ZEAL Network SE Report: NuWays AG Upgrades to "Buy"

NuWays AG has upgraded ZEAL Network SE to a "Buy" recommendation as of August 1, 2024. The target price is set at €54.00. Analyst Henry Wendisch highlights the strong lottery environment in Q2’24 as a key driver for record sales and profit growth.

Lottery demand was high, leading to a 20% year-over-year increase in Lottery billings, reaching €252 million. Lottery sales rose by 25% to €33 million. Games roll-out faced delays, yet showed a minor increase in users and sales.

Total sales for Q2 are expected to increase by 33% year-over-year to €37.5 million, driven by robust lottery performance and improved marketing efficiency. Marketing expenses are estimated lower at €11.6 million, yet yield about 200,000 new registrations.

Personnel and indirect costs have grown due to new product launches, resulting in a 133% year-over-year rise in EBITDA, reaching €10.2 million. Positive free cash flow is anticipated for Q2 after a negative swing in Q1.

The full-year sales guidance appears conservative, with potential FY sales of €155 million. EBITDA is projected at the upper end of the guidance, contingent on H2 jackpot activity. The value-accretive squeeze-out of Lotto24 shares should further enhance ZEAL’s financial position.