ICICI Securities Initiates Coverage on Newgen Software Technologies, Sets Target Price of Rs 530

Newgen Software Technologies Posts Resilient Revenue Growth Despite Macro Headwinds

Newgen Software Technologies has reported a resilient revenue growth of 5.3% year-over-year (YoY) in Q4FY26, despite facing macro headwinds in its EMEA region, which accounted for 30% of the company's revenue during the quarter. The EMEA region experienced a decline of 12.3% YoY, however this was offset by robust growth from the APAC/India region.

Notably, the company's business segments have seen significant growth, with healthcare and insurance growing by a notable 43% YoY. Additionally, Newgen has achieved gross margin expansion of 477bps YoY, which was aided by AI-led delivery gains. The company has also seen a 24% YoY expansion in subscription-based revenue, providing a stable source of income.

Key Growth Drivers

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

• Healthcare and insurance segment grew 43% YoY
• Gross margin expansion of 477bps YoY
• 24% YoY expansion in subscription-based revenue
• Strong deal pipeline with a significant uptick in deferred revenue
• Continued strong R&D focus, representing 8.5% of revenue

Newgen Software Technologies has also seen an increase in the share of annuity revenue from 56% in FY25 to 62% in FY26, with the potential to reach 75-80% in the medium term.

Outlook and Recommendations

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

We have reduced the one-year forward target price-to-earnings (P/E) ratio to 19x, as the company missed its benchmark growth of 20% YoY. We maintain a HOLD recommendation with a target price of INR 530 for March 2027, based on growth recovery estimates for FY27E (10.3%) led by a bounce-back in license revenue.