SYS ROE Rising from 21% to 30% by 2026 according to Topline Securities

A Tech Giant’s Next Leap

Systems Limited (SYS), a significant player in Pakistan’s technology sector, is poised for a period of accelerated growth. According to a recent report from Topline Securities, the company’s Return on Equity (ROE) is projected to climb from 21% in 2024 to a robust 30% by 2026. In simple terms, Return on Equity is a key indicator of how efficiently a company uses investors’ money to generate profits. This forecast indicates that Systems Limited is on a path to becoming significantly more profitable and efficient in the years to come.

The Engine of Growth: Strategic Acquisitions

This impressive growth forecast is not happening in a vacuum. The primary driver behind Topline’s revised and more optimistic earnings estimates is the company’s recent series of strategic acquisitions. These moves are designed to expand the company’s market footprint, talent pool, and client base. The two key acquisitions highlighted in the report are:

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• Confiz Limited
• British American Tobacco SAA Services

While the Confiz deal is the larger of the two, the acquisition of British American Tobacco SAA Services is also projected to contribute an estimated US$10-12 million in annual revenue.

A Closer Look at the Confiz Limited Acquisition

The acquisition of Confiz Limited, one of Pakistan’s top three IT services firms, is a particularly transformative deal, as Confiz generates revenue equivalent to approximately 10% of Systems Limited’s own. The acquisition provides substantial and multifaceted strategic benefits:

• Strengthened North American Foothold: Approximately 90% of Confiz’s revenue is generated from North America. This deepens Systems Limited’s presence in the region and provides access to a market where revenue per employee is comparatively higher.
• High-Profile Clientele: The acquisition brings a high-value client base that includes major retail chains such as Walmart, Nordstrom, and Macy’s. While Confiz experienced earnings pressure last year due to high client concentration, the recent onboarding of Nordstrom has helped stabilize performance and improve revenue visibility.
• Expertise in Key Verticals: Confiz possesses strong specialization in the retail and consumer packaged goods (CPG) sectors, with a particular technical focus on the Microsoft ecosystem, including Dynamics 365 and Power Platform.
• Talent Expansion: The deal adds over 700 skilled employees to the company, expanding SYS’s global workforce to approximately 9,000 professionals.
• Financial Structure: The transaction was structured as a 100% share swap, which integrates the companies without a cash outlay but results in an estimated 4% dilution for existing Systems Limited shareholders.

The Financial Outlook in Plain Numbers

These strategic moves translate directly into strong financial projections from Topline Securities. The following table summarizes the key performance indicators and growth trajectory for Systems Limited over the next few years.

Systems Limited: Key Financial Projections

As the data shows, the company’s Return on Equity is on a clear upward path, projected to hit 30% by 2026. This is complemented by exceptional Earnings Per Share (EPS) growth, forecasted to be 57% in 2025 and 47% in 2026, signalling strong and sustained profitability.

Reinforcing its “Buy” stance, Topline Securities has set a December 2026 Target Price of Rs.221/share for Systems Limited, which suggests a potential total return of 37% for investors.

Potential Risks on the Horizon

To provide a balanced perspective, it is important to consider potential challenges that could impact these forecasts. Topline Securities has identified several key risks to watch for:

1. A significant appreciation of the Pakistani Rupee (PKR).
2. A slowdown in global IT spending.
3. Unfavourable government policies that could impact export growth.
4. Adverse regulatory changes related to taxation in the IT sector.

Conclusion

Systems Limited is executing a clear and aggressive growth strategy centred on strategic acquisitions. The addition of key players like Confiz Limited is positioning the company to significantly enhance its market position, client roster, and financial performance. The key projection from Topline Securities underscores this positive outlook: the company’s ROE is on an upward trajectory, reflecting a strong and profitable future built on strategic expansion.

⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →