Systems Limited (SYS) recently held an analyst briefing to discuss its CY24 financial results and future outlook.

The following are the key points:

• The company posted its highest-ever revenue of PkR67.5bn in CY24, an increase of 26% Yoy, compared to PkR53.4bn in SPLY. Of the total revenue, 94% is generated in foreign currency. The company has achieved a 5-year revenue CAGR of 62%.
• Clients with revenue above US$100k currently stand at 250, compared to 236 in CY23. Moreover, the number of clients in the US$3–5mn range has risen to 11, up from 4 in CY23.
• Gross margins for the year reached 23.8%, down from 25.6% in SPLY. Margins for CY24 remained under pressure due to inflation, resulting in an upward ~20% increment in salaries in efforts to retain talent. The currency’s appreciation also had a negative impact on the business.
• Additionally, the GCC region’s implementation of visa restrictions is expected to result in improved talent retention.
• As per management prior investments in technologies, including AI, have begun to yield results by converting previously unbillable work into billable outcomes, which is expected to improve gross margins.
• Recently announced reciprocal tariffs by the U.S. do not negatively impact the company, as they do not apply to services. In fact, management views these tariffs as a potential opportunity. The resulting inflationary pressure on clients and prospective customers is expected to drive greater focus on cost control through rightsizing and digitalization.
• Management also emphasized that they are no longer actively exploring new markets or segments. Instead, their focus has shifted to optimizing returns from past investments.
• Company is now placing greater emphasis on onboarding enterprise clients, shifting away from its previous focus on small to medium-sized businesses.
• Management sees significant potential in the MENA region, where the market remains largely untapped. As a result, they are actively focusing on expanding their presence in Saudi Arabia.
• Management plans to enhance gross margins in Pakistan by prioritizing enterprise clients. The focus will be on improving margins rather than solely increasing revenue.
• We maintain our ’BUY’ stance with Dec’25 target price of PkR879/sh for the scrip due to: i) Increase in global IT spending, ii) strong presence in the MENA region, and iii) improvement in gross margins amid consolidation.

Courtesy – AKD Research