Kazakhstan Floods Impact Kaspi.kz Stock, Analyst Sees Upside Potential: 'Sell-Off Overdone'

Kaspi.kz JSC ADR KSPI witnessed a 7% decline in its shares on Monday, April 8 after severe flooding struck rural regions of Kazakhstan.

Such occurrences are not uncommon in Kazakhstan. However, the flooding is reported to be the worst natural disaster to hit the nation in 80 years, according to President Kassym-Jomart Tokayev.

The Kaspi Analyst: JPMorgan analyst Reginald L. Smith believes the sell-off has been overdone and presents an opportunity for investors to enter at an attractive price point. Despite the short-term market reaction, Smith reiterates an Overweight rating for Kaspi.kz ADR. His price target of $159 on the stock by Dec. 2024, implies an upside of 28.77%.

The Kaspi Thesis: Smith points out that the impact of the flooding is primarily concentrated in the northern, rural regions of Kazakhstan, with an estimated 75,000 people, mainly adults, directly affected.

This represents less than 1% of the country’s total population and is unlikely to significantly affect Kaspi’s business operations. Notably, major urban centers such as Almaty and Shymkent in southern Kazakhstan remain unaffected, underscoring the localized nature of the disaster.

He emphasizes that Kaspi’s digital ecosystem remains robust, serving over 14 million monthly active users and nearly 600,000 merchants. The company offers a comprehensive suite of consumer and merchant products. They include in-person payments, bill pay, buy now, pay later (BNPL), e-commerce, e-grocery, and consumer banking services.

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Undervalued Relative To Fintech Peers

From a valuation perspective, Kaspi.kz appears undervalued relative to its peers in the global e-commerce and fintech space. Despite strong growth and profit margins, the stock trades at just 8.5 times forward adjusted net income estimates for 2024, compared to a peer comp range of 20 to 30 times.

Smith’s price target is based on a forward EV/Sales multiple of 4.2, reflecting the company’s growth potential and market positioning.

While risks such as geopolitical tensions, increased regulation, and slow product adoption exist, Smith remains optimistic about Kaspi.kz’s long-term prospects.

The company maintains a dominant position in Kazakhstan’s digital landscape. Its continued expansion efforts position it well for sustained growth, despite short-term market fluctuations.

Investors may find the current dip in share price an opportune moment to capitalize on the stock’s potential.

KSPI Price Action: Kaspi.kz ADR closed the trading day on Monday at $123.50, down 7% for the day.

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