Systems Limited (SYS) announced its 2QCY24 financial results today. The company posted a Profit after Tax (PAT) of PkR1.7bn (EPS: PkR5.7) vs PkR1.2bn (EPS: PkR4.9) in SPLY, up 18% YoY. Earnings were below our estimate of PkR6.7/sh, primarily due to lower gross margins than anticipated.

·         Company reported revenue of PkR15.8bn in 2QCY24, compared to PkR12.5bn in SPLY, up 27%YoY. The increase in revenue is attributed to robust growth of 93%/29%/17%YoY in Europe/MENA/North American regions, respectively.

·         Gross margins contracted significantly to 22%, down from 28% in 2QCY23. This is primarily due to changes in the workforce mix, with labor costs being higher in the MENA region compared to Pakistan, and the impact of wage inflation.

·         Notably, gross margins decreased significantly in the MENA region, down to 21% in 2QCY24 vs. 34% in 2QCY23.

·         Subsequently, operating expenses saw a notable decrease of 12%YoY.

·         Other income witnessed a 40%YoY decrease to PkR171mn vs. PkR286mn in SPLY, largely attributable to lower exchange gains due to stability in local currency.

·         Finance cost decreased to PkR139mn, down from PkR251mn in 2QCY23, decline of 45%YoY, mainly on the back of reduced borrowings.

·         Overall, 1HCY24 earnings accumulated to PkR11.1/sh vs. PkR18.2/sh in SPLY, down 39%YoY.

Courtesy –  AKD Research