We raise our estimates and expect ZEAL to beat its 2026 EBITDA guidance. ZEAL generated c. € 25m of EBITDA before deal costs in Q3 without a peak Eurojackpot. October's stronger jackpot backdrop gives ZEAL scope to repeat that performance in Q4. Conservatively, we still model just c. € 20m.
Social lotteries helped ZEAL grow in a weaker market. ZEAL grew organic sales by c. 9% yoy in Q3 despite a 3% decline in combined German Lotto and Eurojackpot stakes. Eurojackpot had zero draws at the cap versus two in Q3 25. Lotteries segment sales grew 8% yoy, helped by higher ticket sales and related fees from freiheit+ and by the new Dream Car Raffle. A richer product mix lifted the lottery gross margin by 0.6pp to 18.5%. Games sales rose 20% yoy, driven mainly by a 14% increase in monthly active users. Notably, ARPU also rose c. 13% qoq to € 40.93, likely helped by ZEAL's phased rollout of higher spin limits from July. Including € 10.5m from SevenCanyon's first quarter of consolidation, group sales rose 26% yoy to € 77m.
The underlying EBITDA margin reached 32.1%. Excluding c. € 4.9m of deal costs, Q3 EBITDA rose 32% yoy to c. € 25m. Personnel costs increased just 11% yoy against 26% sales growth, the clearest source of positive operating leverage. Direct costs also fell as a share of sales, to 8.3% from 8.8%. Even after deal costs, reported EBITDA rose 6% yoy to € 19.9m (8% ahead of eNuW).
ZEAL needs € 16.3m in Q4 to reach the top end of the FY EBITDA guidance. We see € 20.2m. That implies c. 37% EBITDA growth yoy in Q4 and FY26 EBITDA of € 79.0m, € 4.0m above the guidance ceiling. Our Q4 estimate sits c. € 4.5m below Q3 underlying EBITDA. Three October Eurojackpot draws at the € 120m cap, versus none in Q4 25, should support customer reactivation.
The discount is getting harder to justify. ZEAL trades at just 8.3x FY27e EV/EBITDA against a five-year average of c. 22x. Yet EBITDA growth looks set to nearly double to c. 28% yoy in FY27, taking EBITDA to c. € 101m with the margin back above 30%. Secular growth and a track record of turning EBITDA into cash (five-year historical FCF/EBITDA of c. 92%) still support a multiple around ZEAL's historical average, in our view. The PT implies 18x 2027e EV/EBITDA (eNuW).
Management seems to see value here too. The CEO and CFO bought c. € 87k of shares in late September at average prices of € 42.14 and € 42.80, respectively. This compares to a share price of c. € 40 today.
ZEAL's growth is becoming less dependent on the jackpot calendar. Its own lotteries and Games give players reasons to return between big draws, and SevenCanyon gives ZEAL a platform for international expansion.
Action: the strong Q3 operating performance points to the group's potential and supports a 5.6% average increase in FY26-28e EBITDA estimates.
BUY, PT raised to € 85 (old: € 83), based on DCF.
ISIN: DE000ZEAL241
