Pakistan recorded monthly IT exports of US$292mn, up 42% YoY and down 2% MoM in September 2024. These monthly IT exports in September 2024 are higher than the last 12-month average of US$280mn. Starting from October 2023, this is the 12th consecutive month of YoY IT export growth. This takes 1QFY25 IT exports to US$877mn, up 34% 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 decrease in IT exports is due to lower working days in September (20) compared to August (21). Export proceeds per day were recorded at US$14.6mn for September 24 vs. US$14.2mn in August 24.
§ Pakistani IT companies are active in engaging with global clients. Recently leading IT companies of Pakistan attended London Tech Week 2024, Collision Canada 2024, and Black Hat, USA.
§ According to the 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$255mn and increased by 56% YoY in Sep-2024. These net IT export numbers in Sep-2024 are also higher than the last 12-month average of US$245mn.
§ 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 trades at 2024E and 2025F PE of 14x and 10x, respectively.
Courtesy – Topline Pakistan Research
