Systems Limited to hit Rs180/share by June 2026

August 4, 2025 (MLN): Systems Limited (PSX: SYS), has received a Buy call with a DCF-based target price of Rs180 per share by June 2026.

JS Global, which issued the buy call, noted that this represents an upside potential of 35% from current levels.

SYS is Pakistan’s largest listed IT services firm, offering end-to-end technology solutions including enterprise software implementation, cloud and digital transformation, IT consulting, and BPO.

The company serves clients across BFSI, telecom, retail, and healthcare, with 87% of its revenue export-driven. SYS operates through a robust global footprint across North America, Europe, the Middle East & Africa (MENA), and Asia-Pacific (APAC).

 The current trading price for SYS is around Rs137, down from a peak of nearly Rs550, on the back of technical adjustments rather than a deterioration in fundamentals.

In May 2025, Systems Limited increased its issued share capital through the issuance of 367,000 shares under the Employee ShareOption Scheme (ESOS).

This was followed by a 1:5 stock split effective May 31, 2025, which expanded the total number of shares to approximately 1.47 billion. These corporate actions significantly adjusted the per-share price without impacting intrinsic valuations, a key detail for interpreting recent price movements.

SYS’s most significant growth engine remains the Middle East and Africa (MENA) region, which now contributes 59% of the company’s topline.

MENA revenue climbed 35% YoY in CY24 and is forecast to grow at a 5-year CAGR of 71%, with Saudi Arabia and the UAE accounting for 80% of the region’s revenue.

The broader MENA IT services market is rapidly expanding, expected to reach US$54.9 billion by CY25.

Within that, Saudi Arabia SYS’s primary focus is poised to grow to US$69.8bn by CY30, at a CAGR of 31%, supported by aggressive national digitization agendas as estimated by the brokerage.

As shown above, SYS’s MENA revenue has grown exponentially since CY21 and is forecast to reach Rs84bn by CY27.

Saudi Arabia continues to drive future expansion, with management estimating 3–5x greater revenue potential compared to the UAE.

Beyond MENA, the company is well-placed in other global markets. North America, supported by SYS’s 28-year operational presence and long-standing client relationships, is forecast to post a 5-year CAGR of 19%.

Demand in this region is being driven by increased cloud migration, data-led strategies, and digital transformation across Retail and CPG sectors offering high-margin, long-term project opportunities.

In Europe, SYS continues to grow off a smaller base, with a projected CAGR of 22%.

The region is currently managed through the company’s Dubai operations and remains challenged by market maturity and competition, limiting its share in overall revenues despite steady progress.

In Asia-Pacific (APAC), the company delivered a 73% YoY increase in CY24, although this rapid growth is expected to normalize. Industry-wide projections suggest a 5-year CAGR of 9.5%, with SYS targeting 40% cumulative revenue growth in the region by CY29.

SYS’s Temenos Country Model Bank license gives it a strategic edge in core banking projects, positioning it strongly in APAC’s expanding digital banking space.

SYS’s vertical-wise performance in CY24 further reinforces its long-term appeal. The Banking, Financial Services, and Insurance (BFSI) segment remained the top revenue contributor, accounting for 30% of total revenues, driven by a 34% YoY increase.

The acquisition of Temenos’s regional partner has been pivotal SYS now holds first right of refusal to implement Temenos’s Core Model Bank in MENA and APAC, a structural edge in core banking transformation.

The Retail and Consumer Packaged Goods (CPG) segment matched BFSI in growth, also posting 34% YoY revenue expansion. Backed by stable clients in North America and Europe and strong recurring contracts, this segment delivered the highest gross margin and contributed 11% to overall revenue.

The Telecommunications vertical grew 31% YoY, contributing 23% to total revenue with a solid 26% gross margin, fueled by joint digital innovation projects with large telco.

Meanwhile, the Technology segment though slower in revenue growth at 9% maintained strong margins of 28%, supported by backend optimization and better delivery processes.

Trading at a forward CY26E P/E of 12x while earnings grow at a 5-year CAGR of 37%, SYS remains undervalued, according to JS Global.

With 94% of revenue in USD and only 43% of costs dollarized, the company benefits from a natural hedge against rupee depreciation, reinforcing its margin resilience.

SYS also continues to grow inorganically, recently acquiring BAT SAA Services to enhance its delivery footprint, a key provider of IT-led shared and digital services from BAT International Holdings (UK).

The deal, approved on July 29, 2025, is aligned with SYS’s long-term strategy to scale its global BPO footprint.

The company has consistently outpaced Pakistan’s IT export sector, increasing its share from 2.3% in CY17 to 6.6% in CY24, with expectations of crossing 7% by CY27 based on the estimates.

Risks to SYS Price

While SYS remains one of the most attractive plays in Pakistan’s technology sector, some risks could challenge the investment case.

Slower-than-expected growth in key regions, especially MENA, could limit topline momentum. While the company is expanding rapidly, revenue remains tied to macroeconomic health and client sector performance, making it susceptible to broader demand slowdowns.

Currency appreciation poses a profitability risk. A sustained strengthening of the Pakistani Rupee would reduce forex gains, potentially affect PKR-reported revenue and limit margin upside, particularly as 94% of revenues are USD-based.

Changes to the existing tax regime could impact earnings significantly. SYS currently enjoys a favorable 0.25% tax rate on export income, which is set to expire by June 2026.

A reversion to the standard 29% corporate tax rate (plus 10% super tax) would cut estimated CY27 earnings per share by 22%.

The company also faces long-term talent retention challenges. While Pakistan’s cost competitiveness supports margins, high attrition remains a structural issue.

 A growing number of skilled professionals are shifting to freelancing due to flexible work options and the same 0.25% tax incentive putting pressure on IT exporters to retain top-tier talent.

Finally, the rise of artificial intelligence presents a structural risk to legacy IT models. As enterprises increasingly shift toward AI-driven automation, traditional enterprise software models may face disruption.

This could force companies like SYS to adopt outcome-based pricing and rethink their commercial strategies to stay competitive.

With strong global positioning, robust free cash flows, a natural currency hedge, and accelerating demand in core verticals and geographies, Systems Limited stands out as a high-conviction Buy.

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