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Original-Research: ZEAL Network SE - from NuWays AG

08.10.2024 / 09:01 CET/CEST
Dissemination of a Research, transmitted by EQS News - a service of 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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Classification of NuWays AG to ZEAL Network SE

Company Name: ZEAL Network SE
ISIN: DE000ZEAL241

Reason for the research: Update
Recommendation: Buy
from: 08.10.2024
Target price: EUR 54.00
Target price on sight of: 12 months
Last rating change:
Analyst: Henry Wendisch

Conference Feedback: growth in- and outside the state lottery

Last week, we hosted ZEAL at the European MidCap Conference in Paris where
we sat down with the company for some insightful meetings. Here are the key
takeaways:

Strong market share gains during peak jackpots: during the strong jackpot
phases in Q1, ZEAL's brokerage business has noted a strong jump in market
share. While this is not disclosed and exact data will be available in
Jan'25, our preliminary calculations indicate ZEAL's market share at around
43-44% (vs. 41.4% in FY'23).

Market trend tailwinds: Within the lottery brokerage business, growth is
stemming from (1) a rising online penetration, which still stands at a mere
24% and (2) an increase in market share. In both cases, it is crucial for
ZEAL to acquire those customers that are switching from offline to online
instead of trying to acquire customers that are already onboarded in the
online channel of the state lottery (lotto.de). Last year's decision to
focus more in brand marketing, additional to performance marketing, thus
clearly pays off, visible in reduced CPLs and high user intake this year.

Additional growth beyond the state lottery: The most recent additions to
ZEAL's offering (Games and Dream House Raffle) are not only serving ZEAL's
cross-selling and lock-in of customers, but are also completely outside of
the state-lottery (brokerage business), thus reducing ZEAL's dependency on a
volatile jackpot environment. Despite being new and thus still small
compared to the brokerage business, both show great potentials and come in
with higher ARPUs and margins, improving the overall mix.

Strong operating leverage: While in FY'24e, the operating leverage effect
should be subdued temporarily by an increase of personnel expenses
(currently: 240 FTEs vs. an average of 172 in FY'23) for the successfull
implementation of new products (i.e. Games, Dream House Raffle, etc.), the
level show its full effect into FY'25e, where strong top-line growth meets a
more constant cost base and thus rising EBITDA margins.

All in all, ZEAL is well on track to increase its user base while also
increasing customer monetization at the same time, leading to an ever
growing CLTV for ZEAL's customer base. Therefore, we reiterate our BUY
recommendation and ZEAL's position in our AlphaList with unchanged PT of EUR
54.00, based on DCF.

You can download the research here: http://www.more-ir.de/d/31001.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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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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2003695 08.10.2024 CET/CEST

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