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Equity99
Newgen Soft (Buy)
CMP: ₹258.75
Target: ₹500
Newgen Software Technologies is strengthening its global presence. It has witnessed broad-based growth on a y-o-y basis in APAC at 47 per cent, EMEA at 45 per cent, the US at 7 per cent and India at 7 per cent. Newgen has added 120 new customers during FY18 compared to 98 in FY17. Total active customers were 520+ as of FY18. Banking & financial services vertical continued to be a stronghold witnessing 36 per cent y-o-y growth while revenue from emerging verticals such as healthcare and insurance witnessed a growth of 81 per cent and 6 per cent respectively.
Newgen is currently trading at 22.9x FY18 P/E, which is reasonable in our view, given strong growth prospects. It has healthy balance sheet & scalable business model. Company continues to strengthen the horizontal product platform with vertical service accelerators.
We strongly believe Newgen can drive innovation and adopting solutions in line with rapidly evolving technological trends. Considering the above, along with the growth drivers; we recommend a strong ‘buy’ to our investors with a target price of ₹500 with duration of 18-24 months.
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