Pakistan recorded monthly IT exports of US$310mn, up by 62% YoY and by 1% MoM in Apr-2024. This is the highest ever export number in a single month with previous highest being US$306mn in Mar-2024. These monthly IT exports in Apr-2024 are higher than last 12-month average of US$245mn.

YoY jump in IT exports is due to (1) IT export companies growing in the GCC region especially Saudi Arabia, (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.

In 10MFY24 IT exports clocked in at US$2.59bn, up by 21% YoY compared to US$2.14bn recorded in 10MFY23.

Net IT Exports (Exports-Imports) also displayed highest ever monthly number of US$283mn and increased by 68% YoY in Apr-2024. These net IT exports numbers in Apr-2024 are also higher than last 12-month average of US$214mn. In 10MFY24 net IT exports recorded a growth of 20% YoY to US$2.28bn.

The higher retention facility of 50% was introduced by caretaker government of Pakistan. At that time caretaker IT minister had stated that this facility will boost IT exports by US$1.0bn on top of US$2.6bn recorded in FY23.

However, this target of US$3.5-3.6bn is not likely to be achieved in FY24 with IT exports set to close in the region of US$3.1-3.2bn.

Within the IT sector, Systems Limited (SYS) is our preferred pick. SYS is currently trading at 2024F and 2025F PE of 12x and 9x, respectively.

Courtesy – Topline Research