity revenues. Within this, SaaS revenues almost doubled YoY and Support revenues saw a strong 40% YoY growth driven by complete resumption of travel. Insurance and Banking verticals drove growth.

“We raise our FY23-25 EPS estimates by 3-8% to reflect 3Q beat and expect a 24% EPS Cagr over FY23-25. The stock has rallied 10% over the last week, but has corrected by 70% over the last year and trades at 15x 1-yr fwd PE – in-line with 5-yr average. Newgen’s current price bakes in a revenue Cagr of just 9% over FY23-33E, compared to 16% Cagr delivered over FY13-22, which seems overtly pessimistic,” the note stated.

Management highlighted strong growth outlook for traditional markets (India, EMEA) and APAC, which in addition to contribution from Australian market from FY24 should drive strong growth for Newgen. US continues to be challenging, and traction on GSI strategy is lower than anticipated, with Newgen signing only 10 deals during the year through GSIs, as per the brokerage. 

“Newgen aims to step up its Marketing efforts and scale up GSI network to improve growth in US. Management remains confident of 20-25%+ revenue growth longer term. We raise our FY23 revenue growth estimate by 3ppts to factor the beat but keep our FY24/25 growth estimates unchanged. We expect an 18% revenue Cagr over FY23-25,” Jefferies added.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.