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Investing.com - UBS initiated coverage on Lottomatica Group Spa (BIT:LTMC) with a Buy rating and set a price target of EUR33.00.
The investment bank notes that Lottomatica currently trades at an 8.4% equity free cash flow yield, suggesting the shares are "materially undervalued" if the company can achieve free cash flow per share growth exceeding 20%.
UBS projects Lottomatica can grow its free cash flow per share by approximately 25% between fiscal years 2026 and 2028, driven primarily by 10% EBITDA growth from the online segment, which the firm believes has "underappreciated" operational leverage and high incremental margins.
The bank expects Lottomatica’s free cash flow conversion to rise to approximately 50% by 2028, citing structurally capped capital expenditures, reduced financing expenses, and the natural cessation of merger and acquisition related cash outflows.
UBS also anticipates Lottomatica will implement additional share buybacks of EUR400 million annually starting in 2027, supported by the company’s growing free cash flow and increased leverage headroom.
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