Classification of NuWays AG to ZEAL Network SE

Company Name:	ZEAL Network SE
ISIN:	DE000ZEAL241
Reason for the research:	Update
Recommendation:	BUY
Target price:	EUR 83
Target price on sight of:	12 months
Last rating change:
Analyst:	Simon Keller

On a winning streak; chg. est. & PT
 

A favourable jackpot environment should drive a strong Q2 and, on early Q3 data, looks set to continue; the newly announced SevenCanyon acquisition adds a cheap, well-understood growth leg in the UK; and the July loosening of German online slot stakes provides a further regulatory tailwind.

Jackpots are back as a tailwind, and this time Lotto did the heavy lifting. Total Eurojackpot stakes rose c. 3% yoy in Q2, with two peak jackpots, the same as a year ago. The real swing came from Lotto 6/49: stakes jumped c. 23% yoy as the lottery reached its € 50m cap for the first time under the current jackpot rules and did not let go, producing 11 peak-jackpot draws over the quarter. Remarkable for a lottery that typically loses ground to Eurojackpot given its lower headline and second-tier prizes, and its extended run at the cap materially lifted market activity: in aggregate, the German lottery market grew c. 11% yoy, the support that Q1 lacked. In its lottery business, ZEAL is seen to outgrow the market by c. 13pp (eNuW), driven by ongoing online penetration, share gains and stronger customer activation in high-jackpot phases, where it can deploy its full marketing playbook as well as support from growth in proprietary raffles.

For ZEAL, 24% yoy billings growth should translate disproportionately into sales (+30% yoy; both eNuW), as billings margins look set to benefit from mix: more profitable team play (Tippgemeinschaften) in high-jackpot phases and, structurally, a rising share of higher-margin social lotteries. EBITDA should grow at a similar c. 27% rate yoy, as higher marketing spending for proprietary formats is seen to absorb the operating leverage (eNuW, more details on p. 2).

UK entry via attractive acquisition. ZEAL agreed to acquire the remaining 96.5% of SevenCanyon, a leading UK prize-draw operator it has known from the inside as a minority investor since 2018. Customers buy tickets for digital draws of cars, houses and lifestyle prizes, similar to ZEAL's own Traumhaus and Traumauto model, but in Europe's largest market (c. € 1.5bn billings, > 7m players). The deal thus creates a second home market and further reduces dependence on the German jackpot cycle. Mid-term, ZEAL's marketing playbook meets a fragmented field of 400+ mostly young operators, while its compliance DNA should turn into a moat once this lightly regulated market formalises. The purchase price of up to c. € 45m (incl. earn-out) is fully debt-financed via a new € 40m term loan. We expect c. € 30m sales and c. € 8m EBITDA in 2027 (eNuW), implying c. 5.6x EV/EBITDA against ZEAL's own c. 13x: EPS and multiple accretive from the first full year of consolidation. In FY26 (six months of consolidation), one-off costs are seen to offset the EBITDA contribution (eNuW).

Higher stakes in slots. Regulation is turning into a tailwind, working both ends of channelisation. The carrot: since 1 July, the per-spin stake limit for licensed virtual slots rose from a flat € 1 to a € 1-5 model. Under-21s stay at € 1, over-21s can be cleared for € 3, and € 5 requires 90 days without signs of problematic play. The stick: the pending Second Amendment State Treaty will oblige internet providers to block unlicensed gambling sites (DNS blocking). The prize: c. 23% of the online gambling market is still unlicensed (2024, source: GGL). ZEAL is on the whitelist, with >650 games ready to absorb returning players. The parallel review of the € 1,000 monthly deposit limit adds further monetisation opportunities. Games remains small at c. 7% of group sales, but the direction of travel is clearly supportive.

BUY, PT € 83 (old: € 80), based on DCF. Estimate and PT changes reflect the accretive acquisition.

You can download the research here: zeal-network-se-2026-07-20-update-en-fdf70
For additional information visit our website: https://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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