Karachi: Systems Limited (SYS) reported a 21% year-over-year increase in earnings per share (EPS) for the first quarter of 2026, reaching Rs2.05, despite lower-than-expected gross margins, according to its latest financial results. The company's consolidated profit after tax (PAT) amounted to Rs3 billion, though this marked a 2% decline from the previous quarter.

According to JS Global, the company's net sales for the quarter rose by 33% year-over-year to Rs24 billion, driven largely by significant growth in the Middle East segment, which increased from Rs10.2 billion in the first quarter of 2025 to Rs14 billion in the same period of 2026. The North American region also experienced a 33% year-over-year and 39% quarter-over-quarter revenue growth, attributed to the integration of Confiz accounts following a recent acquisition. Systems Limited anticipates the full impact of this acquisition will be realized in the latter half of 2026.

The company's gross margins stood at 25% for the quarter, a decrease from the recent trend of approximately 30%. Margins saw a decline across all regions, with North America at 28%, Europe at 33%, the Middle East at 24%, Asia Pacific at 29%, and Pakistan at 19%. Meanwhile, other income saw a quarterly increase of 130% to Rs340 million, despite an exchange loss of Rs75 million due to the appreciation of the Pakistani Rupee.

Selling and distribution costs rose 39% year-over-year to Rs867 million, driven by the company's robust growth strategy across its markets. Additionally, finance costs increased by 44% year-over-year and 42% quarter-over-quarter, reaching Rs129 million. The effective tax rate for the period was 9%, compared to 7% in the first quarter of 2025 and 14% in the fourth quarter of 2025.

JS Global maintains a "BUY" recommendation for Systems Limited, noting that the company is trading at a 2026 estimated and 2027 forecasted price-to-earnings ratio of 14.0x and 10.9x, respectively.