Pakistan’s Information Technology (IT) exports for August 2023 of US$235mn are up by 10% MoM. Segment-wise, Telecom and Computer Services increased by 12% and 9% MoM, respectively.
August 2023 IT export inflows are better than last 12-month average of US$218mn.
IT exports in August 2023 improved on a MoM basis, mainly due to a higher number of working days compared to July 2023. Our banking channel checks indicate that higher clearing days impacted the realization of proceeds.
That said, IT export proceeds realization per day remained flat MoM in August 2023.
Among Computer Services, Hardware and Software Consultancy exports up 21% and 18% MoM respectively in August 2023.
Services Exports (Excluding IT) of Pakistan have also increased by 14% MoM due to the abovementioned reasons.
On a YoY basis, IT exports for August 2023 increased by 3% to US$235mn due to 11% YoY increase in Telecom and 1% YoY increase in 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 the exchange rate.
According to the IT Minister, IT companies are holding around US$1-2bn outside Pakistan.
In 2MFY24, IT exports have increased by 5% YoY to clock in at US$449mn.
Improvement in IT exports mainly reflects the global increase in IT spending. As per Gartner Inc. (Technology Research and Consulting firm) worldwide IT spending is projected to US$4.7trn in 2023, an increase of 4.3% from 2022.
Net IT Exports (Exports-Imports) for August 2023 have increased by 7% MoM and by 3% YoY to US$204mn. In 2MFY24 Net exports have increased by 4% YoY to US$394mn compared to an increase of 5% YoY in overall IT exports number.
Net IT Exports on TTM basis as of August 2023 also have grown by 13% 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 2023 PE of 13.1x and PS of 2.6x.
In 2MFY24, gross IT exports as % of total exports increased at 7.9% compared to 7.0% in 2MFY23.
Segment wise breakdown for the month of August 2023 indicates that Telecom Services increased by 12% MoM and by 11% YoY to US$46mn and Computer Services increased by 9% MoM and by 1% YoY to US$189mn.
The total share of Telecom/Computer Services exports for August 2023 stood at 20%/80% respectively compared to 18%/82% share in August 2022.
In 2MFY24 Telecom/Computer share of exports stood at 19%/81% similar to witnessed same period last year.
Courtesy – Topline Pakistan Research