Q1 2024 Earnings Summary
- Kaspi is tapping into a huge and fragmented car market with significant potential, leveraging technology to streamline the entire car ownership experience, including buying, financing, servicing, and selling cars. They have recently sold around 1,200 cars in the first quarter, which is just the beginning, indicating significant growth potential.
- The company is integrating multiple services around car ownership, including e-cars marketplace, online car finance (one of their fastest-growing fintech products), auto parts sales, and value-added services like online registration and tax payments, creating a seamless experience and strong cross-selling opportunities.
- Kaspi's commitment to continuous innovation and expanding into new business lines suggests ongoing growth and potential for positive surprises, making it challenging for analysts to forecast their business due to the rapid rate of innovation.
- The company's guidance remains unchanged at 25% bottom-line growth for the year, despite strong initial performance. Management emphasized that "we're 1 quarter into the year... and the first quarter is the smallest of the 4 quarters", suggesting potential caution due to uncertainties ahead.
- The National Payment System project may pose competitive challenges to Kaspi's payments business. While management stated that "the National Bank is not going to interfere with the fees or set the fees", there is concern that if fee levels are regulated downwards, it could impact Kaspi's profitability.
- There is limited potential for increasing the marketplace take rate, as the company is cautious about overcharging merchants. Management mentioned they are "not in the business of overmonetizing the merchants" and advised not to expect them to "go wild on the take rates for the marketplace", which may limit revenue growth in this segment.
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Guidance Philosophy
Q: Why maintain guidance despite strong traction?
A: Management reiterated 25% growth guidance for the year, emphasizing it's still early with only one quarter completed and the first quarter being the smallest. While momentum is good, visibility for the full-year outcome will improve as they progress into the summer period. -
National Payment System Impact
Q: How will National Payment System affect payment economics?
A: The National Bank stated that fees are not being regulated and remain a market practice. Reducing fees isn't advisable since Kaspi's fees are already among the lowest at 0.95%. Lowering fees could hinder innovation and competition, potentially making larger players even bigger. -
Balance Sheet Usage
Q: Will new offerings increase balance sheet commitments?
A: The company doesn't anticipate a major increase in balance sheet usage. As the largest consumer bank in the country, they already manage a significant balance sheet. New services like car financing leverage existing capabilities, capturing more value by converting goods into lending products. -
Marketplace Take Rate
Q: Is there room to monetize value-added services further?
A: Management doesn't expect the take rate to skyrocket. They're focused on delivering value to merchants rather than over-monetizing them. While expanding through value-added services, they won't charge merchants 20% or 30% like other marketplaces. -
Capital Allocation and Expansion
Q: Any updates on international expansion plans?
A: The company is open-minded and seeking acquisition targets. Believing their Kazakhstan business model is remarkable, they aim to bring it to other markets. However, the country and target quality are crucial, and there's nothing immediate to report. -
Car Platform Growth
Q: Can you provide comparables for car platform growth?
A: The car platform contributes 26% of e-Commerce GMV, mostly developed in the last six months after acquiring Kolesa. They're just scratching the surface, leveraging technology to streamline car ownership in a huge market. -
Product Development Approach
Q: How do you decide which products not to pursue?
A: They avoid crowded markets where they can't add significant value. For instance, they've chosen not to pursue food delivery due to intense competition and limited value addition. They prefer "blue ocean" ideas that create new opportunities rather than disrupting existing ones. -
Car Buying Experience
Q: How does your car service change the buying experience?
A: In Kazakhstan, car sales are mostly consumer-to-consumer with low dealership penetration. Kaspi aims to organize this fragmented market by providing an online experience, streamlining processes, and increasing transparency. They liken themselves to CarMax or Carvana but without expensive physical infrastructure.