Pakistan IT exports up 32% YoY in Feb-2024

Pakistan recorded monthly IT exports of US$257mn, up 32% YoY while down 3% MoM in Feb-2024. These monthly IT exports in Feb 2024 are higher than last 12-month average of US$233mn.

YoY jump in IT exports is due to (1) relaxation in the permissible retention limit by the State Bank of Pakistan (SBP), increasing it from 35% to 50% in the Exporters’ Specialized Foreign Currency Accounts, and (2) stable PKR currency which encouraged IT companies to repatriate their foreign income and deposit it in local accounts.

However, the decline in MoM IT exports is attributed to the fewer working days of 19 in Feb-2024 compared to 23 working days in Jan-2024.

To highlight, the reported IT export number indicates the amount remitted back to Pakistan by technology companies.

In 8MFY24 IT exports clocked in at US$2.0bn, up 15% YoY compared to US$1.7bn recorded in 8MFY23.

Net IT Exports (Exports-Imports) also recorded an increase of 31% YoY while down 4% MoM to US$230mn in Feb-2024. These net IT exports numbers in Feb-2024 are also higher than last 12-month average of US$204mn. In 8MFY24 net IT exports recorded a growth of 13% YoY to US$1.7bn.

Soon after the Sharif-led government took power, the Prime Minister called for a meeting with a focus on fully utilizing the country’s potential for IT exports, directing ministry for the submission of a comprehensive roadmap to boost IT exports.

In a recent interview with a private TV channel, the newly appointed Finance Minister, Muhammad Aurangzeb, stated that IT exports are likely to reach US$3.5bn this year.

Although there has been a growth in gross IT exports during 8MFY24, the government’s target appears challenging. We anticipate that gross IT exports for FY24 will likely fall around US$3bn compared to US$2.6bn recorded last year. 

Within the IT sector, Systems Limited (SYS) is our preferred pick. SYS is currently trading at 2023E and 2024F PE of 13x and 10x, respectively.

Courtesy – Topline Pakistan Research 

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