NEWGEN - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 05 Nov 25, 7:43 am

Fundamental Rating: 4.1

📊 Financial Overview

• Profitability: PAT at ₹76.7 Cr, up from ₹48.7 Cr QoQ; EPS at ₹22.0
• Margins: ROCE at 27.8%, ROE at 22.4% — strong capital efficiency
• Debt Profile: Debt-to-equity ratio of 0.03 — virtually debt-free
• Dividend Yield: 0.51% — modest but consistent

📈 Valuation Metrics

• P/E Ratio: 44.8 — above industry average of 29.4
• P/B Ratio: ~9.4 — premium valuation relative to book value ₹104
• PEG Ratio: 1.97 — suggests valuation is slightly ahead of growth
• Intrinsic Value: Estimated around ₹850–₹900 based on earnings and sector multiples

🏢 Business Model & Competitive Edge

• Core Operations: Newgen Software provides enterprise content management (ECM), business process management (BPM), and customer communication management (CCM) solutions
• Moat: Proprietary platforms, strong client retention, and global presence in BFSI and government sectors
• Growth Drivers: Digital transformation, cloud migration, and increasing demand for automation in enterprise workflows

📌 Entry Zone Recommendation

• Suggested Entry: ₹880–₹920 — near DMA50 and below intrinsic value
• Technical Indicators: RSI at 65.0 (approaching overbought), MACD positive — bullish momentum but caution advised

📈 Long-Term Holding Guidance

• Hold for long-term if accumulated near support; ideal for tech-focused portfolios seeking digital transformation exposure
• Monitor global deal wins and margin expansion for sustained upside

✅ Positive

• Strong ROCE and ROE with low debt
• Quarterly PAT growth of 16.4%
• DII holding increased by 0.12%
• Consistent demand for digital automation solutions

⚠️ Limitation

• High P/E and PEG ratios
• FII holding declined by 1.52%
• Stock down ~45% from 52-week high

📰 Company Negative News

• FII outflows amid broader tech sector volatility and profit booking

🌟 Company Positive News

• Strong Q2 FY26 results with margin improvement and new client acquisitions in North America
• Expansion of cloud-based offerings and AI integration into core platforms

🏭 Industry

• Enterprise software industry P/E at 29.4 — Newgen trades at a premium
• Sector driven by digital transformation, cloud adoption, and workflow automation

🧾 Conclusion

• Newgen is a fundamentally strong digital transformation player with robust margins and global growth potential
• Accumulate near support zones for long-term growth; monitor valuation and institutional flows