Pakistan recorded monthly IT exports of US$306mn, up by 37% YoY and by 19% MoM in Mar-2024. This is the highest ever export number in a single month with previous highest being US$303mn in Dec-2023. These monthly IT exports in Mar-2024 are higher than last 12-month average of US$238mn.

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.

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

In 9MFY24 IT exports clocked in at US$2.28bn, up by 17% YoY compared to US$1.94bn recorded in 9MFY23.

Net IT Exports (Exports-Imports) also recorded an increase of 37% YoY and of 20% MoM to US$275mn in Mar-2024. These net IT exports numbers in Mar-2024 are also higher than last 12-month average of US$208mn. In 9MFY24 net IT exports recorded a growth of 16% YoY to US$1.99bn.

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 9MFY24, the government’s target appears challenging. We anticipate that gross IT exports for FY24 will likely fall around US$3.0bn compared to US$2.6bn recorded last year.

Within the IT sector, Systems Limited (SYS) is our preferred pick. SYS is currently trading at 2024F and 2025F PE of 10x and 8x, respectively.