Acquisition In Turkey And New Verticals Will Strengthen Future Prospects

Key Takeaways

• Innovative merchant products and digital innovations are set to enhance merchant engagement, improve operational efficiency, and drive net margin growth.
  
• Expansion into new markets and consumer verticals offers diversification and substantial growth opportunities, boosting overall revenue and earnings potential.
  
• Potential regulatory changes, currency volatility, acquisition risks, slower fintech growth, and marketplace expansion uncertainties could impact Kaspi.kz's financial performance.

Catalysts

Provides payments, marketplace, and fintech solutions for consumers and merchants in the Republic of Kazakhstan.

• Kaspi.kz's introduction of innovative merchant products such as buy inventory now, pay later and business deposits are expected to drive merchant engagement and revenue growth. As these products increase in adoption and scale, they are likely to improve net margins by enhancing the merchant value proposition and operational efficiencies.
  
• The expansion of Kaspi's e-Grocery segment, particularly entering new cities and scaling operations, provides significant growth potential due to low current penetration. This expansion is expected to drive substantial increases in revenue and contribution to overall earnings, given the high consumer demand and repeat usage in the e-Grocery space.
  
• Strategic initiatives in marketplace expansion into new consumer verticals like home and garden, as well as fashion, are aimed at diversifying revenue streams. This diversification can increase transaction frequency and customer retention, positively impacting revenue growth and net income.
  
• The acquisition of Hepsiburada in Turkey introduces Kaspi to a large market with low e-commerce penetration, providing a significant opportunity for growth. By leveraging Kaspi’s fintech services and digital innovations, this is expected to drive future revenue and earnings growth from an expanded consumer and merchant base.
  
• The integration of new delivery systems and digital innovations like Kaspi’s advanced POS registers adds value for merchants and enhances transactional efficiency. This is anticipated to increase merchant adoption, transaction volumes, and eventually improve net margins through higher cost efficiencies.

Kaspi.kz Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Kaspi.kz's revenue will grow by 17.5% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 40.9% today to 39.6% in 3 years time.
• Analysts expect earnings to reach KZT 1634.3 billion (and earnings per share of KZT 8392.55) by about March 2028, up from KZT 1039.7 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.8x on those 2028 earnings, up from 8.7x today. This future PE is lower than the current PE for the US Consumer Finance industry at 10.5x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.09%, as per the Simply Wall St company report.

Kaspi.kz Future Earnings Per Share Growth

Risks

• Potential regulatory changes or discussions in Kazakhstan could present uncertainties for Kaspi, impacting operations and revenue projections.
  
• Currency volatility, such as the weakening of the tenge, may affect Kaspi's financial results, especially when translated into other currencies, potentially impacting net income.
  
• The Hepsiburada acquisition may dilute focus or resources from core operations, presenting integration risks that could impact net income.
  
• Slower growth in fintech due to rising interest rates or macroeconomic conditions could slow earnings growth, impacting the net margins of the fintech segment.
  
• Marketplace initiatives depend on continued expansion and success in less penetrated areas; failure to execute these plans could impact future revenue and earnings growth.

Valuation

• The analysts have a consensus price target of KZT132.967 for Kaspi.kz based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of KZT142.35, and the most bearish reporting a price target of just KZT91.3.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be KZT4128.5 billion, earnings will come to KZT1634.3 billion, and it would be trading on a PE ratio of 9.8x, assuming you use a discount rate of 9.1%.
  
• Given the current share price of KZT97.59, the analyst price target of KZT132.97 is 26.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.