Classification of NuWays AG to ZEAL Network SE

Company Name:	ZEAL Network SE
ISIN:	DE000ZEAL241
Reason for the research:	Update
Recommendation:	Kaufen
from:	01.10.2024
Target price:	EUR 54.00
Target price on sight of:	12 months
Last rating change:
Analyst:	Henry Wendisch

Solid Q3 ahead despite a normalized lottery environment

Following two very strong lottery quarters, overall demand for ZEAL's most important products from lottery brokerage have normalized in Q3, as no peak jackpots have been reached. For ZEAL, we nevertheless expect solid Q3 results. In detail:

Lotto 6aus49 continues its negative streak: Q3 finished off as the fourth quarter in a row without a peak jackpot. Furthermore, the largest jackpot came in at only € 30m (out of max. € 50m), showing that the jackpot situation was well below maximum. Consequently, demand for this product continued to be weak with nationwide stakes of only € 850m in Q3, implying a 15% yoy decline and standing 8% below its LTM average.

EuroJackpot normalized: Without a peak EuroJackpot and only one run-up to € 96m (out of max € 120m), the strong demand from Q1 and Q2 could not be sustained into Q3. Hence, nationwide stakes for the EuroJackpot came in at € 1.06bn, which is nevertheless up 9% yoy, but sequentially down 17% qoq and thus only 2% below its LTM average.

Combined, nationwide lottery stakes stood at € 1.91bn in the third quarter, which is down 3% yoy, down 10% qoq and 5% below its LTM average, implying a constant user activity yoy, but a lower one qoq. - see p.2 for details

Nevertheless solid Q3 results ahead: At ZEAL, billings should grow 7% yoy (eNuW), driven by (1) strong H1 user intake offsetting lower Q3 user activity, and (2) stable average billing per user of € 61 (eNuW). More importantly, measures to raise the billings margin to 'above 15%' (eNuW: 15% vs. 13% LTM average) should boost lottery sales by 27% yoy in Q3 (eNuW; c. 90% of group sales). With marketing expenses expected to be at € 11m, group EBITDA is projected up 15% at € 11m in Q3 (eNuW). Moreover, first tangible results of the newly launched lottery product 'Traumhausverlosung' are expected with the Q3 release, giving more visibility into the product's potential.

Against this backdrop, we reiterate our BUY recommendation with unchanged PT of € 54.00, as ZEAL continues the current chapter of elevated growth and market share gains.

You can download the research here: http://www.more-ir.de/d/30967.pdf
For additional information visit our website: www.nuways-ag.com/research

Contact for questions:
NuWays AG - Equity Research
Web: www.nuways-ag.com
Email: research@nuways-ag.com
LinkedIn: https://www.linkedin.com/company/nuwaysag
Adresse: Mittelweg 16-17, 20148 Hamburg, Germany
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Offenlegung möglicher Interessenskonflikte nach § 85 WpHG beim oben analysierten Unternehmen befinden sich in der vollständigen Analyse.
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