Pakistan Technology: IT Exports Flat YoY in Sep 2023; IT Exports up 3% YoY in 1QFY24

Pakistan’s Information Technology (IT) exports for Sep 2023 of US$206mn are down by 12% MoM. Segment-wise, Telecom and Computer Services down by 26% and 9% MoM, respectively.

Sep 2023 IT export inflows are also lower than last 12 month average of US$219mn.

IT exports in Sep 2023 declined on a MoM basis, mainly due to lower number of working days compared to Aug 2023. Our banking channel checks indicate that higher clearing days impacted the realization of proceeds.

Among Computer Services, Software Consultancy and Exports of Computer Software exports down 20% to US$55mn and 17% MoM to 47mn respectively in Sep 2023.

Services Exports (Excluding IT) of Pakistan have remained flat MoM at US$365mn in Sep 2023.

On a YoY basis, IT export for Sep 2023 remain flat US$206mn due to the stagnant export of Computer Services.

The reported IT export number indicates the amount remitted back to Pakistan by technology companies. According to our channel checks, IT companies are retaining a greater portion of their proceeds outside the country due to declining business confidence and volatility of exchange rate.

According to the IT Minister, IT companies are holding around US$1-2bn outside Pakistan.

In 1QFY24, IT exports have increased by 3% YoY to clock in at US$655mn.

According to Gartner Inc. (a Technology Research and Consulting firm), worldwide IT spending is projected to reach US$4.7trn in 2023, reflecting a 4.3% increase from 2022. That being said, we anticipate improvement in Pakistan’s IT exports in the upcoming months.

Net IT Exports (Exports-Imports) for Sep 2023 have also declined by 20% MoM and by 7% YoY to US$164mn. In 1QFY24 Net exports have increased by 1% YoY to US$558mn compared to increase of 3% YoY in overall IT exports number.

However net IT Exports on TTM basis as of Sep 2023 have grown by 12% YoY to US$2.3bn.

Going forward, software and IT services spending is expected to increase by 13.7% and 8.8% respectively in 2023, according to Gartner research.

As per Garter, software segment will see double-digit growth in 2023 as organizations increase utilization and reallocate spending to core applications and platforms that support efficiency gains, such as Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) applications. Vendor price increases will also continue to bolster software spending through this year.

This presents an opportunity for companies such as Systems Limited (SYS), which is our top pick in the IT sector. SYS currently trades at a 2023E PE of 13.9x and PS of 3.8x.

In 1QFY24, gross IT exports as % of total exports increased at 7.5% compared to 7.0% in 1QFY23.

Segment wise breakdown for the month of Sep 2023 indicates that Telecom Services declined by 26% MoM and by 5% YoY to US$34mn and Computer Services declined by 9% MoM and flat YoY to US$172mn.

The total share of Telecom/Computer Services exports for Sep 2023 stood at 16%/84% respectively compared to 17%/83% share in Sep 2022.

In 1QFY24 Telecom/Computer share of exports stood at 18%/82% similar to witnessed same period last year.

Courtesy – Topline Pakistan Research 

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