Joint Stock Company Kaspi.kz (KSPI)

Executive Summary / Key Takeaways

• Dominant Super App Ecosystem: Kaspi.kz has built Kazakhstan's de facto digital infrastructure, capturing approximately 70% of e-commerce market share while processing payments for 78% of the country's cashless transactions, creating network effects that drive 18-20% underlying net income growth despite near-term headwinds.

• Strategic Inflection Through International Expansion: The $650 million Hepsiburada (HEPS) acquisition and planned $300 million Rabobank investment in Turkey represent a calculated pivot from domestic monopoly to regional platform player, funded entirely by the company's massively cash-generative Kazakhstan operations without diluting shareholders.

• Temporary Headwinds Masking Underlying Strength: Smartphone supply disruptions, high interest rates, and new regulatory taxes have artificially suppressed 2025 reported growth to ~10%, but the core business excluding these factors is tracking 18-20% net income growth, creating a potential valuation inflection point as these issues normalize in 2026.

• Capital Allocation Signals Management Conviction: The initiation of a $100 million ADS buyback program in November 2025, combined with explicit plans to resume dividends in 2026, indicates management views the stock as attractively valued and the business model as sufficiently robust to fund both growth investments and shareholder returns.

• Critical Execution Variable: The investment thesis hinges on Kaspi's ability to replicate its super app playbook in Turkey's 85-million-person market while navigating regulatory sensitivity at home, with Hepsiburada's Q3 2025 negative EBITDA serving as an early indicator of the execution challenge ahead.

Setting the Scene: Kazakhstan's Digital Operating System

Joint Stock Company Kaspi.kz, incorporated in 2008 and headquartered in Kazakhstan, has evolved far beyond its origins as a fintech provider into something far more valuable: the digital operating system for Central Asia's largest economy. The company operates two interconnected super apps—one for consumers, one for merchants—linked by a proprietary payment network, marketplace, and financial services ecosystem. This isn't merely a collection of digital services; it's a closed-loop system where each transaction generates data that strengthens risk models, each merchant relationship creates switching costs, and each new vertical reinforces customer lock-in.

Kaspi's market position reflects structural advantages that traditional banks and pure-play e-commerce platforms cannot replicate. In payments, Kaspi and Halyk Bank (HLKGY) collectively control 78% of cashless transactions, but Kaspi's mobile-first architecture and merchant integration create a user experience gap that Halyk's branch-based heritage struggles to match. In e-commerce, Kaspi commands roughly 70% market share, dwarfing cross-border competition from Russian platforms like Wildberries that lack local payment integration and fintech capabilities. This dominance matters because it transforms Kaspi from a service provider into essential infrastructure, giving it pricing power and data advantages that compound over time.

The industry context amplifies Kaspi's opportunity. Kazakhstan's e-commerce penetration remains low relative to developed markets, while cashless transaction growth continues at double-digit rates. High interest rates, typically a headwind for fintech, have become a tailwind for deposit acquisition as Kaspi attracts customers with 18% rates on three-month deposits. The smartphone supply disruption that plagued 2025, while painful in the short term, reflects a market where underlying demand for digital services remains robust and will recover as regulatory friction normalizes.

Technology, Products, and Strategic Differentiation: The Network Effect Engine

Kaspi's super app architecture represents a fundamentally different approach than Western fintechs or e-commerce platforms. By maintaining separate consumer and merchant applications connected through a unified backend, Kaspi creates distinct but reinforcing network effects. Consumers gain access to payments, shopping, travel booking, and financial services in one interface, while merchants receive integrated payment processing, inventory management, advertising tools, and lending. This matters because each side's engagement directly enhances value for the other, creating a moat that single-sided platforms cannot cross.

The company's product innovation pipeline demonstrates how it deepens this moat. "Pay by Palm" (Kaspi Alaqan), launching in late 2025, will offer biometric payments free to merchants for three months, further embedding Kaspi's infrastructure into physical retail. The Kaspi AI Assistant, enriching product content for merchants starting January 2026, has already shown dramatic results: a kettle product saw 83% sales uplift after AI-generated content enhancement. These aren't feature additions; they're mechanisms to increase merchant dependency and consumer engagement simultaneously.

Kaspi's data-driven risk management technology provides a structural cost advantage. The fintech platform maintains a cost of risk around 2.1% while growing its loan portfolio 30% year-over-year, reflecting proprietary AI models that traditional banks like Halyk cannot match. The integration of Glovo's restaurant delivery into the super app, processing over 1 million transactions in Q3 2025, shows how Kaspi can absorb third-party services and capture their transaction data, further strengthening its network effects.

Financial Performance & Segment Dynamics: Evidence of Moat Strength

Kaspi's Q3 2025 results provide clear evidence that its super app model translates into superior economics, even as temporary headwinds obscure the underlying trajectory. Consolidated net income grew 14% year-over-year, but this figure masks the true health of the business. Excluding the 4% drag from higher interest rates, 1% impact from new taxes on government securities, and 1% from increased reserve requirements, underlying growth reaches 20%—exactly in line with the company's historical performance. This demonstrates that the core engine remains intact, with external factors creating a temporary valuation opportunity.

The Payments Platform exemplifies operational gearing at work. Despite a 9 basis point take rate decline from QR payment mix shift, net income grew 12% on 18% TPV growth. This implies that Kaspi's fixed cost base and liquidity revenue generation allow profit growth to outpace revenue, a hallmark of scalable network infrastructure. Merchant balances in wallets grew 22% year-over-year, indicating that merchants aren't just using Kaspi for transactions but are leaving funds within the ecosystem, reducing funding costs and increasing switching costs.

Marketplace performance reveals both resilience and strategic evolution. GMV growth of 12% appears modest until you exclude the 8 percentage point drag from smartphone supply shortages, which pushed underlying growth to 20%. More importantly, the take rate hit an all-time high of 10.3%, driven by value-added services like advertising (up 56% year-over-year) and delivery. This indicates Kaspi is successfully monetizing its ecosystem beyond transaction fees, with merchants willing to pay premium rates for access to its 12.5 million active consumers. The e-Grocery vertical's 53% GMV growth, while lower-margin, drives high-frequency engagement that increases overall platform stickiness.

The Fintech Platform faces the clearest headwinds but also the most visible path to recovery. TFV growth of 16% remains robust, but net income growth of 15% (28% excluding rate impacts) reveals how severely high interest rates compress margins. The loan portfolio grew 30% while deposits increased 18%, pushing the loan-to-deposit ratio to 97% and increasing funding costs. However, this creates an opportunity: new term deposit products offering 18% rates have attracted significant inflows, acquiring customers who will eventually transact across Kaspi's platforms. When rates normalize, as management expects, these deposits will become dramatically more profitable, creating a future earnings tailwind.

Hepsiburada's Q3 2025 results show the execution challenge ahead. GMV grew 15% inflation-adjusted, but EBITDA remained negative as Kaspi invested in delivery infrastructure, BNPL partnerships with third-party banks, and user experience improvements. This highlights that Kaspi's super app model isn't immediately transferable; it must be rebuilt for Turkey's competitive landscape and consumer behavior.

Outlook, Management Guidance, and Execution Risk

Management's 2025 guidance reveals a company navigating temporary disruptions while positioning for accelerated growth. The revised forecast of ~10% consolidated net income growth for Kazakhstan reflects smartphone issues, regulatory changes, and a higher base rate, but management explicitly states that excluding these factors, growth would be 18-20%. This guidance frames 2025 as an investment year rather than a deterioration in fundamentals, with the smartphone disruption expected to "naturally resolve" by March 2026, creating favorable base effects.

The capital allocation strategy signals management's confidence in both the business model and current valuation. The $100 million ADS buyback program, launched in November 2025, represents a shift from dividends to repurchases, which management describes as "an incredibly strong case" given the stock's valuation. The decision to fund Hepsiburada from operating cash flow, resulting in no dividends for Q4 2024 and H1 2025, demonstrates discipline in avoiding dilution. This signals management views the stock as attractively priced while prioritizing long-term value creation over short-term income distributions.

Hepsiburada's strategic priorities reveal Kaspi's methodical approach to international expansion. Rather than pursuing quick wins, management is focusing on four areas: improving delivery economics for low-ticket items, expanding BNPL partnerships with Turkish banks, optimizing performance marketing, and redesigning user experience. The user experience improvements have already shown results, with "recently viewed" sections increasing click-through rates from 15% to 31%. This suggests Kaspi is applying the same product-quality-first philosophy that built its Kazakhstan dominance, even if it means accepting near-term losses for long-term market position.

The fintech outlook contains the most significant potential inflection. Management views the high interest rate environment as an "opportunity to acquire more customers with savings," building a deposit base that will become dramatically more profitable when rates normalize. The planned $300 million investment in Rabobank, expected to close in H2 2025, will provide the banking license needed to launch Kaspi's full fintech suite in Turkey. This positions Kaspi to replicate its most profitable business model in a market 3.5x larger than Kazakhstan, with the timing aligned to Turkey's macroeconomic stabilization.

Risks and Asymmetries: What Can Break the Thesis

The smartphone supply disruption, while temporary, reveals Kaspi's vulnerability to regulatory shocks beyond its control. The new registration requirements, combined with iPhone 17 shortages, created an 8 percentage point GMV drag and 3 percentage point net income impact in Q3 2025. Management expects resolution by early 2026, but this episode demonstrates how quickly regulatory changes can affect performance. The risk is that future regulatory shifts—such as the discussed VAT changes or national payment network—could have more permanent impacts.

Kazakhstan's high interest rate environment presents a double-edged sword. While management frames it as a customer acquisition opportunity, the 70 basis point year-over-year increase in deposit funding costs directly compresses fintech margins. The base rate increase from 15.25% to 16.5% alone reduced Q3 net income growth by 4 percentage points. If rates remain elevated longer than expected, or if the National Bank raises them further to combat inflation from lower oil prices, Kaspi's profitability could face sustained pressure, delaying the anticipated margin recovery.

Regulatory and tax changes have already created a 200 basis point headwind on 2025 net income growth. The 10% tax on government securities revenue and increased minimum reserve requirements (which accrue no interest) each reduced net income by 1% in Q3, and discussions about raising the bank income tax from 20% to 25% could create additional drag. While management notes that "there's never really been a regulatory decision that had a dramatic impact on the business model," the cumulative effect of these changes demonstrates increasing government extraction from Kaspi's profitability.

The Hepsiburada acquisition represents the largest execution risk. Turkey's e-commerce market is more competitive, and politically driven consumer boycotts in March 2025 showed how quickly sentiment can shift. While Q2 2025 showed recovery with volumes up 7% year-over-year, the business remains unprofitable with negative EBITDA as Kaspi invests heavily. The $300 million Rabobank investment adds execution complexity, requiring Kaspi to build a fintech business from scratch in a market where it lacks the brand dominance and merchant relationships that underpinned its Kazakhstan success.

Valuation Context: Pricing a Dominant Platform with Optionality

At $77.31 per share, Kaspi trades at 6.98 times trailing earnings and 2.21 times sales, metrics that appear modest for a business with 59.55% ROE and 53.95% operating margins. The enterprise value of $15.34 billion represents 3.48 times EBITDA, suggesting the market is pricing in significant headwind persistence. This creates potential upside if management's thesis plays out: that smartphone issues resolve, rates normalize, and regulatory impacts fade.

The cash flow metrics reveal a business converting profits to cash efficiently. Price-to-operating-cash-flow of 15.96 and price-to-free-cash-flow of 22.26 reflect strong conversion, with $947.97 million in annual free cash flow funding both the Hepsiburada acquisition and the new buyback program. The balance sheet provides strategic flexibility: debt-to-equity of 0.18 and a current ratio of 4.29 indicate minimal leverage risk, while the 10.03% dividend yield (based on historical payments) shows the income potential that buybacks aim to enhance.

Comparing Kaspi to its stated competitors highlights its premium positioning. Halyk Bank, while larger by assets at ~$34 billion versus Kaspi's ~$15 billion, grew net income 26.8% in 9M 2025 but lacks Kaspi's super app integration and growth verticals. ForteBank's (FTEB.KZ) 33% net profit growth in Q1 2025 reflects solid execution but at a fraction of Kaspi's scale and without marketplace or travel ecosystems. Kaspi's 74.12% gross margin and 30.11% net margin exceed traditional banking economics, reflecting its technology platform premium.

The valuation asymmetry lies in the Turkey optionality. If Hepsiburada achieves even a fraction of Kaspi's Kazakhstan dominance in an 85-million-person market, the current multiples would prove conservative. Conversely, if execution falters or domestic headwinds persist, the low multiples provide downside protection relative to high-growth tech peers. The $100 million buyback, representing roughly 0.6% of market cap, may seem modest but signals management's willingness to act on valuation disconnects.

Conclusion: A Dominant Platform at an Inflection Point

Kaspi.kz represents a rare combination of entrenched market dominance, proven business model economics, and meaningful growth optionality. The company's super app ecosystem has created a self-reinforcing moat in Kazakhstan that generates 59.55% ROE and 30.11% net margins while maintaining 18-20% underlying growth. The temporary headwinds of 2025—smartphone supply, high interest rates, regulatory changes—have created a valuation disconnect that management is addressing through disciplined capital allocation.

The critical variable for investors is execution of the Turkey expansion. Hepsiburada's Q3 performance shows early progress but also the scale of investment required. If Kaspi can replicate its product-quality-first approach and super app integration in Turkey, the addressable market more than triples. If not, the domestic business alone justifies the current valuation, particularly as smartphone issues resolve and interest rates normalize.

The thesis hinges on whether Kaspi is a Kazakhstan story nearing maturity or a regional platform in its early chapters. The evidence suggests the latter: a massively cash-generative core business funding international expansion, with management's buyback decision signaling confidence that the market underappreciates both the durability of the domestic moat and the probability of successful international replication. For investors willing to look through near-term noise, Kaspi offers exposure to emerging market digitalization with the downside protection of a proven, profitable business model.