Kaspi.kz The Dominant Super App in a Growing Digital Economy

Kaspi.kz represents a compelling investment opportunity, centered on its position as the dominant "super app" in Kazakhstan, a rapidly digitizing economy. The company's integrated ecosystem, spanning payments, marketplace, and fintech services, has fostered a loyal and engaged user base, creating a powerful network effect that drives growth and profitability, evidenced by its exceptional 80.5% Return on Invested Capital (ROIC). Our investment thesis is predicated on Kaspi's ability to continue to expand its user base, deepen user engagement, and leverage its platform to introduce new products and services, all while navigating the unique opportunities and risks of the Kazakh market.

Bull Case: High-Growth Scenario

Our high-growth scenario envisions Kaspi.kz firing on all cylinders, with a projected revenue CAGR of 23.3% and an impressive EPS growth of 25.4% through 2030. This scenario is underpinned by several key assumptions:

• Sustained Market Leadership: Kaspi.kz not only maintains but expands its market share across its key segments. The super app becomes even more deeply embedded in the daily lives of Kazakh consumers and merchants.
• Successful Product Innovation: The company continues to successfully roll out new and innovative products and services, further monetizing its user base. This could include expansion into new verticals like insurance, wealth management, or further penetration into the B2B market.
• Favorable Macroeconomic Environment: The Kazakh economy performs at the higher end of expectations, with robust GDP growth, rising disposable incomes, and a continued shift towards a digital, cashless society.
• International Expansion: While not a core part of the current thesis, any successful international expansion, even on a small scale, could provide a significant upside to this scenario.

Under this scenario, we project a 2030 stock price of $491.52, representing a total return of 417.2% and an impressive IRR of 45.4%.

Base Case: Mid-Growth Scenario

Our mid-growth, or base case, scenario reflects a more moderate but still very attractive growth trajectory. We project a revenue CAGR of 20.0% and EPS growth of 19.3%. This scenario assumes:

• Continued Strong Execution: Kaspi.kz continues to execute well, but faces increased competition, leading to slightly slower growth than the high-growth scenario.
• Stable Macroeconomic Conditions: The Kazakh economy grows in line with current forecasts, providing a stable backdrop for Kaspi's growth.
• Gradual Maturation of Core Markets: While still growing, the pace of growth in core markets like payments and marketplace begins to moderate as they reach higher levels of penetration.

In this scenario, we project a 2030 stock price of $335.94, delivering a total return of 253.5% and an IRR of 33.3%.

Bear Case: Low-Growth Scenario

Our low-growth scenario considers the potential for a more challenging operating environment. We project a revenue CAGR of 13.1% and EPS growth of 11.2%. This scenario could be triggered by:

• Macroeconomic Headwinds: A slowdown in the Kazakh economy, potentially due to lower oil prices or geopolitical instability in the region, could dampen consumer spending and credit demand.
• Increased Regulatory Scrutiny: As a systemically important financial institution, Kaspi.kz is subject to significant regulatory oversight. Any adverse regulatory changes could impact its profitability and growth prospects.
• Competitive Pressures: Increased competition from both domestic and international players could erode Kaspi's market share and pricing power.
• Execution Missteps: Any significant stumbles in execution, such as a failed product launch or a data security breach, could damage the company's brand and financial performance.

In our low-growth scenario, we project a 2030 stock price of $183.84, which would still generate a total return of 93.4% and an IRR of 16.2%.

Key Business Risks

An investment in Kaspi.kz is not without its risks. We have identified the following key risks that could impact our investment thesis:

• Geopolitical Risk: While Kaspi.kz's operations are almost entirely within Kazakhstan, the country's location in a volatile region presents a degree of geopolitical risk. Any instability in the region could have a negative impact on the Kazakh economy and, by extension, on Kaspi.kz.
• Regulatory Risk: As a financial technology company that operates a licensed bank, Kaspi.kz is subject to a complex and evolving regulatory landscape. Changes in regulations related to consumer lending, data privacy, or interchange fees could have a material impact on the company's business.
• Concentration Risk: With virtually all of its revenue generated in Kazakhstan, Kaspi.kz is highly exposed to the economic and political fortunes of a single country.
• Competition: The digital payments and e-commerce markets are highly competitive. While Kaspi.kz has a dominant position in Kazakhstan, it faces potential competition from other domestic players, as well as large international technology companies that may seek to enter the market.
• Valuation: While we believe the stock is attractively valued, particularly in our base and bull case scenarios, the stock has experienced significant volatility in the past. Any deterioration in the company's growth prospects could lead to a significant de-rating of the stock.

Conclusion

Despite the risks, we believe that Kaspi.kz offers a compelling risk/reward proposition. The company's dominant market position, strong brand, and integrated ecosystem provide a solid foundation for continued growth. Our scenario analysis suggests that even in a low-growth environment, the stock can generate attractive returns. We believe that for investors with a long-term time horizon and a tolerance for emerging market risk, Kaspi.kz represents a unique opportunity to invest in a high-quality, high-growth company at a reasonable valuation.