Pakistan recorded monthly IT exports of US$324mn, up by 25% YoY while down by 2% MoM in Nov-2024. These monthly IT exports in Nov-2024 are higher than the last 12-month average of US$295mn. This is the 14th consecutive month of YoY IT export growth, starting from October 2023.
This takes 5MFY25 IT exports to US$1.53bn, up by 33% YoY.
§ YoY jump in IT exports is due to (1) IT export companies growing client base globally, especially in GCC region, (2) relaxation in the permissible retention limit by the State Bank of Pakistan, increasing it from 35% to 50% in the Exporters’ Specialized Foreign Currency Accounts, and (3) stability in PKR encouraging IT exporters to bring higher portion of profits back to Pakistan.
§ MoM decline in IT exports is due to lower number of working days in November (21 days) compared to October (23 days). While, export proceeds per day were recorded at US$15.4mn for Nov-24 vs. US$14.3mn in Oct-24.
§ Pakistani IT companies are active in engaging with global clients. Leading IT companies in Pakistan recently attended Oslo Innovation Week 2024 and the Pak-US Tech Investment Conference.
§ According to a Pakistan Software Houses Association (P@SHA) survey, 62% of IT companies maintain specialized foreign currency accounts.
§ A major development in FY25 was SBP adding a new category of Equity Investment Abroad (EIA), specifically for export-oriented IT companies. IT exporters can now acquire interest (shareholding) in entities abroad utilizing up to 50% proceeds from specialized foreign currency accounts. This development will further boost the confidence of IT exporters to remit proceeds back to Pakistan.
§ Net IT Exports (Exports-Imports) displayed monthly number of US$287mn and increased by 27% YoY in Nov-2024. These net IT export numbers in Nov-2024 are also higher than the last 12-month average of US$261mn.
§ We believe, IT sector will continue its growth trajectory and momentum with likely growth of 10-15% for FY25 to US$3.5-3.7bn.
§ Within the IT sector, Systems Limited (SYS) is our preferred pick. SYS is trading at 2024E and 2025F PE of 22.8x and 16.5x, respectively.
Courtesy – Topline Pakistan Research
