AKD Research has released an optimistic report on Systems Limited (SYS), projecting an increase in margins amid consolidation. We expect the company to report a net profit after tax (NPAT) of PKR 2.9 billion (EPS: PKR 1.9) in 2QCY25, up from PKR 1.7 billion (EPS: PKR 1.1) in the same quarter last year.

Key Highlights:

– Anticipated revenue growth of 23% year-over-year, driven by demand in the Middle East, Africa (MEA), and North America.

– Expected gross margins to increase to 25.5%, up from 22.0% last year.

– We maintain a ‘BUY’ recommendation with a target price of PKR 176 per share for December 2025.

Detailed Expectations:

For 2QCY25, we project a 71% YoY rise in NPAT and a 53% YoY increase in operating profit to PKR 2.9 billion. Finance costs are expected to decrease significantly to PKR 74 million.

Revenue Surge:

Quarterly revenue is expected to reach PKR 19.5 billion, driven by strong growth in the MEA and North American markets.

Improved Margins:

Gross margins are improving due to reduced inflationary pressures and a focus on existing investments, as well as the expiration of unprofitable contracts.

Investment Perspective:

We keep a ‘BUY’ stance on SYS due to a 19% YoY increase in IT exports during 11MFY25, improving margins, and a strong presence in the MEA region. Our target price of PKR 176 offers a 49% potential upside and an estimated 2025 dividend yield of 1.5%.