Kaspi.kz's Superficial Metrics Mask Deepening Turkey Losses and Regulatory Drag, Sustaining Valuation Discount

What happened

A recent article touts Kaspi.kz's 73% revenue growth, 68% gross margins, and low 6.89x P/E as an emerging market bargain, but this optimistic view ignores critical underlying pressures. The DeepValue report reveals that consolidated earnings are heavily dragged by Turkey operations, which incurred TRY 2.5 billion losses in 9M 2025 and require ongoing capital injections, shifting the company toward a more capital-intensive, bank-like profile. Core Kazakhstan still delivers mid-teens ex-Turkey net income growth and high ROE, but legislated tax hikes and higher reserve requirements are set to erode profitability from 2026. Market sentiment has evolved from a clean fintech compounder narrative to one focused on managing Turkey's integration risks and Kazakh regulatory headwinds, explaining the stock's derating. The current valuation at ~7.3x P/E discounts these execution challenges, but the report maintains a potential buy stance if Turkey's losses narrow and core earnings hold.

Implication

Kaspi.kz's low P/E multiple signals market skepticism about sustaining high growth amid Turkey's persistent EBITDA losses and regulatory burdens, making it a speculative bet on execution turnaround. Core Kazakhstan's robust payments and marketplace fees offer a defensive cushion, but tax hikes from 20% to 25% CIT and a 10% levy on securities income could compress net income margins. Quarterly updates on Turkey's GMV growth versus EBITDA losses and management's ex-Turkey net income guidance will be crucial to assess whether the drag is contained or worsening. Position sizing should remain modest due to the thin margin of safety, as downside risks include further regulatory tightening or credit quality deterioration in the loan book. A base case valuation of $95 implies upside from current levels, but failure to curb Turkey losses or stabilize taxes could trigger a bear case drop to $65, highlighting the asymmetric risk-reward.

Thesis delta

The news article highlights Kaspi.kz's apparent undervaluation based on headline growth and margin figures, but this does not alter the core thesis from the DeepValue report. The report already identifies Turkey losses and regulatory pressures as key drags justifying the discount, so the delta is minimal: investors must avoid being misled by superficial metrics and instead focus on the execution risks outlined, maintaining a cautious but opportunistic stance if Turkey shows improvement.