D-Market Elektronik Hizmetler ve Ticaret A.S. (HEPS)

Executive Summary / Key Takeaways

• Kaspi's 65.4% acquisition represents a strategic inflection point: The January 2025 closing of Kazakhstan's fintech leader acquiring control of Hepsiburada provides more than capital—it injects proven payments marketplace expertise that could accelerate Hepsipay's dominance and unlock cross-border synergies, fundamentally altering the competitive calculus against Trendyol.

• Integrated ecosystem as the only true moat: Hepsiburada's combination of HepsiJet delivering 72% of parcels (with off-platform volume at 34.6%), Hepsipay's TRY 16.2 billion lending volume (2.6x year-on-year), and Premium's 3.7 million members generating 31% higher order frequency creates a closed-loop ecosystem that no pure-play marketplace can replicate, driving gross contribution margin expansion of 2.1 percentage points to 11.3% in 2024.

• Financial inflection despite macroeconomic gauntlet: Achieving first positive operating income since IPO in Q3 2024, while delivering 12.1% real GMV growth and 1.1% EBITDA-to-GMV in a 49% inflation environment with shrinking discretionary demand, demonstrates operational leverage that becomes more potent as macro pressures ease.

• Competitive positioning hinges on execution velocity: While Trendyol maintains scale advantages with roughly double Hepsiburada's traffic, Hepsiburada's unique payment license enabling installment financing across cosmetics, FMCG, and mobile categories—combined with Kaspi's technology acceleration—creates a defensible niche in affordability-driven Turkish e-commerce that could capture disproportionate share as consumers prioritize value.

• Critical variables for 2025 success: Investors must monitor whether Hepsiburada can scale its ecosystem services (particularly HepsiJet's off-platform growth and Hepsipay's risk management) while integrating Kaspi's systems, and whether management's "building blocks" strategy of low prices, widest lending options, and Premium service can maintain momentum through the first half's expected demand contraction.

Setting the Scene: Turkey's E-commerce Battlefield

D-Market Elektronik Hizmetler ve Ticaret A.S., operating as Hepsiburada, was incorporated in 2000 and is headquartered in Istanbul, Turkey. What began as a traditional e-commerce platform has evolved into something far more complex: a hybrid first-party (1P) and third-party (3P) marketplace where approximately 100,000 merchants operate alongside Hepsiburada's own retail operations, now comprising roughly 70% of the business. This shift toward 3P reflects a deliberate strategy to reduce working capital intensity while capturing higher-margin service revenues.

Turkey presents a uniquely challenging yet opportunistic market. With 80 million people, half under 24 years old, and e-commerce penetration increasing from 2.7% to 6.5% of GDP between 2019 and 2024, representing a 2.4x increase, the structural tailwinds are powerful. Yet the macroeconomic environment—characterized by inflation that reached 71.6% in mid-2024 before declining to 49.4% by September—creates a constant pressure on consumer purchasing power. Credit availability has tightened as interest rates remain elevated, making affordability solutions not just a convenience but a necessity for maintaining order volume.

The competitive landscape is dominated by Trendyol, which commands an estimated 40-50% market share with roughly double Hepsiburada's traffic. Amazon Turkey (AMZN) maintains a modest 5-10% share, constrained by limited local adaptation and higher import-reliant pricing. n11.com holds a smaller niche position. This duopoly structure means every strategic move by Hepsiburada must be measured against Trendyol's scale advantage, which enables materially lower unit costs through logistics density and supplier leverage.

Into this battlefield enters Kaspi.kz (KSP), which closed its acquisition of a 65.4% controlling stake on January 29, 2025. The Kazakh fintech giant's expertise in building a payments-led marketplace ecosystem—where financial services drive commerce engagement—could prove to be the accelerant Hepsiburada needs to differentiate beyond price competition. The Turkish Competition Authority's approval in November 2024 cleared the path for what management describes as "extremely exciting" potential value creation opportunities.

Technology, Products, and Strategic Differentiation: The Ecosystem Flywheel

Hepsiburada's competitive strategy rests on three interconnected service pillars that transform it from a transactional marketplace into an ecosystem partner: HepsiJet logistics, Hepsipay fintech, and Hepsiburada Premium loyalty. Each component reinforces the others, creating switching costs that pure marketplaces cannot match.

HepsiJet delivered 72% of total parcels dispatched in 2024, up from 68% in Q1, demonstrating increasing control over the customer experience. More importantly, its off-platform business—serving third-party merchants and other e-commerce players—grew to 34.6% of total volume, nearly doubling year-on-year in Q3 to 9.8 million parcels. This B2B expansion generates higher-margin revenue while building density that improves cost economics for the entire network. The service's Net Promoter Score (NPS) underscores its value, and the addition of electric vans in Q2 2024 signals a commitment to sustainable differentiation that resonates with increasingly environmentally conscious Turkish consumers.

Hepsipay represents the most defensible moat. As Turkey's largest non-bank Buy Now Pay Later (BNPL) solution provider, it processed TRY 16.2 billion in lending volume over the last twelve months—2.6 times 2023's total. The platform's 17.6 million wallet customers storing 21 million cards by November 2024 demonstrate deep integration into the payment fabric. Critically, Hepsipay's cost of risk remains controlled at approximately 2.6%, while annualized interest rates on BNPL loans range from 80% to above 100% (averaging around 95% including tax), reflecting pricing power in a credit-constrained environment. The "Pay with Hepsipay" one-click checkout solution's expansion to 140 key accounts by end-2024 creates a payment network effect that extends beyond Hepsiburada's own marketplace.

Hepsiburada Premium loyalty program reached 3.7 million members by November 2024, with members generating 31% higher order frequency after joining and an NPS of 84—nine points above the overall platform NPS. The five-year exclusive partnership with Warner Bros. Discovery (WBD)'s BluTV provides content differentiation that transcends typical discount-driven loyalty. Management's long-term objective of enrolling "at least half of our customers" mirrors successful programs at developed marketplaces like Allegro (ALLE) and Mercado (MELI), suggesting significant runway for membership growth and recurring subscription revenue.

Advertising services, included in "other revenue," grew 112% in 2024, contributing to gross margin expansion. This monetization of merchant relationships through sponsored listings and display ads leverages Hepsiburada's data insights without requiring additional logistics or payment infrastructure investment.

Financial Performance & Segment Dynamics: Margin Expansion Through Mix Shift

Hepsiburada's 2024 results tell a story of strategic execution translating into structural margin improvement despite macro headwinds. Real GMV growth of 12.1% was driven by 131.4 million orders and higher average order value, with order growth of around 8% excluding digital products. The 2.9 percentage point shift toward marketplace (3P) operations—now approximately 70% of the business—reflects a deliberate move toward higher-margin commission revenue and reduced inventory risk.

Gross contribution margin improved 2.1 percentage points to 11.3% in 2024, driven by three factors: increased delivery service revenue from HepsiJet's off-platform expansion, higher other revenue (including advertising and Premium subscriptions), and improved 1P margins from better inventory management. This margin expansion flowed through to EBITDA, which reached 1.1% of GMV—up 0.7 percentage points year-on-year. On an unadjusted inflation basis, EBITDA margin hit 2.1%, demonstrating the company's ability to price above cost inflation in a hyperinflationary environment.

Segment performance reveals the ecosystem strategy's financial impact. Delivery service revenue grew 50% in 2024, with Q3 alone up 47% as off-platform volume doubled. This B2B revenue carries higher margins than core marketplace commissions because it leverages existing fixed infrastructure. The 1P retail segment, while shrinking as a percentage of GMV, maintained profitability through disciplined category management, particularly in electronics where Hepsiburada holds approximately 32% market share and continues gaining share.

Cash generation shows both strength and strain. Free cash flow of TRY 3.7 billion for the full year 2024 represented a decrease of TRY 1.9 billion compared to 2023, driven by a TRY 1.55 billion decrease in operating cash flow and a TRY 0.34 billion increase in CapEx. The decline in operating cash flow primarily reflects lower inflation's impact on working capital benefits—specifically, reduced monetary gains from trade payables as inflation moderated. This is a mechanical effect of macro stabilization rather than operational deterioration. The company remains a negative working capital business, which management identifies as a key pillar for increasing free cash flow as the top line grows.

Q3 2024 marked a milestone: the first quarterly positive operating income since IPO, with EBIT of TRY 32 million. This achievement, combined with nine-month EBITDA of 1% of GMV (adjusted for inflation), demonstrates that the ecosystem strategy is reaching operational leverage inflection.

Outlook, Management Guidance, and Execution Risk

Management's commentary for 2025 balances caution with strategic confidence. The first half faces "shrinking demand for discretionary products" as the government's orthodox monetary policy works through the economy. This contraction is expected to last six to nine months, creating headwinds for GMV growth. However, management views this as "beneficial for long term in Turkey, not in short term," suggesting they prioritize sustainable macro foundations over temporary demand stimulus.

To navigate this period, Hepsiburada is deploying three "building blocks" for immunity: maintaining low prices to offer value during macro challenges, providing the widest spectrum of lending services when consumers need affordability most, and leveraging Premium's service excellence to retain high-value customers. This strategy directly addresses the core Turkish consumer pain point—purchasing power compression—while reinforcing ecosystem stickiness.

The Kaspi acquisition introduces both opportunity and execution risk. Management emphasizes "shared customer centricity and service quality orientation" and believes Kaspi's "expertise in fintech, technological capabilities and experience will be significant accelerators." The immediate priorities include integrating payments systems, sharing marketplace technology, and potentially cross-pollinating loyalty programs. However, the transaction occurred just as macro headwinds intensified, testing management's ability to execute integration while managing through a demand downturn.

Regulatory changes create tailwinds. New two-factor authentication requirements for merchants temporarily slowed active merchant base growth but ultimately favor incumbents with robust compliance infrastructure. More significantly, cross-border tax adjustments effective August 2024 disadvantage import-reliant global competitors while benefiting Hepsiburada, whose global inbound share is minimal at around 1% of business.

Management does not expect to pay corporate taxes in 2024 due to R&D incentives, with tax payments likely commencing in 2026. This provides a two-year cash flow advantage for reinvestment. The company also plans a second tranche of asset-backed securities to fund Hepsipay's lending growth, demonstrating access to diversified funding sources beyond equity.

Risks and Asymmetries: What Could Break the Thesis

The investment thesis faces three material risks that could fundamentally alter the trajectory.

Execution at Scale Risk: Hepsiburada must simultaneously integrate Kaspi's systems, scale HepsiJet's off-platform business, manage Hepsipay's credit risk through a demand downturn, and expand Premium membership—all while maintaining service quality. The company's NPS leadership (73-75 overall, 84 for Premium) reflects current excellence, but scaling from 3.7 million Premium members toward the long-term goal of half of all customers requires operational complexity that could strain systems and culture. If execution falters, the ecosystem's network effects could weaken, reducing the margin expansion that underpins the investment case.

Macroeconomic Deterioration Risk: While management views the government's orthodox policy as long-term positive, the short-term impact on discretionary spending could be more severe than anticipated. The "boycotts against shopping observed in early 2025" and "limited marketing activities due to political sensitivity" create a demand vacuum that even the widest lending options cannot fill. If inflation resurges or interest rates remain elevated beyond expectations, Hepsiburada's 80-100% APR lending products may face regulatory scrutiny, and consumer defaults could rise above the current 2.6% cost of risk, compressing Hepsipay margins.

Competitive Escalation Risk: Trendyol's scale advantage—roughly double Hepsiburada's traffic and significantly greater logistics density—allows it to absorb macro pressures through cost leadership. If Trendyol accelerates discounting or matches Hepsiburada's service innovations, the ecosystem differentiation may prove insufficient to prevent market share erosion. Amazon's potential expansion with enhanced Prime services or Alibaba (BABA)'s direct involvement could further compress Hepsiburada's competitive space. The Kaspi acquisition helps, but if integration delivers synergies slower than expected, Hepsiburada could find itself out-invested in critical areas like AI personalization and quick commerce.

The asymmetry lies in Kaspi's potential to unlock value not captured in current metrics. If the fintech integration enables Hepsipay to capture a meaningful share of Turkey's $40 billion consumer loan market, or if Kaspi's marketplace technology accelerates Premium adoption toward the 50% customer penetration target, the ecosystem's monetization could exceed expectations. Conversely, if macro conditions deteriorate beyond management's "six to nine month" timeline, the company's debt load (3.22x debt-to-equity) could become burdensome despite current cash generation.

Valuation Context: Pricing a Transformation Story

At $2.38 per share, Hepsiburada trades at a market capitalization of $772.62 million, representing 0.58 times trailing twelve months' revenue of $1.34 billion. This revenue multiple sits well below typical e-commerce marketplace valuations, reflecting both the challenging macro environment and the company's recent history of losses. The price-to-operating cash flow ratio of 1.81x appears attractive, but must be contextualized within the $1.01 million negative free cash flow over the last twelve months, driven by increased capital expenditure in logistics and technology.

Key financial metrics reveal a company in transition. Gross margin of 25.57% demonstrates fundamental profitability in the core business, while the operating margin of 0.00% and profit margin of -4.70% reflect heavy investment in ecosystem expansion. The debt-to-equity ratio of 3.22x appears elevated but is manageable given the company's negative working capital model and cash generation capacity. With $427 million in annual operating cash flow, Hepsiburada has sufficient liquidity to service debt while funding growth initiatives.

Comparative positioning is challenging due to the lack of direct Turkish e-commerce peers trading publicly. Trendyol's private market valuation reportedly exceeds $10 billion, implying a revenue multiple several times Hepsiburada's, though this reflects its market leadership and growth trajectory. Amazon trades at 3.50x sales with 11.06% operating margins, representing the mature marketplace benchmark that Hepsiburada aspires to reach through its ecosystem strategy. The valuation discount to global peers appears justified by macro risks and competitive position, but creates potential upside if the Kaspi integration delivers promised fintech synergies.

The balance sheet provides strategic optionality. With a current ratio of 0.85 and quick ratio of 0.49, liquidity is adequate for operational needs. The company's stated intention to explore a local equity listing in Turkey could provide additional funding flexibility and improve valuation multiples through enhanced local investor access. Management's confidence in not requiring tax payments until 2026 preserves cash for reinvestment during the critical integration period.

Conclusion: Ecosystem Execution at an Inflection Point

Hepsiburada stands at a pivotal moment where two decades of ecosystem building and a transformative acquisition converge against a backdrop of macroeconomic normalization. The company's integrated strategy—combining HepsiJet's logistics control, Hepsipay's lending dominance, and Premium's loyalty lock-in—has driven measurable margin expansion even as discretionary demand contracts. The Kaspi acquisition provides not just capital but proven fintech DNA that could accelerate Hepsipay's penetration of Turkey's $40 billion consumer loan market and introduce marketplace innovations that Trendyol's scale cannot easily replicate.

The investment thesis hinges on execution velocity through the first half of 2025's expected demand downturn. If management can maintain service quality while scaling ecosystem services, integrate Kaspi's technology without disruption, and leverage regulatory tailwinds, Hepsiburada could emerge with strengthened competitive positioning as macro conditions improve. The 12.1% real GMV growth and first positive operating income since IPO demonstrate that the model works; the question is whether it can work fast enough to justify the valuation and debt load before competitive pressures intensify.

For investors, the critical monitoring points are HepsiJet's off-platform revenue growth as a signal of B2B service adoption, Hepsipay's cost of risk trends through the credit cycle, and Premium membership growth toward the 50% customer penetration target. Success on these metrics would validate the ecosystem moat and support multiple expansion. Failure would expose Hepsiburada to Trendyol's scale advantage and macro vulnerability, turning the Kaspi acquisition from catalyst to distraction. The next six months will likely determine whether this is Turkey's next great e-commerce story or a cautionary tale about ecosystem ambition meeting competitive reality.