Newgen Software - Digitally Transforming Enterprises With ‘NewGen’ Tech; Dolat Capital Initiates With A 'Buy'

Dolat Capital Report

We initiate coverage on Newgen Software Technologies Ltd. with a ‘Buy’ rating and target price of Rs 1,300 (implies ~50 times/40 times on FY26E/FY27E earnings per share).

With a strong scalable model, we believe the company has a significant growth runway driven by:

1. its strong performance in banking sector with 21% CAGR over FY19-24,

2. consistent customer upgrades (tripled Rs 50 million plus customers in last four years), and

3. success in rapid transition towards SaaS with 40% CAGR over FY19-FY24 (now accounting 10% of revenues).

Newgen aspires to achieve $500 million revenue over next four-five years (implies 25%+ CAGR), supported by confidence of continued growth rate improvement over past run-rate. Newgen delivered revenue/EPS growth of 15%/20% CAGR over FY19-FY24.

Noting Newgen’s varied capabilities, healthy customer addition, powering GTM strategy (expanding GSI channel) and revered industry recognition, we expect Newgen to deliver a strong revenue/EPS CAGR of 24%/27% over FY24- FY26E.

Risks

• Intense Competition

• High Sector Concentration

• ‘Niche’ Player in Automation

• Business and results of operations are dependent on the contracts

• Failure or delays in obtaining third-party certifications and accreditations

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