Kaspi.kz (NASDAQ:KSPI) closed last week with a 3.5% gain, buoyed by limited insider selling activity. Director Vyacheslav Kim disposed of 56,806 American Depositary Shares (ADSs) under a Rule 10b5-1 trading plan, with the final filing submitted late Friday after Nasdaq's close. The sales represented just 3.7% of Kaspi's average weekly trading volume, and Kim parted with only 0.15% of his initial direct stake.
The transactions were spread across four sessions, with weighted sale prices ranging from $86.47 to $87.95. On Friday, the stock closed at $88.78, 2.0% above Kim's average sale price of $87.05. The modest scale of the sales suggests no significant insider bearishness, allowing investors to focus on the company's upcoming earnings report.
Earnings Preview: Margin Conversion Is Key
Kaspi's bigger challenge lies in converting its revenue growth into profits. The company is scheduled to release its second-quarter results on August 10, and first-quarter figures reveal a concerning trend: while revenue surged 31% to KZT1.1 trillion, adjusted EBITDA grew only 9%, and net income slipped 1%. Net margin contracted to 23.3% from 30.9% a year earlier.
The margin decline was driven by a 2.5 percentage point drag from higher interest expenses and a 4.4 point hit from cost of goods sold. This highlights the pressure on profitability despite robust top-line expansion.
Segment Performance: Mixed Results
A segment breakdown shows uneven profit conversion. The marketplace segment, which delivered 49% revenue growth, saw adjusted EBITDA rise just 12%, with its EBITDA margin falling 7.4 percentage points. Payments revenue grew 7% but contributed zero EBITDA growth, while fintech posted 25% revenue growth and 12% EBITDA growth, with an incremental margin of 20.7%.
Marketplace accounted for 64% of additional segment revenue but only 42% of incremental EBITDA, whereas fintech generated 58% of the incremental profit. Payments added KZT11 billion in revenue without any EBITDA contribution, underscoring efficiency challenges.
Turkish Expansion: Opportunity and Risk
CEO Mikheil Lomtadze has identified Türkiye as "an important part of our next growth phase." The market contributed 50% of first-quarter e-commerce GMV, with Hepsiburada near EBITDA breakeven. Kaspi finalized its acquisition of Rabobank A.Ş. on July 15, securing a fully licensed bank in Türkiye, which will enable deposit-taking and financial services.
However, the investment is still weighing on margins. The company has not provided detailed guidance on product timing or expected returns from the Turkish operations, leaving uncertainty about the near-term impact.
Funding Costs and Macro Context
Funding pressures remain a short-term headwind. Kaspi's deposit funding cost rose to 14.3%, up 220 basis points. Kazakhstan's central bank cut its base rate to 16.75% on July 24, which could gradually ease funding strains, though deposit pricing adjustments may lag. Inflation stood at 10.3% in June, with risks still skewed upward.
The company's non-performing loan ratio increased to 6.6% from 6.1% at year-end, signaling potential credit quality concerns. Currency fluctuations and Turkish execution risks add further uncertainty.
Valuation and Peer Comparison
Kaspi's price-to-earnings ratio stands at 7.6x, significantly lower than peers like MercadoLibre (49.6x), Nu Holdings (22.1x), and Sea Ltd. (41.7x). This discount underscores the market's skepticism about profit conversion. The company's incremental adjusted EBITDA margin is estimated at 11.5% based on first-quarter segment data, meaning it generates only about $0.115 of additional EBITDA for every extra dollar of revenue.
To close the valuation gap, Kaspi must demonstrate that it can translate volume growth into higher profitability. The upcoming earnings report will be a critical test.
Peer earnings will also provide context: MercadoLibre reports on August 5, and Kaspi follows on August 10. Investors will be watching for signs of margin improvement, funding cost trends, and progress in Türkiye.
