Systems Limited EPS Rises 31% YoY, Misses Expectations

Staff Report:

Systems Limited (SYS) announced its 4Q2024 results, reporting a consolidated PAT of Rs2.03bn (EPS of Rs6.92), up 31% YoY but down 7% QoQ. The earnings fell short of expectations due to lower-than-expected gross margins and higher distribution costs.

Alongside the results, SYS declared a DPS of Rs6.00, in line with expectations, and announced a stock split in a 5:1 ratio.Small scale RE systems exempted from generation license

Gross margins for 4Q2024 stood at 23.6% compared to 25.3% in 3Q2024 and 19.7% in 4Q2023. Higher one-off trading revenue with lower margins impacted overall profitability.

Distribution costs surged 61% QoQ to Rs991mn due to the company’s aggressive growth strategy across all markets.

Earnings increased 31% YoY in 4Q2024, driven by higher net sales, improved gross margins, and reduced losses from associates.

Revenue rose 19% YoY and 11% QoQ to Rs19.2bn, with growth across Middle East (15%), North America (14%), Pakistan (36%), and Europe (64%). Revenue also grew ~20% in USD terms.

Loss from associates stood at Rs63mn in 4Q2024, significantly lower than Rs493mn in 4Q2023. Finance costs declined 62% YoY to Rs81mn due to lower interest rates.

The effective tax rate was 8.3% in 4Q2024 compared to 10.0% in 3Q2024 and 11.0% in 4Q2023.

For 2024, consolidated PAT dropped 14% YoY to ~Rs7.46bn, mainly due to an exchange loss of Rs264mn versus an exchange gain of Rs2.26bn in 2023.

Annual revenue increased 26% YoY (~27% in USD terms) to Rs67.47bn, though gross margins declined to 23.8% from 25.1% in 2023.

Within the IT sector, SYS remains our top pick. It is currently trading at 2025F and 2026F PE of 15.9x and 11.8x, respectively.