KEGOC JSC Publishes Financial Results for Q4 2025. We assess the report as moderately positive: record quarterly revenue amid a sharp tariff hike since October was accompanied by a recovery in margins after several quarters of decline, and net profit more than doubled year-on-year (YoY) for the quarter. For the full year 2025, revenue grew by 24 % YoY to KZT 397.7 billion, net profit by 19 % YoY to KZT 70.8 billion, and EPS reached KZT 257. The expected dividend yield reaches a solid 10 %. However, we note several risks that could limit further growth: uncertainty regarding approval of a new five-year tariff schedule, the upcoming unfreezing of utility tariffs, and a large-scale investment cycle that will increase the debt burden. The updated target price per share is KZT 1,930, offering a 32 % upside potential from current levels. Recommendation: Buy.
Key Valuation Factors. The main catalyst is the ongoing tariff growth. Since 1 October 2025, tariffs for all major services have been significantly increased: transmission: +42 % YoY, use of the National Electric Grid (NEG): +43 % YoY, dispatching: +30 % YoY, balancing: +34 % YoY; another, albeit smaller, increase is expected from April 1, 2026. KEGOC is already considering further tariff hikes, but the key risk remains the approval of the new five-year tariff schedule in an environment where the government is concerned about inflation, which could limit future revenue growth. In addition, the freeze on utility tariffs slowed the growth of technological electricity loss costs, positively affecting margins. However, the planned unfreezing from April 1 and the already observed increase in electricity tariffs in February (+3 %) may offset this effect in the coming quarters. We also note fairly low current price multiples and a solid dividend yield of 10 %. The main structural risk is the large-scale investment cycle. Capital commitments at the end of 2025 amounted to KZT 643 billion (vs KZT 434 billion a year earlier). The company is implementing two major projects: strengthening the Southern Zone of the Unified Energy System (UES) - ~ KZT 154 billion, and integrating Western Kazakhstan with the UES - ~ KZT 202 billion. Both projects are scheduled for completion in 2027. Borrowing to finance these projects will increase the debt burden and financial expenses, limiting the potential for dividend growth over the next two to three years.
Revenue: Record Quarter Thanks to October Tariff Hike. Quarterly revenue reached an all-time high of KZT 118.9 billion (+36% YoY, +24% QoQ). The largest revenue item, NEG usage services, grew by 49% YoY due to a 43% tariff increase and a 4.3% volume increase. Transmission revenue increased by 20% YoY: the tariff rose by 42%, but volumes declined by 16% YoY. Dispatching services grew by 37% YoY thanks to a 30% tariff hike and a 5% volume increase. Balancing revenue rose by 45% YoY. On the downside, revenue from balancing electricity sales fell by 16% YoY. For the full year 2025, revenue totaled KZT 397.7 billion (+24% YoY), largely driven by NEG usage services. Overall quarterly electricity turnover in Kazakhstan grew by 6.1% YoY due to increased production.
Margins: Reversal after Several Quarters of Decline. Unlike Q2 and Q3, Q4 showed a notable improvement in profitability. Quarterly gross Margin rose to 33.2% from 26.9% a year earlier. Cost of Sales increased by only 24% YoY while revenue grew by 36%. Stabilisation of technological electricity loss costs (+18% YoY vs +50% in Q3) due to the utility tariff freeze played a key role. Electricity procurement costs for cross-border flows decreased by 21% YoY. Wage growth slowed from 20% to 15% YoY. Depreciation and amortisation increased by 5% YoY. As a result, quarterly EBITDA reached KZT 48.4 billion (+49% YoY). EBITDA Margin hit 40.7% vs 37.1 % a year earlier. Quarterly Net Profit more than doubled (+106% YoY) to KZT 25.6 billion, or KZT 93.2 per share. Net Margin rose to 21.6% from 14.2%. For 2025, EBITDA totaled KZT 152.2 billion (+19% YoY) with an EBITDA Margin of 38.3 %. Net Profit reached KZT 70.8 billion (+19% YoY). Thus, H2 was highly profitable, with EPS reaching KZT 132.8 and dividends expected to be at least KZT 80 per share. Quarterly Free Cash Flow grew by 41% YoY thanks to a 46% YoY increase in operating cash flows, despite a 51% YoY rise in quarterly capital expenditures.
Our Opinion and Changes to the Valuation Model. The Q4 report was expectedly positive and confirms our investment thesis: KEGOC continues to demonstrate steady income growth thanks to improved regulatory tariffs, and the margin recovery addresses a key concern from previous quarters. In the valuation model, we have updated all key financial metrics based on full-year 2025 actuals. WACC was notably reduced due to falling yields on Kazakh government bonds from 17.1% to 15.1%, which had the most positive impact on the valuation. We slightly increased the forecast for electricity consumption and imports in the country.
After all adjustments, the updated target price per KEGOC share reached KZT 1,930, implying a 32% upside potential. Recommendation: Buy.
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