Yesterday after the bell, ZEAL released an ad-hoc with a guidance hike and better than expected Q3 prelims, fully confirming our positive view on the stock and its elevated momentum in top- and bottom-line.
FY'24e guidance raised: Sales are now expected between € 158-168m (old: € 140-150m), implying an increase by 12% at mid-point, whereas EBITDA is seen between € 42-46m (old: € 38-42m), implying a 10% increase at mid-point.
Q3 prelims much better than expected: Next to the increased guidance, Q3 prelims were released and came in much better than expected. Sales arrived at € 44.2m (+42% yoy) driven by the strong user intake from H1 coupled with a billings margin expansion at the start of Q3. While detailed figures are released with final Q3 results on November 6th, the better than expected sales figure could stem from a successful launch of the new product "Traumhausverlosung" (eng.: Dream House Raffle), in our view. Consequently, EBITDA also came in better than expected at € 15.2m (+61% yoy; eNuW: € 11m) on the back of a better fixed cost coverage.
Stellar growth continues: Following a superb first half of the year, (sales: + 40% yoy; EBITDA: +46% yoy) carried by a strong jackpot environment and user intake, ZEAL has continued its current growth story in the third quarter despite a muted jackpot environment thanks to the increased billings margin of above 15% in the lottery brokerage business (c. 90% of sales). Consequently, next year should also remain a year of at least 15% sales growth as the increased billings margin in the lottery brokerage business comes in with a full-year effect.
FY'24e guidance raised: Sales are now expected between € 158-168m (old: € 140-150m), implying an increase by 12% at mid-point, whereas EBITDA is seen between € 42-46m (old: € 38-42m), implying a 10% increase at mid-point. After incorporating the Q3 prelims into our model, but leaving our Q4'24e estimates unchanged, our new estimates (see below) are now at mid-point of the new guidance.
All in all, a strong release fully confirming our positive view on the stock. The strong sales momentum should inevitably lead to an acceleration of profitability thanks to ZEAL's operating leverage. Therefore, we reiterate our BUY recommendation, increase our PT to € 57.00 (old € 54.00) and confirm the stock as one of NuWays' Alpha Picks for 2024.
ISIN: DE000ZEAL241
