Newgen Software stock surges 7% on $1.3 million ECM contract from global client

Newgen Software Technologies, a small-cap IT stock, jumped 7% in early morning trade on Thursday, March 27, reaching ₹1,037.45 per share following an order win from global client. In a regulatory filing on Wednesday, the company informed investors that it had secured a letter from an international client for an Enterprise Content Management (ECM) solution worth $1.3 million.

The contract is set to be executed over five years. "Newgen Software Technologies Limited has accepted the award letter from the customer for the Enterprise Content Management Solution (ECM). The aggregate value of the aforesaid award is $1,285,074, inclusive of taxes," the company stated in its regulatory filing on Wednesday.

The company has bagged multiple orders this year. In late January, its US-based subsidiary secured purchase orders worth $3 million. The five-year contract is from an undisclosed customer in the insurance industry.

During the same month, the subsidiary also signed a $2.6 million agreement for enterprise content management with an unnamed healthcare client in the US.

Stock price trend

The company’s shares plunged 38% in January, reacting to weak December quarter earnings, which also led analysts to cut target multiples. The decline extended into February, with an additional 11% drop. However, the stock rebounded in March, gaining 10.22%, though it remains down 42% from its January peak.

Despite the sharp decline in shares, they are still up by 309% over the last 3 years and 1800% in 5 years. Following the company’s weak earnings, global brokerage firm Jefferies downgraded Newgen by two notches, moving its rating from "buy" to "underperform" after revenue missed the brokerage's estimates by 6%.

Jefferies also cut its price target to ₹1,240 from ₹1,500. In its note, the brokerage stated that while Newgen’s results fell short of expectations, the slower growth in annuity revenue and weaker India operations were key concerns.

For the December quarter, Newgen Software reported 5.5% topline growth compared to the September quarter, while net profit grew by 26.5% during the same period.

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