Q2 2024 Earnings Summary
- The launch of brand advertising on Kaspi's platform presents a significant new revenue opportunity. Leveraging existing relationships with FMCG and global brands like Samsung, this service allows brands to increase awareness and is expected to contribute meaningful growth in the second half of the year. ,
- The e-Grocery business is experiencing strong demand, with active consumers reaching 639,000 and GMV growth of 99%. The business is profitable with net income margins of 7-8%, and Kaspi is expanding capacity to meet demand, indicating significant growth potential.
- The company's fintech profitability is set to rebound in the second half of the year due to lower deposit rates and an improved loan-to-deposit ratio, positioning Kaspi for stronger financial performance and growth into 2025.
- Kaspi.kz expects lower growth across the marketplace and payments platforms in the third quarter due to the absence of the Juma promotional event during that period. The reliance on such events for significant growth introduces volatility and could impact GMV growth and profitability.
- The payments take rate is declining slightly as QR payments, which have lower fees (approximately 0.95%), make up a larger share of transactions. The take rate has decreased from around 1.24% last year to about 1.19%-1.18%, and may continue to decline as QR payments grow, potentially pressuring margins.
- Potential regulatory changes in Kazakhstan, such as proposed interest rate caps reducing the maximum interest rate on consumer lending from 56% to 46%, could negatively impact Kaspi.kz's fintech business. Additionally, ongoing discussions about tax increases create uncertainty around future profitability.
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Fiscal Year Guidance
Q: Why is second-half growth expected to decelerate?
A: Management explained that the lower growth in the third quarter is due to the timing of the Juma promotional events, which are occurring three times this year—in Q1, Q2, and Q4—compared to twice last year in Q3 and Q4. Consequently, Q3 will lack this major promotional boost, leading to lower growth across the board, but they expect significantly higher growth in Q4. They reaffirmed that the full-year guidance is realistic. -
International Expansion
Q: Any updates on international expansion efforts?
A: The company is actively exploring opportunities to bring its business outside of Kazakhstan and is working with advisors on a healthy pipeline of potential companies. They are being selective and focusing on markets where they can add significant value but did not provide specifics on regions or targets. -
Brand Advertising Growth
Q: Can you discuss the brand advertising launch and outlook?
A: Management stated that they are scaling their brand advertising platform and already have FMCG brands collaborating with them. While current revenues are not material, they have contracts in place and expect rapid growth in the second half of the year. They believe the opportunity could be equal to or greater than the existing merchant advertising segment. -
Juma Promotional Events
Q: Will Juma events occur quarterly, and what are post-Juma benefits?
A: They plan to hold Juma events three times a year, corresponding with seasonal product demand. Juma acts as a nationwide shopping festival boosting engagement and allows them to introduce new categories. Post-Juma, shoppers continue to exhibit increased engagement and purchasing activity. -
Payments Take Rate Stability
Q: How are payments take rates affected by QR growth?
A: Despite the increasing share of QR payments at a fee of 0.95%, the overall payments take rate remains broadly stable around 1.19%. Management does not foresee dramatic changes and indicated take rates are sustainable. -
E-commerce Take Rates
Q: How to interpret e-commerce take rates, especially with e-Grocery?
A: The reported e-commerce take rate applies only to third-party (3P) transactions; e-Grocery, being a first-party (1P) business, is not included in this metric. The e-Grocery segment operates on a gross profit and net income basis, with gross margins exceeding 30% and net income margins of 7–8%. -
Fintech Profitability Outlook
Q: What drives fintech net income improvement in H2?
A: The expected improvement is due to declining deposit rates and a more effective use of the balance sheet, leading to an increased loan-to-deposit ratio. Deposit rates are being repriced at maturity, a process that takes up to 12 months, with more pronounced benefits starting in Q3 and increasing in Q4. -
Regulatory and Tax Changes
Q: Any impact from potential tax increases in Kazakhstan?
A: Management indicated that while there are discussions on regulatory changes, including interest rate caps and tax reforms, these are still under deliberation and it's too early to determine their impact. They do not expect any material effects on the company at this stage. -
Cost of Risk
Q: Is there a reason for the slight increase in cost of risk?
A: They see no significant concerns regarding cost of risk and attribute any slight increase to seasonality in specific products like merchant financing, which now accounts for 17% of their business. They anticipate stability in the third quarter. -
Deposit Rates and Competition
Q: How are deposit rates and competition affecting you?
A: The company offers a straightforward annual deposit product and tends to set the market rates. When they adjust rates, other players often follow. They focus on consumer needs rather than just cost of funding. -
E-Cars and E-Grocery Models
Q: Can you explain the e-Cars and e-Grocery business models?
A: The e-Cars platform combines elements of businesses like Carvana and Auto Trader, offering car sales, financing, and related services, aiming to be a comprehensive solution for car owners. In e-Grocery, they offer around 10,000 SKUs, delivering weekly purchases directly to homes, and have made it a profitable segment with a 7% net income margin in just 12 months. Consumers have payment options, but they typically do not use BNPL for grocery purchases due to smaller ticket sizes.