Kazakhtelecom JSC delivered moderately positive results for the third quarter of 2025. Quarterly revenue showed a slight acceleration in growth rates, while operating margin improved significantly due to a modest increase in cost of sales and a reduction in general and administrative expenses. We also note continued growth in net income, supported in part by improvements in certain non-operating metrics. In our valuation model, we updated the key financial indicators, adjusted net debt, and raised our capex forecasts. As a result, our updated target price per Kazakhtelecom share is KZT 37,900, implying a 5% overvaluation versus the current market price. Our recommendation is “Hold.”
(=) Quarterly revenue slightly accelerated. Including the government subsidy, the Company’s revenue for Q3 2025 increased by 4.4% QoQ and 18% YoY, reaching KZT 145 bn. The largest contribution to revenue growth came from data transmission services, which reached KZT 71 bn in the third quarter, up 12% YoY. The “Other” category also made a notable contribution, growing 26% YoY. Revenue from fixed-line and wireless telephony services continues to show modest but stable growth, increasing by 4.3% YoY to KZT 27 bn. Revenue from mobile device sales declined 20% YoY, but decreased by only 1.5% QoQ, totaling KZT 9.4 bn.
(+) Margins improved significantly. Quarterly gross margin increased from 19.7% in 2024 to 26.3%. Cost of services rose by 0.5% QoQ and 8.2% YoY, mainly due to a 9.6% increase in personnel expenses and the emergence of a new cost item related to joint service provision. The “Other” category also contributed materially, increasing 130% YoY. As a result, adjusted quarterly EBITDA margin improved from 34.3% to 39.6% over the year. We note that EBITDA margin has remained stable for the last few quarters. General and administrative expenses declined by 2.9% YoY, marking the second consecutive quarter of reduction. Interest expenses amounted to KZT 14.3 bn, rising 60% QoQ and 33% YoY. We also highlight a substantial improvement in FX revaluation gains: from a loss of KZT 0.3 bn last year to a gain of KZT 12.3 bn this year. Compared to the previous quarter, this indicator increased 34%. As a result, due to improved operating margin and favorable non-operating metrics, net income increased sharply. Quarterly net profit attributable to shareholders amounted to KZT 22.8 bn, significantly above last year’s KZT 668 mn and 53% higher than Q2, according to our adjusted net income calculations.
(=) Free cash flow continues to improve quarter-on-quarter. Free cash flow in Q3 2025 totaled -KZT 2.9 bn, 7% better than Q2, yet KZT 35.6 bn lower than in Q3 last year. The main driver of improvement was a 38% QoQ decline in capital expenditures. At the same time, operating cash flow generation fell 34% QoQ. However, Q2 saw a sharp drop in prepaid corporate income tax under current assets, which led to unusually high operating cash inflows. Overall, free cash flow for nine months reached -KZT 45 bn, KZT 63 bn below 2024. This large difference is explained by the sale of the subsidiary Mobile Telecom-Service (Altel–Tele2), as cash flow figures are not adjusted here, unlike the income statement. As a result, cash and short-term financial assets totaled KZT 126 bn at the end of September 2025. This figure does not include long-term financial assets formed after the MTS sale. The Company’s net debt declined 19% QoQ, reaching KZT 92.8 bn.
Our opinion and valuation model changes. We characterize this Kazakhtelecom report as moderately positive. Revenue continues to grow at double-digit rates and demonstrated a slight acceleration in growth dynamics. In addition, quarterly margins once again improved meaningfully year-on-year. We note ongoing growth in quarterly net profit on a sequential basis, supported in part by strong FX revaluation gains, which will likely be negative in Q4 against the backdrop of the recent strengthening of the tenge. In our valuation model, we updated the core financial metrics, with the main change being an improvement in the net non-consolidated cash balance, reflecting debt and outstanding funds from the transaction, which are reported as long-term financial assets. We also raised our capex expectations, as the actual capex came in higher than we previously anticipated. Otherwise, model changes were limited. As a result, our updated target price for Kazakhtelecom shares stands at KZT 37,900, suggesting the stock is 5% overvalued at current levels. Recommendation – “Hold.”