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Buy This Small-Cap IT Software Stock To Get 24% Potential Gain, 45% Final Dividend Declared

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Leading brokerage firm ICICI Direct has given a buy rating to the stock of Newgen Software Technologies Ltd. for a potential gain of 24% if you buy it at the current market price of Rs 355 apiece.

 

1. Newgen Software Stock Outlook

1. Newgen Software Stock Outlook

The current market price of Newgen Software Technologies Ltd is Rs 355.30 apiece. The 52-week high of the stock is Rs 755 apiece and 52-week low of the stock is Rs 323 apiece, respectively. The stock has given a return of 40.77% in 5 years. If you buy the stock today at its current price, you can potentially get a return of 24% as the stock offers potential to reach the target price of Rs 440 apiece.

Current Market PriceRs 355.30
Target PriceRs 440
Potential Gain24%
52-Week HighRs 755
52-Week LowRs 323
5-Year Return40.77%
2. Newgen Software declares final dividend of 45%
 

2. Newgen Software declares final dividend of 45%

The board of directors of the company has recommended a final equity dividend of 45% amounting to Rs 4.5 per equity share of Rs 10 each. The ex-dividend date is 15 June, 20222 and record date is 16 June, 2022.

3. Key Triggers For Future Performance

3. Key Triggers For Future Performance

Strong logo addition and increasing annuity mix (recurring business) from existing clients would aid revenue growth as we baked in 17.2% CAGR revenue growth over FY22-24. We expect the company to return to historical 70-80 logo additions/year as travel opens up. This coupled with subscription (SaaS + ATS/AMC) growth of 31% CAGR over FY22-24 is expected to drive annuity (SaaS + ATS/AMC+Support) revenues, which are expected to grow at 21.8% CAGR in the same period and forms 63% of the revenue mix.

The company is working on 70-80 cases as far as GSI opportunity is concerned. Depending on the scenario analysis we did, it has an incremental revenue opportunity of Rs 79-131 crore in the next two years over and above its normal revenue run rate. Strong focus on R&D investments to stay competitive. Newgen now has 23 patent grants across India and US out of 43 patents filed so far. Its R&D team has grown to about 580 employees in FY22 (vs approximate 250 in FY18) and R&D investments as percentage of sales is 10.2% in FY22 vs. 7.2% in FY18.

The company also acquired recently 'Number Theory' to strengthen its platform with AI/ML modelling and data analytics capability.

4. Valuation

4. Valuation

According to ICICI Direct, "We initiate coverage under Stock Tales format with a BUY rating and a target price of Rs 440. We value Newgen at 14x FY24 EPS to arrive at a target price of Rs 440 per share."

5. About Newgen Software

5. About Newgen Software

It was incorporated in 1992. Newgen is a low code application development platform company. It is an established player in the market of enterprise content management (ECM), business process management (BPM) & customer communications management (CCM). The current market capitalization of the company is RS 2485 Crore.

Disclaimer

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.

 

Story first published: Saturday, June 25, 2022, 15:04 [IST]
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