- Pakistan recorded monthly IT exports of US$286mn, up 34% YoY while down 4% MoM in July 2024. These monthly IT exports in July 2024 are higher than the last 12-month average of US$269mn.
- 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, which encourages IT exporters to bring a higher portion of profits back to Pakistan.
- Pakistani IT companies are actively engaging with global clients. Recently, leading Pakistani IT companies attended London Tech Week 2024 and Collision Canada 2024. The companies’ presence at the events was supported by IT representative bodies and the Government of Pakistan.
- According to a Pakistan Software Houses Association (P@SHA) survey, 62% of IT companies maintain specialized foreign currency accounts.
- A major development in July 24 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 without prior bank designation by utilizing funds from specialized foreign currency accounts. The previous restriction of acquiring only one entity per jurisdiction has also been lifted.
- Net IT Exports (Exports-Imports) reached a monthly total of US$252mn in July 2024, an increase of 33% year over Year. These net IT export numbers in July 2024 are also higher than the last 12-month average of US$236mn.
- 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.
- Systems Limited (SYS) is our preferred pick within the IT sector. SYS currently trades at 2024F and 2025F PE of 13x and 9x, respectively.
Courtesy – Topline Pakistan Research
