Pakistan’s IT Exports in May 2023 Surge 24%, Reach US$236mn
Pakistan’s IT exports in May 2023 increased by 24% MoM. Segment wise Telecom and Computer Services increased by 92% and 11% MoM.
Among Computer Services, the Export of Software, Other Services, and Software Consultancy increased by 14%, 13%, and 8% MoM respectively.
IT exports increased on an MoM basis due to a higher number of working days in May 2023 compared to April 2023. As per our channel checks, the number of clearing days has an impact on the realization of proceeds.
Services Exports (Excluding IT) of Pakistan have also increased by 18% MoM in May 2023 due to the reason cited above.
IT Export proceeds realization per working day declined to US$10.7mn/day in May 2023 compared to US$11.2mn/day in April 2023.
On a YoY basis, IT export numbers for May 2023 increased by 28% to US$236mn due to a 95% YoY increase in Telecom and a 16% YoY increase in Computer Services.
The increase on a YoY basis is due to low base effect (May 2022: US$184mn) and potentially due to interbank rates reaching Rs298.93 on May 11, 2023.
In 11MFY23, IT exports have marginally declined 1% YoY to record US$2.37bn.
IT export number only indicates the amount remitted back to Pakistan by tech companies and freelancers. It does not include income retained abroad.
According to our channel checks, IT players are retaining a greater portion of their proceeds outside the country due to declining business confidence and volatility of the exchange rate.
May 2023 exports are the 2nd highest number in FY23 (Dec 2022: US$246mn). This number is also above the FY23 average exports of US$215mn.
At the current run rate, IT exports is expected to clock in at US$2.58bn in FY23, which would be a decline of 1% YoY vs FY22.
Segment-wise breakdown for the month of May 2023 indicates that Telecom Services increased by 92% MoM and by 95% YoY to US$55.5mn and Computer Services increased by 11% MoM and by 16% YoY to US$180.3mn.
The total share of Telecom/Computer Services exports for May 2023 stood at 24%/76% respectively compared to 15%/85% share in May 2022.
In 11MFY23 Telecom/Computer share of exports stood at 19%/81% compared to a 20/80% share in 11MFY22. This is because Telecom Services exports have declined by 2% YoY in 11MFY23 vs. Computer Services exports remaining flat in the same period.
Net IT Exports (Exports-Imports) for May 2023 have increased by 26% MoM and by 46% YoY to US$211mn. 11MFY23 Net exports have increased by 16% YoY to US$2.1bn compared to a decline of 1% YoY in gross IT exports number.
Net IT Exports on a TTM basis as of May 2023 also have grown by 17% YoY to US$2.29bn.Pakistan’s Textile Exports Show Promising Growth in May 2023, Despite YoY Decline
As a result of MoM increase in IT exports for May 2023, IT exports as % of total exports stood at 7.4% for the month compared to 7.3% in April 2023 and 6.2% in May 2022.
In 11MFY23 IT exports as % of total exports stand at 7.3% compared to 6.7% in 11MFY22.
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 against the overall growth estimation of 5.5% for 2023.
This presents an opportunity for companies such as Systems Limited (SYS), which is our top pick in the IT sector, Topline Research said in a report. SYS currently trades at a 2023 PE of 12.1x and PS of 2.4x.
