Pakistan’s IT Exports In March 2023 Up 14% MoM

Pakistan’s IT exports in March 2023 experienced a recovery, up by 14% compared to the previous month due to a 51% increase in Telecom and 8% in Computer Services.

Other Services in Computer Services increased by 11% while Software Consultancy increased by 10%, and Computer Software remained flat.

In January 2023, exports declined by 23% due to a gap between Interbank and Grey Market rates of US Dollar, which has since reduced, allowing IT export realizations to recover in subsequent months.Pakistan IT Exports in September 2022 down by 10% MoM

However, IT export numbers for March 2023 decreased by 14% compared to the previous year due to a 16% decline in Computer Services.

IT export numbers refer to the amount remitted back to Pakistan by technology companies.

According to channel checks, IT companies are retaining a larger portion of their proceeds outside the country due to declining confidence in the country’s economic fundamentals.

In 9MFY23, IT exports remained flat year-on-year at US$1.94bn. Exports for March 2023 recovered above the US$200mn mark, exceeding the six-month rolling average of US$218mn.

However, a broader slowdown is being witnessed since April 2022, with YoY growth averaging 1% compared to the average 32% YoY growth in the prior eleven-month period from June 2021 to April 2022.

The slowdown in IT exports is indicative of a global slowdown in IT spending. Gartner reported that 2022 global IT spending slowed down to 0.5% in 2022 compared to 9.5% growth in 2021.

Due to the MoM recovery in March 2023, IT exports as a percentage of total exports increased to 7.3% compared to 6.9% in March 2022 and 7.0% in February 2023. In 9MFY23, IT exports as a percentage of total exports stood at 7.3% compared to 6.7% in 9MFY22.

The breakdown for March 2023 indicates that Telecom Services increased by 51% MoM while Computer Services increased by 8% MoM, with Telecom and Computer Services accounting for 20% and 80% of exports, respectively.

In 9MFY23, Telecom/Computer share of exports stood at 19%/81% compared to a similar share in 9MFY22.

Net IT Exports (Exports-Imports) during 9MFY23 have increased by 17% YoY to US$1.72bn compared to flat YoY overall IT exports number.

Going forward, despite the global slowdown, software and IT services spending is expected to increase by 12% and 9% respectively in 2023, according to Gartner research.

This presents an opportunity for companies such as Systems Limited (SYS), which is the top pick in the IT sector. SYS currently trades at a 2023 PE of 13.4x and PS of 2.9x.