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Original-Research: ZEAL Network SE - from NuWays AG

Classification of NuWays AG to ZEAL Network SE

Company Name: ZEAL Network SE
ISIN: DE000ZEAL241

Reason for the research: Update
Recommendation: BUY
from: 06.03.2024
Target price: 51.00
Target price on sight of: 12 Monaten
Last rating change:
Analyst: Henry Wendisch

Q4 preview: tough comp for lottery, games still small

Topic: ZEAL should release final FY'23 figures on March 20th. Here's what
we expect for Q4'23e:

Tough comp for lottery: Against a strong Q4'22 (peaking EuroJackpot), total
German lottery spending (on & offline) has declined by 9% yoy in Q4'23 (+3%
yoy for FY'23; Source: DLTB). For ZEAL it should also be hard to exceed its
strong Q4'22, as we expect a slight yoy decline of 3% to EUR 208m in billings
in Q4'23e. On a a FY'23e basis however, solid billings growth of 11% yoy to
EUR 841m (guidance: EUR 800-830m) should be in the cards thanks to 1.15m MAU
(eNuW; +7.5% yoy) and an ABPU of EUR 61.00 (eNuW; +3.2% yoy). With an average
Lottery gross margin of 12.6% (eNuW), FY'23e sales from Lottery should grow
accordingly by of 6% yoy to EUR 106m (Q4: EUR 26.8m, -9% yoy).

Next data point of Games roll-out: While the new segment 'Games' showed
strong KPIs in its first quarter after introduction (Q3'23), we expect
further improvements in Q4, as more games were added and lottery players
should have been cross-sold. However, as regulatory approval takes more
time than anticipated, we expect conservative sales of EUR 1.9m (vs. EUR 1.2m
in Q3), based on an slightly increased pay-in for games of EUR 3.9m (vs. EUR
3.3m for Q3'23) and a constant pay-in to billings ratio.

Guidance well in reach: We expect ZEAL to exceed its lottery billings
guidance of EUR 800-830m (eNuW: EUR 841m) while the sales (EUR 110-120m; eNuW: EUR
115m) and EBITDA (EUR 30-35m; eNuW: EUR 33.4m) guidance should be reached at
mid-point.

Promising FY'24e outlook: While we expect Lottery sales to grow by 12% yoy
to EUR 119m (driven by continuous marketing driven user intake), the Games
business should also have first meaningful sales contribution of EUR 10m,
implying total sales growth of 18% yoy. As ZEAL currently targets existing
lottery players for its Games business, we model no marketing expenses for
Games while EUR 42m should be spent on Lottery for brand awareness & customer
acquisition. However, as user KPIs for Games look attractive (Q3'23 ARPU: EUR
7.67 at Lottery vs. EUR 22.02 at Games), additional EUR 3-8m of marketing
expenses could be spent on Games in return for more user intake during
FY'24e.

Against this backdrop, the recent share price weakness should be a buying
opportunity, especially as Q1'24 saw extraordinary strong jackpots already,
indicating a promising start into a strong growth year. Reiterate BUY with
unchanged PT of EUR 51.00, based on DCF.

You can download the research here:
http://www.more-ir.de/d/29071.pdf
For additional information visit our website
www.nuways-ag.com/research.

Contact for questions
Die Analyse oder weiterführende Informationen zu dieser können Sie hier downloaden
www.nuways-ag.com/research.
Kontakt für Rückfragen
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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Diese Meldung ist keine Anlageberatung oder Aufforderung zum Abschluss bestimmter Börsengeschäfte.
Offenlegung möglicher Interessenskonflikte nach § 85 WpHG beim oben analysierten Unternehmen befinden sich in der vollständigen Analyse.
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-------------------transmitted by EQS Group AG.-------------------


The issuer is solely responsible for the content of this research.
The result of this research does not constitute investment advice
or an invitation to conclude certain stock exchange transactions.

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