Pakistan recorded monthly IT exports of US$330mn, up 39% YoY and 13% MoM in October 2024. These monthly IT exports in October 2024 are higher than the last 12-month average of US$287mn. This is the 13th consecutive month of YoY IT export growth, starting from October 2023. This takes 4MFY25 IT exports to ~US$1.21bn, up 35% YoY.
According to Topline Pakistan Research, the YoY jump in IT exports is due to (1) IT export companies’ growing client base globally, especially in the GCC region, (2) the 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 a higher portion of profits back to Pakistan.
§ MoM increase in IT exports is due to higher working days in October (23) compared to September (20). Export proceeds per day were recorded at US$14.3mn for Oct-24 vs. US$14.6mn in Sep-24.
§ Pakistani IT companies are active in engaging with global clients. Recently, leading IT companies in Pakistan 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$299mn and increased by 47% YoY in Oct-2024. This is the highest-ever monthly figure. These net IT export numbers in Oct-2024 are also higher than the last 12-month average of US$253mn.
§ 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 18.4x and 12.5x, respectively.
Courtesy – Topline Pakistan Research
