Freedom Holding FY2026 Earnings: Recovery But Below Base Case

What happened

Freedom Holding reported FY2026 revenue of $2.19 billion (up ~9% YoY) and net income of $153.3 million, a meaningful recovery from FY2025's $85 million but still far below FY2024's $376 million peak. The earnings improvement was driven by brokerage growth and stabilizing insurance, but new Kazakh tax surcharges and commission caps continued to compress margins, with the effective tax rate rising by 4.5 percentage points in Q2 alone. The reported net income falls short of the DeepValue master report's base case of $180 million, indicating that structural headwinds are more persistent than previously modeled. While revenue growth remains robust, the earnings power of the franchise is clearly constrained by the tougher regulatory and tax regime in Kazakhstan.

Implication

The $153 million net income implies a normalized P/E of roughly 55x at current prices, still elevated relative to the risk profile. The structural margin compression from higher taxes and insurance caps is likely to persist for several years, capping earnings growth. A re-rating lower is probable unless management demonstrates a clear path to $250 million+ net income; maintain a cautious stance and consider building a position only near the $90 bear-case entry.

Thesis delta

The base case assumption of net income normalizing to ~$180 million now appears optimistic given FY2026 actuals of $153 million, which already reflect partial recovery. The gap implies that regulatory and tax drags are greater than anticipated, pulling the sustainable earnings power down toward the bear case (~$100 million). This reduces the implied fair value to approximately $100-105 per share and increases the probability that the stock will test lower levels over the next 12-18 months.