KazTransOil JSC published its financial results for the Q4 2025. We assess the report as moderately positive: quarterly revenue hit a new all-time high on the back of volume growth, while the EBITDA margin reached 45.9%. However, reported net profit for the quarter declined due to a large non-cash impairment of property, plant and equipment (PPE) amounting to KZT 17.4 billion. For the full year 2025, revenue increased by 14.6% YoY, and EPS stood at KZT 119. Against this backdrop and given the company’s strong cash position on the balance sheet, we can expect dividend growth up to the EPS level. In this scenario, the dividend yield would reach 9.5%, although a more realistic forecasted yield of 8.5% seems more plausible. In our valuation model, we have lowered the expected tariff levels due to tariff regulation in line with the approved schedule. We have also reduced the WACC and the forecast USD exchange rate. As a result, our updated target price per one share of KazTransOil is KZT 1,350, implying an upside potential of 8%. Recommendation: Hold.
Core Valuation Factors. The main catalyst is the increase in the oil transportation tariff for the domestic market by 37.9% effective 1 January 2026, to KZT 6,778 per tonne per 1 000 km - approved by the Committee on Regulation of Natural Monopolies. The tariff schedule has been approved for the five-year period 2026–2030, with annual increases projected up to KZT 8,019 by 2030. However, we should note immediately that due to the low investment programme in 2025, a compensatory tariff of KZT 4,963 was introduced for 2026. Thereby, we have incorporated lower forecast tariffs into the valuation model, despite the approved tariff schedule. A strategic catalyst is the diversification of export routes: an agreement has been signed with Poland’s PERN, the company’s first office in the EU has been opened, and deliveries of Kazakhstan oil to Germany reached 1.9 million tonnes in the first 11 months of 2025. We note a significant liquidity position on the balance sheet, which is highly likely to be used to increase dividends. Sanctions uncertainty has been partially resolved following the recent UK authorisation for operations involving Kazakhstan oil via Russia’s Transneft. On the other hand, the OFAC licence for the transit of Russian oil through Kazakhstan to China is valid until April 29, 2026. However, the company, in cooperation with KMG, is working to extend this licence. Given the current high oil prices, the occurrence of this risk is unlikely.
Revenue: A New Quarterly Record. Quarterly revenue reached a record KZT 103.3 billion (+26% YoY, +14% QoQ). The largest revenue stream - crude oil transportation - showed substantial growth, increasing by 35% YoY and 28% QoQ to KZT 79.9 billion. This was driven by an increase in oil transportation volumes by 5.9% YoY and 8.6% QoQ, as well as the rise of certain tariffs. Revenue from pipeline operation and maintenance services amounted to KZT 8.6 billion (+6.1% YoY). On the other hand, revenue from water transportation declined by 8.5% YoY to KZT 6.6 billion. For the full year 2025, revenue totaled KZT 357.5 billion (+14.6% YoY), with growth recorded across all major segments. The share of profit from joint ventures (KKT and MunayTas) decreased in Q4 by 38.4% YoY to KZT 3.4 billion.
Margin: EBITDA Margin Growth Offset by Impairment. Quarterly Gross Margin improved to 21.0%, up from 13.2% a year earlier. Cost of Goods Sold (COGS) rose by 15% YoY, which is below the revenue growth rate of 26%. The main drivers of COGS growth were personnel costs (+15% YoY) and depreciation & amortisation (+28% YoY). As a result, the EBITDA margin reached 45.9%, marking the best figure since 2021. A year ago, the figure stood at 37.7%, and in the previous quarter - at 42.9%. However, quarterly operating profit amounted to only KZT 4.5 billion (− 40.5% YoY) due to a major non-cash impairment of property, plant and equipment (PPE) of subsidiaries amounting to KZT 17.4 billion. Meanwhile, other operating income rose to KZT 6.0 billion. Quarterly net profit was KZT 6.5 billion, or KZT 17 per share, which is 35% lower than a year earlier. For the full year 2025, net profit totaled KZT 45.6 billion (+7.4% YoY), and EPS was KZT 119. Quarterly cash flow from operating activities was KZT 29.7 billion (+15% YoY), and Free Cash Flow (FCF) reached KZT 10.1 billion - significantly higher than the negative KZT 2.2 billion a year earlier. As a result, the volume of liquid assets reached KZT 143 billion at year-end, setting a new record for this time of year.
Our Opinion and Changes to the Valuation Model. Overall, the report confirms steady revenue growth driven by tariff adjustments and some volume expansion. The EBITDA margin has reached multi-year highs, significantly improving the company’s cash position. However, this is not the first time that a large non-cash impairment of property, plant and equipment (PPE) has occurred at year-end, ultimately leading to a decline in the final annual net profit. As a result, this is likely to limit the dividend level for 2025. Nevertheless, at the «Issuer Day» event, management confirmed that dividends will be at least KZT 86 per share, the same as last year. We expect dividends to likely amount to around KZT 100–110 per share, implying a solid yield of 8–9 % based on the current market price. In our valuation model, we have updated the key financial indicators. The forecast USD exchange rate has been lowered, resulting in reduced revenue for services priced in US dollars. We have also lowered the expected tariffs for oil transportation to the domestic market relative to the approved tariff schedule, taking into account precedents of tariff regulation. This notably limits forecasted cash flows, but if these expectations are not met, a higher target price can be expected in the future. We note a decrease in the WACC due to falling government bond yields, while further reduction of net debt has boosted the valuation. As a result of all these changes, we have slightly increased our target price for KazTransOil shares to KZT 1,350, implying an upside potential of 8 % relative to the latest market price. Recommendation: Hold.