Software company Newgen Software Technologies has reported robust growth of around 9% year-on-year (YoY) in Q3FY22 backed by strong performance in the EMEA/APAC region, highlighted brokerage house ICICI Securities as it sees more upside on the multibagger stock after the earnings.
“Strong growth of +20% YoY in subscription revenue was a key positive while SaaS revenue posted muted growth due to client-related adjustments," the note added. The brokerage has maintained its Add rating on the IT stock with a revised target price of ₹700 (from ₹640 earlier). Shares of Newgen Software have given multibagger return of over 101% in a year's period.
Newgen's growth in the US region remained muted due to impact of one-offs present in Q3FY21. In terms of verticals, while BFSI, government/PSUs and BPO/IT grew on a yearly basis, insurance and healthcare declined.
Newgen continues to invest aggressively across R&D and S&M with expenses aggregating around 30% of revenues in Q3FY22. Management commentary hinted at robust demand environment and healthy pipeline, but some delay in generating revenues from its GSI partnerships, the brokerage highlighted.
“We believe mid-teen growth for FY22E is contingent upon continued performance in key markets and travel opening up. Revenues generated through GSI partnerships over the coming quarters is key to watch," ICICI Securities added.
The IT company reported an impressive 17 new logo wins during the quarter. Increased focus of the company to gain new logos and a foothold in Fortune 2000 accounts with the help of GSIs should help Newgen in getting better visibility and acceptably within client ecosystem. Conversion of the same remains the key.
Considering the aforementioned, the brokerage estimates revenue and EPS CAGR (compound annual growth rate) of around 21% over FY22-24E for Newgen Software.
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