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Shares of Newgen Software Technologies Ltd. gained on Wednesday, January 21, after brokerage firm Jefferies double-upgraded the stock but cut its target price by 9%. The stock had declined 15% on Tuesday after its December quarter results were announced.
Jefferies double-upgraded the stock to "buy" from its earlier rating of "underperform." However, it has cut its price target on the stock to ₹760 from ₹835 earlier. This implies an upside potential of 21% from Tuesday's closing levels.
The brokerage said Newgen's third quarter revenues missed, but profits beat their expectations.
Slower growth in licence sales and core markets were key negative surprises, it said. Licence sales have declined in the fiscal year 2026 on a high base and should normalise in FY27, given the current fiscal's low base, Jefferies said.
Jefferies has cut Newgen's Earnings Per Share (EPS) estimates by 3% to 8% to factor in weaker growth, but anticipates its Earnings Per Share to grow at a Compounded Annual Growth Rate (CAGR) of 15% over financial year 2026-2028.
At 22 times its estimated price-to-earnings ratio for financial year 2027, on normalised growth expectations, Jefferies said the risk-reward looks attractive for Newgen Software.
Newgen Software's net profit in the December quarter declined 23.2% to ₹63 crore from ₹82 crore in the previous quarter. It stated that there was a one-time impact of the new labour code worth 35 crore, which impacted its profitability. Adjusted for the same, the bottomline would have been higher on a sequential basis.
The third quarter revenue remained unchanged at ₹401 crore from 400 crore in the previous quarter.
Its earnings before interest and tax (EBIT) increased 3.1% sequentially to ₹97 crore and EBITDA margins expanded to 24.2% from 23.5%.
Of the nine analysts that have coverage on the stock, six have a "buy" rating, two have a "hold" rating and one has a "sell" rating.
Shares of Newgen Software ended 0.8% higher on Wednesday at ₹633.6. The stock has halved in value over the last 12 months.
Also Read: SRF shares fall over 6% after management cites 'persistent pressure' from Chinese competitors
Jefferies double-upgraded the stock to "buy" from its earlier rating of "underperform." However, it has cut its price target on the stock to ₹760 from ₹835 earlier. This implies an upside potential of 21% from Tuesday's closing levels.
The brokerage said Newgen's third quarter revenues missed, but profits beat their expectations.
Slower growth in licence sales and core markets were key negative surprises, it said. Licence sales have declined in the fiscal year 2026 on a high base and should normalise in FY27, given the current fiscal's low base, Jefferies said.
Jefferies has cut Newgen's Earnings Per Share (EPS) estimates by 3% to 8% to factor in weaker growth, but anticipates its Earnings Per Share to grow at a Compounded Annual Growth Rate (CAGR) of 15% over financial year 2026-2028.
At 22 times its estimated price-to-earnings ratio for financial year 2027, on normalised growth expectations, Jefferies said the risk-reward looks attractive for Newgen Software.
Newgen Software's net profit in the December quarter declined 23.2% to ₹63 crore from ₹82 crore in the previous quarter. It stated that there was a one-time impact of the new labour code worth 35 crore, which impacted its profitability. Adjusted for the same, the bottomline would have been higher on a sequential basis.
The third quarter revenue remained unchanged at ₹401 crore from 400 crore in the previous quarter.
Its earnings before interest and tax (EBIT) increased 3.1% sequentially to ₹97 crore and EBITDA margins expanded to 24.2% from 23.5%.
Of the nine analysts that have coverage on the stock, six have a "buy" rating, two have a "hold" rating and one has a "sell" rating.
Shares of Newgen Software ended 0.8% higher on Wednesday at ₹633.6. The stock has halved in value over the last 12 months.
Also Read: SRF shares fall over 6% after management cites 'persistent pressure' from Chinese competitors
