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  • 19 Oct 2022
  • ICICIdirect Research

NEWGEN ASPIRES FOR US$ 500 MN REVENUE IN 5-6 YEARS

NEWGEN - 1429 Change: 76.25 (5.64 %)

News:

 Newgen reported revenue of Rs 226.1, up 21.9% YoY led by strong growth in its SaaS business. SaaS revenue increased 50% YoY while subscription & annuity revenues reported a strong growth of 30.4% & 24.3% YoY, respectively. The company reported EBITDA margin of 16.6%. Margins were impacted by supply side challenges and resumption of travel & facility expenses. Geography wise, revenue growth was led by India & Middle East regions. India reported revenue growth of 27.2% while EMEA region reported growth of 23.5%. The US region still remains impacted by the change in strategy of the company and reported growth of 5.8% YoY. Vertical wise, banking (61% of mix) led the growth with 15.2% YoY. The company added 14 new logos during the quarter. It maintained its EBITDA margin guidance of 23-35% for FY23.

View:

 The company reported strong numbers across regions except the US where decision making has been on the slower side. EMEA region growth is linked to oil price movement and if prices remain stable, the region is expected to continue its growth momentum. The company had launched low code, future ready trade finance platform during the quarter as trade finance process globally is largely outdated and requires a major upgradation. This platform, along with continued growth from its key markets, recovery in US markets and GSI opportunity panning out as per their expectations (currently in a slow lane) are major building blocks for their aspiration to reach US$500 mn annual revenues in the next five to six years. Continued elevated employee costs amid high attrition and resumption of some costs like travel and facility is expected to keep margins at the lower end of the guidance band.

Impact:

Positive.