SYS Sees US Tariffs as an Opportunity for Growth
Staff Report
Islamabad: The management of Systems Limited (SYS) has seen the recent US tariffs as an opportunity since the tariffs have not been imposed on services industry.
Systems Limited (SYS) held its corporate briefing today to discuss 2024 financial result and future outlook.
Management sees the recent US tariffs as an opportunity since the tariffs have not been imposed on services industry and also the tariffs will increase cost which the companies will mitigate through AI and outsourcing to companies such as Systems Limited. OCAC Seeks increase in OMCs Margin
SYS EBITDA margins in 2024 decreased to ~15% in 2024 compared to 18% in 2023. Revenue growth in USD terms was 27% in 2024 compared to 2% growth in EBITDA. In 2024 Revenue in USD terms stood at US$242.35mn and EBITDA stood at US$35.94mn.
Appreciation of PKR had dealt a blow to margins of the company since the management had planned for PKR to depreciate by 5% in 2024. Going, forward management is now focused on optimizing its operations rather than be dependent on PKR depreciation.
Company on average provided its employees with an increment of 20% at the start of 2024 due to inflationary environment in Pakistan and retention becoming harder due to migration of skilled resources to foreign countries. This situation has improved due to visa restrictions now placed on Pakistani resources.
Client composition of the company is composed of 250+ active clients compared to 236 in 2023. SYS now has a single client providing US$25mn plus in annual recurring revenues.
This customer account has been gradually increased from lower revenue per annum. Focus is to convert other clients in a similar manner.
The human resource dispersion of the company is composed of 82% in Pakistan, 12% in UAE and now 3% in Egypt. Rest of the 3% are in Qatar, Saudi Arabia and APAC.
Resources in Egypt have increased from 0.55% in 2022 to 3.19% currently.
SYS has 94% of revenue in foreign currency and rest in PKR. Whereas, the costs are 43% in foreign currency and 57% in PKR.
SYS is mainly targeting Saudi Arabia for growth. According to the management, company still has a small share of the market and there is a very high space for growth.
Company’s revenue increased by 27% in USD terms in 2024 to US$242.35mn. Earnings on the other hand declined mainly due to appreciation of PKR in 2024. US$34.18mn Net Profit in 2023 included exchange gain impact of US$8.0mn compared to profit of US$26.80mn in 2024 which includes exchange loss of US$0.9mn.
SYS management does not expect higher income taxation on services in FY26 budget similar to goods exports since government focus is on increasing IT exports.
SYS is a certified technology partner of brands such as Microsoft, IBM, Salesforce, Amazon and Temenos. The company has received numerous awards for its services and is a Top 100 partner of Microsoft by being part of Inner circle.
We maintain ‘Buy’ stance on Systems Limited with the company trading at 2025/26F PE of 13.5/10.0x respectively,” Topline Research said.
