ISLAMABAD: Pakistan recorded monthly IT exports of US$298mn, up by 27% YoY and by 4% MoM ( month on month) in Aug-2024. These monthly IT exports in Aug-2024 are higher than last 12-month average of US$275mn.
According to Topline Securities, the main reason of YoY jump in IT exports is due to (i) IT export companies growing client base globally, especially in GCC region;(ii ) 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 (iii) stability in PKR encouraging IT exporters to bring higher portion of profits back to Pakistan.
However, increase in IT exports on month on month basis, is due to higher number of working days in August (21) compared to July (20). Export proceeds per day were recorded at US$14.2mn for August vs. US$14.3mn in July. Pakistani IT companies are active in engaging with global clients. Recently leading IT companies of Pakistan attended London Tech Week 2024, Collision Canada 2024, and Black Hat, USA.
According to Pakistan Software Houses Association (P@SHA) survey 62% of IT companies are maintaining specialized foreign currency accounts.
A major development in Jul-24 was SBP adding a new category of Equity Investment Abroad (EIA), specifically for export-oriented IT companies. IT exporters can now acquire interest (shareholding) in entities abroad utilizing up to 50% proceeds from specialized foreign currency accounts. This development will further boost confidence of IT exporters to remit proceeds back to Pakistan.
Net IT exports (exports-imports) displayed monthly number of US$257mn and increased by 26% YoY in Aug-2024. These net IT exports numbers in Aug-2024 are also higher than last 12-month average of US$241mn.
“ We believe, IT sector will continue its growth trajectory and momentum with likely growth of 10-15% for FY25 to US$3.5-3.7bn,”said Topline Securities.
Within the IT sector, Systems Limited (SYS) is our preferred pick. SYS is currently trading at 2024E and 2025F PE of 12x and 9x, respectively.
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