Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  

| More

Newgen Software Technologies - Incremental growth hinges on travel - ICICI Securities

Posted On: 2021-01-20 22:36:43 (Time Zone: Arizona, USA)

As anticipated, Newgen reported flat revenues in 9MFY21 with significant margin improvement (from 8.1% in 9MFY20 to 23.4% in 9MFY21). US/APAC quarterly revenues grew 26%/15% YoY with the company reporting 11 new logo wins. Newgen continues to invest aggressively across R&D, S&M and senior leadership personnel with expenses aggregating to ~23% of revenues in Q3. Company hinted at improving demand environment across key industry segments. However, we believe mid-teen growth expectation for FY22E is contingent upon travel opening up and deal conversions happening in Q4FY21E and Q1FY22E. Further, we see a risk of potential margin contraction by ~550bps in FY22E as some of the reined-in costs return (e.g. wage hikes, lower utilisations, S&M investments, travel, etc.). Post a ~40% rally over the previous three months (vs 23% on Nifty IT), we downgrade the stock to ADD (from Buy) given: 1) volatility in deal closures, and 2) dependence on travel to acquire new logos.

- Revenues in line with a meaningful margin surprise. Overall revenues remained flat at 0.7% YoY in Q3FY21 with annuity-based revenues declining 3% due to change in mix of support revenues from onsite to offshore. Margins surprised on the positive side with margins expanding to 23.4% in 9MFY21 from 8.1% in 9MFY20 primarily due to savings in employee costs, lower travel expenses and lower provisioning in Q3. As management alluded to improved deal wins and continuation of cost-saving measures in Q4, we now expect FY21E revenue growth to be at ~1.5% with margins at 25.5% (earlier 20%).

- Downgrade to ADD: Newgen's strong presence and positioning (rated well by industry advisors) in the high-growth markets of BPM and low-code application development should boost earnings going forward. In addition to client mining, a meaningful part of growth comes from acquiring new customers (~15% of revenues came from new clients in FY18-FY20). Typically, new logo acquisitions require sales and delivery to travel to client location for deal conversion. As the Covid-induced lockdown remains a key risk, deal closures might get delayed if freeze in travel continues. New deal wins will be key for further rerating in our opinion. Considering the aforementioned risks and ~40% return in past three months, we downgrade the stock to ADD.

Shares of Newgen Software Technologies Ltd was last trading in BSE at Rs.316.9 as compared to the previous close of Rs. 307.9. The total number of shares traded during the day was 125117 in over 4823 trades.

The stock hit an intraday high of Rs. 332.85 and intraday low of 305.9. The net turnover during the day was Rs. 40148354.

Source: Equity Bulls

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

Bharat Forge - Initiating Coverage - Constant evolution - HDFC Securities

Mahindra Logistics - Large-ticket deal win - ICICI Securities

Company Update - Huhtamaki India - ICICI Direct

Gladiator Stocks: IndusInd Bank, VIP Industries - ICICI Direct

Warehousing demand expected to grow around 160% to reach 35 million sq. ft in 2021: JLL

Telecom - Spectrum auction: Prudent investment by Bharti Airtel - ICICI Securities

JB Chemicals & Pharmaceuticals - Analyst meet takeaways - ICICI Securities

IPO Review - MTAR Technologies Ltd - ICICI Direct

Auto Sector - Monthly Volume Round-up - Feb 21 - Decent YoY Growth Continues

Aditya Birla Fashion and Retail - Focus on scaling up new businesses - ICICI Securities

Automobiles (wholesale) - Wholesales push continues despite modest retail trends - ICICI Securities

Aditya Birla Capital - Thoughtful (inclusive) conglomerate business evolution commands premium - ICICI Securities

Jubilant Foodworks - Buying in-the-money options - ICICI Securities

Multi Commodity Exchange of India - Play on rising commodity prices? - ICICI Securities

Gladiator Stocks - Sudarshan Chemical - ICICI Direct

Monthly Commodities Outlook - March 2021 - ICICI Direct

ICICI Direct - Monthly Currency Outlook: Rupee to depreciate further towards 75.00 level...

ICICI Direct - Covid Recovery Pulse - E-way bill generation in February 2021 starts on strong note...

Company Update - Virtual JLR Investor Event - Tata Motors - ICICI Direct

Analyst Meet Update - Aditya Birla Fashion and Retail - ICICI Direct

MTAR Technologies Ltd. - IPO - Huge Opportunities from Clean Energy Bodes Well - Reliance Research

ICICI Direct Derivatives Weekly View (February 26): Failure to move above 14700 may extend declines towards 14300...

Bank: Sector Credit Trends - Slows, Yet again - HDFC Securities

Piramal Enterprises - Pharma day highlights - ICICI Securities

Polymer price tracker - PVC prices rise sharply again! - ICICI Securities

Greenply Industries - Growth returns, at an inflection point - ICICI Securities

Tata Motors - JLR future proofing itself with rapid electric transition - ICICI Securities

Dairy - Higher freight cost and increase in Global SMP prices - ICICI Securities

Analyst Meet Update - Nestlé India (Hold): Focus on product innovation, expanding rural reach - ICICI Direct

MTAR Technologies Ltd - A strong player in booming high precision engineering... - Geojit

Rollover Report for February - March 2021 : Angel Broking

Reaction from industry experts on Q3FY21 GDP numbers

M. Govinda Rao, Chief Economic Adviser, Brickwork ratings on Q3FY21 GDP numbers

Mr. Dhiraj Relli, MD & CEO, HDFC securities views on Q3FY21 GDP Growth Number

Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research on Q3FY21 GDP

Rollover Analysis - Feb 21, 2021 - YES Securities

Consumer Durables - Demand-driven recovery continues - HDFC Securities

Cement - Demand surprises; earnings upgrade to continue - ICICI Securities

Gladiator Stocks - TeamLease Services - ICICI Direct

Gladiator Stocks - Metals to outshine post multi-year breakout... - ICICI Direct

Company Update - Sundaram Finance - ICICI Direct

Indian pharmaceutical industry to meet an ambition of US$130 billion by 2030 through innovation-led growth: EY-FICCI report

4th Industrial Conclave - Bullish undertone, favourable valuation - HDFC Securities

Sanofi India - Weak quarter; sequential improvement - ICICI Securities

Sunteck Realty - All eyes on upcoming launches - ICICI Securities

Company Update - Tata Motors - ICICI Direct

Q4CY20 Company Update - Mahindra CIE Automotive - ICICI Direct

Event Update - Hindalco - ICICI Direct

EY report launch at BioAsia 2021 - Moving the needle: Healthcare industry in a post-COVID world

Initiating Coverage - Dalmia Bharat Ltd - HDFC Securities Retail Research Desk

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020