KARACHI: Listed technology companies posted a 15 percent increase in profit in the first quarter of FY27, riding strong export revenue, even as margins came under pressure, a brokerage report said on Wednesday.
Sherman Securities in its sector review said profit after tax of the listed computer services companies, excluding telecom operators, rose to Rs3.03 billion from Rs2.63 billion in the same period last year.
Sector revenue jumped 38 percent to Rs35.6 billion. Exports accounted for around 83 percent of the total, while the remaining 17 percent came from domestic sales.
The brokerage said the country’s computer services exports increased 18 percent year-on-year to $1 billion in 1QFY27. The listed IT sector made up about 10 percent of total exports, up from 8 percent a year ago.
Despite the robust topline, gross margin shrank to 26 percent from 30 percent as project execution costs went up amid the ongoing Middle East crisis. Distribution and administrative expenses rose 34 percent and 40 percent respectively, while finance cost doubled. Operating profit remained flat at Rs3.47 billion.
ITANZ reported a revenue growth of 644 percent, mainly on the acquisition of its Australian subsidiary and strong software licensing sales as domestic demand picked up. SYS, the largest company in the sector, saw its revenue increase 29 percent to Rs27 billion, with its technology segment doubling to Rs4.9 billion. The recent Confiz acquisition also strengthened its presence in the North American market.
AVN and SYM posted revenue growth of 123 percent and 104 percent, respectively. AVN’s growth was driven by retail fuel business projects despite slower order inflows and longer project execution cycles in the Middle East. Netsol, on the other hand, managed a meager 7 percent growth to Rs2.7 billion as subscription and support revenue fell 12 percent to Rs1.2 billion.
Netsol was the standout on margins, with gross margin expanding 12 percentage points to 50 percent on higher license and service revenue. ITANZ kept the highest gross margin at 87 percent and net margin at 71 percent.
Industrial technology companies fared the worst. AVN’s gross margin fell to 6 percent from 17 percent and its loss per share widened to Rs1.92 from Rs0.74. Its subsidiary Octopus, where gross margin dropped 21 percentage points to 21 percent, remained loss-making with a loss per share of Rs0.2.
The brokerage said the project-based models of these companies are more exposed to execution delays, supply chain disruptions and cost escalations.
Earnings per share of Netsol and ITANZ surged to Rs3.6 and Rs3.1, respectively, while SYS and SYM both posted a 9 percent increase to Rs2.0 and Rs0.18.
