It is the largest Pakistani information technology company by revenue, and has been growing rapidly for the past decade, having become a market darling for investors of stocks listed on the Pakistan Stock Exchange. The question has always been the extent to which Systems Ltd can keep its stellar trajectory going. Market analysts seem to believe that the answer is “for the foreseeable future”.
According to a comprehensive report by Topline Securities, the company is expected to outperform the broader IT industry, with its market share in Pakistan’s IT exports projected to rise to 6.8% by 2027.
Founded in 1977 as one of Pakistan’s first software companies, Systems Ltd has evolved into a global player with a diverse portfolio of services and an expanding international footprint. The company, which went public on the Pakistan Stock Exchange (PSX) in 2015, has seen its market valuation soar from Rs4 billion at the time of listing to an impressive Rs166 billion today.
Topline Securities has reiterated its “Buy” recommendation for Systems Ltd, setting a December 2025 target price of Rs707 per share. This represents a potential upside of 24% from the current market price of Rs568.95, with a total expected return of 26% including dividend yield.
The optimistic outlook is underpinned by several key factors. [restrict level=1]
Systems Ltd is expected to deliver impressive earnings growth in the coming years. The company’s earnings per share (EPS) is forecast to grow at a compound annual growth rate (CAGR) of 33% over the next three years (2025-2027) and 26% over the next five years (2025-2029). This compares favorably to the company’s remarkable five-year CAGR of 52% from 2019 to 2023.
For the years 2025 and 2026, earnings growth is projected at 38% and 35%, respectively. This rebound comes after an anticipated 24% decline in earnings for the first nine months of 2024, primarily due to economic challenges in Pakistan.
The company’s gross margins are expected to improve from 23.9% in 2024 to 25.6% by 2027, driven by cost optimization strategies and the likely absence of exchange losses. EPS is forecast to reach Rs36.5 in 2025, Rs49.1 in 2026, and Rs62.6 in 2027, following an estimated 11% decline in 2024.
Systems Ltd’s geographical diversification strategy has been a key driver of its growth. In the first nine months of 2024, the company derived 58% of its revenue from the Middle East, 22% from North America, 13% from Pakistan, 4% from Asia Pacific, and 4% from Europe.
The Middle East region has become the company’s largest revenue contributor since 2022, with its share more than doubling from 27% in 2020 to 58% in 2024. Topline Securities expects Middle East revenue to grow at a three-year CAGR (2025-2027) of 28% in USD terms and 35% in PKR terms, reaching US$296 million or Rs96 billion by 2027.
The company’s expansion into the Asia Pacific region, which began in 2022, has shown promising results. Revenue from this region is projected to grow at a three-year CAGR (2025-2027) of 35% in USD terms and 42% in PKR terms, reaching US$21 million or Rs6.9 billion by 2027.
Systems Ltd has consistently outpaced the growth of Pakistan’s overall IT export sector. While Pakistan’s IT exports have increased at a five-year (2019-2023) and ten-year (2014-2023) USD CAGR of 20% and 12% respectively, Systems Ltd’s exports have grown at 37% and 30% over the same periods.
The company’s share of Pakistan’s IT exports is expected to rise from 5.8% in 2024 to 6.8% by 2027. Topline Securities forecasts that Systems Ltd’s exports will grow at a three-year (2025-2027) USD CAGR of 23%, reaching US$391 million by 2027.
Systems Ltd has been strategically expanding its workforce outside Pakistan to tap into diverse talent pools and better serve international markets. The share of employees based in Pakistan has decreased from 95.0% in 2019 to 84.6% by 2024, with a notable increase in resources based in the United Arab Emirates (UAE) from 5.0% to 10.5% over the same period.
The company has also established a resource center in Egypt, which now accounts for 2.5% of its total workforce. This move allows Systems Ltd to leverage Arabic-speaking talent to support its growth in the Gulf Cooperation Council (GCC) region.
Despite this international expansion, Pakistan remains a cost-effective base for IT talent. The average monthly package for a senior software developer in Pakistan is approximately US$1,500, significantly lower than in other popular IT outsourcing destinations such as India (US$2,000), the Philippines (US$2,300), and China or Singapore (US$5,500).
Systems Ltd is expected to generate robust EBITDA of Rs13.0 billion in 2025, Rs17.3 billion in 2026, and Rs21.8 billion in 2027. This strong cash flow generation positions the company well for future acquisitions and inorganic growth opportunities.
The company has already demonstrated its appetite for strategic acquisitions, having invested approximately Rs5.3 billion in recent years (2021-2023) to acquire subsidiaries such as Ndc Tech and Treehouse Consulting, along with their related intellectual property and licenses.
Systems Ltd currently trades at a 2025/2026 forward price-to-earnings (PE) ratio of 15.6x and 11.6x, respectively, compared to its five-year average PE of 16.0x and ten-year average of 14.1x. These valuations are particularly attractive when compared to regional peer companies, which trade at an average PE of 24.0x.
The company also trades at 2025 and 2026 price-to-sales (PS) ratios of 1.9x and 1.5x, respectively, significantly lower than the regional peer average of 4.1x. This suggests that Systems Ltd’s stock may be undervalued relative to its growth prospects and industry peers.
Pakistan’s IT industry has been experiencing robust growth, with the country ranked 4th globally for freelance income growth according to Payoneer’s Global Gig Economy Index. The government has also been supportive of the sector, with the State Bank of Pakistan recently allowing IT companies to retain up to 50% of export proceeds in specialized foreign currency accounts and permitting foreign acquisitions from those proceeds without prior approval.
These favorable regulatory developments, coupled with Pakistan’s competitive advantage in terms of cost-effective IT talent, position Systems Ltd well to capitalize on the growing global demand for IT services.
Despite the positive outlook, investors should be aware of potential risks facing Systems Ltd and the broader IT sector in Pakistan. These include:
- A potential slowdown in global IT spending, which could impact demand for the company’s services.
- High employee turnover due to competition from startups, freelancing opportunities, and talent migration.
- Unfavorable government policies that could affect export growth.
- Substantial appreciation of the Pakistani Rupee, which could impact the company’s profitability.
- The possibility of normal taxation being applied to services exporters, similar to goods exporters.
- Existential threats such as the rise of Artificial Intelligence (AI) that could disrupt the IT industry.
Systems Ltd stands at the forefront of Pakistan’s rapidly growing IT industry, with a strong track record of outperformance and a promising outlook for the years ahead. The company’s geographical diversification, focus on high-growth markets like the Middle East and Asia Pacific, and strategic workforce expansion position it well to capitalize on global opportunities in the IT services sector.
With attractive valuation metrics, robust financial projections, and a demonstrated ability to generate strong cash flows, Systems Ltd presents a compelling investment case for those looking to gain exposure to Pakistan’s thriving IT sector. As the company continues to expand its global footprint and enhance its service offerings, it is well-positioned to maintain its leadership in Pakistan’s IT exports and potentially emerge as a significant player on the international stage.
However, investors should remain mindful of the inherent risks in the rapidly evolving IT industry and the broader economic challenges facing Pakistan. Nonetheless, for those with a long-term investment horizon and a bullish outlook on the global IT services market, Systems Ltd appears to be a stock worth watching closely in the coming years. [/restrict]
