KazTransOil JSC released its financial results for the third quarter of 2025. Quarterly revenue showed solid growth and reached new record highs, while costs increased at a much slower pace. As a result, the company’s operating margins improved year-on-year. Net profit continued to grow, reaching its highest annualized level since 2021. Free cash flow also strengthened, which led to a significant improvement in the company’s cash position. All of this increases the likelihood of higher dividends next year, which, in our view, may reach KZT 105–110 per share. In our valuation model, we updated key financial indicators, raised the WACC and operating margin forecasts, improved the net debt estimate, and lowered our USD/KZT projections. As a result, our updated target price for KazTransOil shares is KZT 1,190, implying 42% upside potential. We assign the stock a “Buy” rating.
(+) Revenue reached new record highs. KazTransOil’s quarterly revenue increased 15% y/y and 7% q/q, reaching a record KZT 91 billion. Annual growth was observed across all major revenue segments. Revenue from crude oil transportation rose 15% y/y and 5.2% q/q, mainly due to tariff increases for selected services. This is also reflected in the 3.8% y/y decline in quarterly oil transportation volumes across KazTransOil’s network. However, the company’s most important routes did not show volume contraction. Deliveries to the domestic market grew 0.3% y/y in the third quarter thanks to higher supplies to the Pavlodar refinery. Transportation volumes via the main export pipeline Atyrau–Samara grew 13% y/y. The second largest revenue segment — “Pipeline operation and maintenance services” — increased 20% y/y and 3.9% q/q. Quarterly revenue from water transportation also grew (+9.4% y/y and +16% q/q). The share of profit from jointly controlled entities — KKT and MunayTas — declined 1.6% y/y but grew 36% q/q.
(+) Margin expansion continues. Gross margin in the third quarter reached 23.2%, noticeably higher than last year’s 18.9%. Cost of services increased 9% y/y, driven in part by personnel expenses (+11.3% y/y). Quarterly EBITDA margin also improved from 40.4% to 42.9%. Net profit for Q3 2025 amounted to KZT 17.6 billion, or KZT 45.6 per share, which is 45% higher than in 2024, largely due to gross profit growth. Free cash flow rose sharply in the third quarter to KZT 26.8 billion (+427% y/y). Compared to Q2 2025, the increase reached 88%. This was driven both by a 68% y/y (and 50% q/q) increase in operating cash flows and by a 33% y/y reduction in capital expenditures. Net debt at the end of September 2025 stood at minus KZT 31.3 billion — meaning that cash and liquid financial assets exceeded total debt by this amount, marking the best level since March 31, 2023. This trend of cash accumulation increases the likelihood of higher dividends next year.
Our opinion and valuation model changes. Overall, KazTransOil’s financial report can be described as moderately positive. Quarterly revenue grew and reached new record levels amid tariff increases and a recovery in transportation volumes in selected parts of the network. Operating margins improved on the back of higher gross profit. As a result, the company once again reported net profit growth, which reached KZT 128 per share on an annualized basis — the highest since 2021. Free cash flow also continues to grow, contributing to further cash buildup, which increases the probability of dividend growth. Much will now depend on whether a non-cash asset impairment charge is recognized, as has been the case in 2022–2024. If such impairment materializes, it would reduce net profit and potential dividends. Nevertheless, we believe that dividends next year are likely to reach KZT 105–110 per share, implying an attractive dividend yield of around 13%. In our valuation model, we updated key financial metrics. We lowered our USD/KZT forecast, which resulted in lower revenue from USD-denominated tariff services. The weighted average cost of capital (WACC) increased due to rising sovereign bond yields. On the other hand, margins improved slightly based on updated financials. A reduction in net debt also positively affected valuation. As a result, after all these adjustments, we slightly raised our target price for KazTransOil shares to KZT 1,190, implying 42% upside from the latest market price. Recommendation: "Buy".