The 14% jump in Newgen Software Technologies’ stock was mainly on account of the impressive Q2-FY24 result of the company. Consolidated net profit of the company rose 59.01 per cent year-on-year to ₹47.78 crore. The growth was driven by strong demand in banking and financial services in multiple geographies. The company’s revenue from operations also increased 29.7% to ₹293.23 crore even as EBITDA expanded 59.3% to ₹57.2 crore with margins coming in at 19.5%citeturn0search0.
2. Fundamental Analysis
- Business Model: Newgen Software is a low-code application development platform company focused on enterprise content management (ECM), business process management (BPM), and customer communications management (CCM).
- Financial Performance:
- Q2-FY24: The net profit surged 59 per cent to ₹47.78 crore.
- Revenue: Increased by 29.7% to ₹293.23 crore.
- EBITDA: Increased 59.3% to ₹57.2 crore with margins expanding to 19.5%. ancial Performance:
- Q2-FY24: Net profit increased by 59% to ₹47.78 crore.
- Revenue: Grew by 29.7% to ₹293.23 crore.
- EBITDA: Rose 59.3% to ₹57.2 crore, with margins improving to 19.5%.
- Growth Drivers:
- Strong demand in the banking and financial services sectors.
- Expansion into new markets and verticals, including lending and trade finance.
- Increased deal sizes by approximately 40% year-on-year.
- Heavy appetite in banking and financial services..
- Rolling out in new markets and verticals such as lending and trade finance.
- Year-to-date average deal sizes up by c. 40%.
- Valuation : The stock has gained 352% in the last five years, which indicates if you long term interest rate investor or market participant. citeturn0search3
3. Technical Analysis
- Price Performance: Shares of the company have surged to an all-time high of ₹1,060, compared with the previous high of ₹1,000.
- Momentum Indicators:
- Relative Strength Index (RSI): Currently 69.1, showing strong bullish momentum.
- MFI: Overbought at 87, can be cautious citeturn0search2.
- Chart Patterns: The stock is regularly exhibiting an ascending moving trend, crossing over its resistance levels and depicts a bullish trend.
4. Value Analysis
- Price-to-Earnings (P/E) Ratio: P/E ratio is critical from the valuation perspective, but the exact number is missing from the information given.
- Price-to-Book (P/B) Ratio This ratio indicates if a market valuation of a company is better than its book value.
- Dividend Yield: D/Y information is not yet available in the provided data.
The stock is up quite a lot, yet investors should check theoretical valuation on price to earnings ratio, and price to book value.
5. Promoter’s Investment
- Promoter Holding: Promoter holding was stable at 54.3% in June ’24 and Sept ’24, showing promotor’s faith in the company citeturn0search1.
- Role of Promoter: Foremost among the promoters are Diwakar Nigam and T.S. Varadarajan who have substantial shareholding in the company, indicating their long-term involvement.
6. FII and DII Activities
- FIIs or Foreign Institutional Investors:
- Increased holdings from 17.84% in June 2024 to 19.98% in September 2024, indicating growing foreign interest citeturn0search1.
- Rising stakes from 17.84% in Jun 2024 to 19.98% in Sep 2024suggest increasing foreign interest citeturn0search1.
- Domestic In
- Leanings downwards in holding pattern: from 9.96% in June 2024 to 8.93% in September 2024 indicating a marginal decrease in domestic institutional interest citeturn0search1. stitutional Investors (DII):
- Slight decrease in holdings from 9.96% in June 2024 to 8.93% in September 2024, suggesting a marginal reduction in domestic institutional interest citeturn0search1.
7. Broker’s View
- Jefferies: Reiterated a ‘Buy’ rating with a price target of ₹860, citing strong growth visibility due to operations in the banking vertical. The brokerage raised FY2024-25 EPS estimates by 2-4% and expects a 23% EPS CAGR over FY2023-25 citeturn0search2.
- Article Sentiment: The article sentiment is mainly positive considering strong financial performance and growth prospects in the key segments 2.
