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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: Recommendation: Kaufen from: 10.05.2024 Target price: EUR 53.00 Target price on sight of: 12 Monaten Last rating change: Analyst: Henry Wendisch

Staggering Q1 kicks off new growth phase; chg est. & PT On Wednesday, ZEAL released staggering Q1 results above expectations with strong sales growth and better than expected profitability. Moreover, ZEAL substantially improved marketing efficiency which drove customer growth to record levels. In detail: Strong Lottery business: Lottery billings came in better than expected at EUR 246m, +22% yoy (eNuW: EUR 234m) and were driven by 4x peak jackpots. Lottery sales grew by 28% yoy to EUR 32m (eNuW: EUR 31m) thanks to the strong billings coupled with a solid billings margin of 13.0%, up 0.9pp yoy (eNuW: 13.2%). Upbeat Games adoption: Games contributed better than expected with billings of EUR 31m (eNuW: EUR 25m) and sales of EUR 2.2m (eNuW: EUR 1.9m) driven by further additions to the Games portfolio as well as user adoption with MAUs growing by 22% qoq to 22k (eNuW: 20k). Consequently, the ARPU stood at EUR 33.6 (vs. EUR 8.0 at Lottery) highlighting the attractive user economics at Games. Dynamic top-line: Q1 sales rose by 35% yoy to EUR 36.1m (eNuW: EUR 34.8m). Based on an average jackpot development, we expect a slight qoq sales decline in Q2e (eNuW: EUR 34m; due to less user activity) before the planned expansion in the billings margin to above 15% (currently: 13%) should unfold its posititve effect on sales from Q3e onwards (eNuW: EUR 38m in Q3e / EUR 42m in Q4e). EBITDA much better than expected: Q1 EBITDA came in at EUR 9.4m, +1% yoy (eNuW: EUR 5.1m) despite heavy marketing expenses of EUR 13.4m (eNuW: EUR 14m), but driven by higher than expected sales and lower than expected indirect costs of EUR 3.6m (-20% qoq; eNuW: EUR 5.8m), as the majority of ramp-up costs of the new social lottery will likely be incurred towards the end of the year and not in Q1 and Q2. Improved marketing efficiency: Costs per Lead decreased by 10% yoy to EUR 33 (eNuW: EUR 40), showing that customer acquisiton has become more efficient. In sum, ZEAL accounted for 320k new registrations (+124% yoy; eNuW: 350k) and grew their MAU in Lottery by 21% to 1.33m (eNuW: 1.26m). Guidance well in reach: Management confirmed the guidance (see bottom right), but based on our revised estimates, we expect a reach at the upper-end of the guidance, due to the improved user base. Therefore, we reiterate our BUY recommendation as well as ZEAL's position in the NuWays' AlphaList with an increased PT of EUR 53.00 (old: EUR 51.00), based on DCF.

You can download the research here: http://www.more-ir.de/d/29651.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 ++++++++++ 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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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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Quelle: dpa-Afx