Jefferies maintains buy on Newgen Software, lowers target price to Rs 290

Jefferies has maintained buy rating on Newgen Software Technologies in the long term and revised target price to Rs 290 from Rs 372. Shares of Newgen Software ended down 19.4% at Rs 200.70 on Wednesday while the BSE Sensex closed 164.18 points up at 39,223.01.

Company Financials

For the quarter ended 30-09-2019, the company has reported consolidated sales of Rs 154.00 crore, up 17.59% from last quarter sales of Rs 130.97 crore and up 2.90% from last year same quarter sales of Rs 149.66 crore. The company has reported net profit after tax of Rs 4.22 crore in the latest quarter.


Investment Rationale

The brokerage has cut EPS estimates for Newgen over FY20-FY22 to reflect weaker growth as well as resulting lower margins. Jefferies has retained buy as it expects growth to recover in FY21 which should also lead to sharp margin expansion. The brokerage is hopeful of traction in sales in the US market in particular which is a large opportunity for Newgen; India business should also grow better next year helped by a more favorable base.