Original-Research: ZEAL Network SE (von NuWays AG): Kaufen

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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, % 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, % 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 (흮% 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

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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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