FDJ United

Executive Summary & Thesis

FDJ United pairs a crown-jewel asset — the French lottery and retail-betting monopoly — with a recurring tax headwind that keeps grinding down margins, and a fat but stretched dividend. The quality and the ~9% yield are real; so is the structural French gaming-tax escalation. We initiate at HOLD, PT €26 (~+12%). Own it for the monopoly and the income if you trust the 2026–28 recovery; the tax trajectory caps the upside and is the reason this is not a Buy.

Since acquiring Kindred (Unibet, 32Red) in October 2024 for ~€2.5bn, FDJ has become a European gaming champion: French Lottery & Retail Betting (the exclusive monopoly), Online Betting & Gaming (Kindred), International Lottery and Payments. But 2025 was a transition year — French and Dutch gaming-tax increases cut recurring EBITDA 6.5% to €902m (margin 25.8%→24.5%), with the lottery the only segment that grew. FY26 brings nearly €90m of further tax increases, guiding the margin lower again to 23–24%, with a second-half-weighted recovery and growth returning thereafter (a EUROMILLIONS relaunch is planned for 2027).

HOLD · PT €26 (~+12%). A high-quality, defensive lottery monopoly at a cheap ~6.7× EV/EBITDA and a ~9% yield, derated ~30% — but the recurring French gaming-tax escalation (structural, possibly worsening given French fiscal pressure) and a dividend that looks stretched on reported earnings keep us neutral. Vs Allwyn (BUY, special situation): same defensive-lottery DNA, but Allwyn has clearer re-rating catalysts and a higher-growth option (PrizePicks); FDJ has the harsher home-market tax grind and a more mature, declining online arm. Prefer Allwyn within the lottery pair.

Business Model & Competitive Forces

A monopoly core plus an acquired, competitive online business — a barbell of very different qualities.

Porter Five Forces

• ▮Barriers to entry — very high (lottery), low (online). The French lottery/retail monopoly is a government-granted exclusive concession — a top-tier, PM-insulated moat; Kindred operates in open, competitive European markets.
• ▮Substitutes / PM threat — low for the core. Prediction markets threaten online sportsbooks (Kindred), not the numerical-lottery monopoly.
• ▮Regulation / tax — the dominant force. France’s escalating gaming taxes are a structural, recurring margin drag specific to FDJ’s home market — the single most important variable.
• ▮Buyer power — low (lottery), moderate (online).
• ▮Rivalry — none in the monopoly, intense in online.

Situation — Monopoly + Yield vs the Tax Grind

The investment debate is monopoly quality + yield versus a recurring tax grind and dividend sustainability.

• ▮The tax grind (the crux). 2025 saw ~€45m of new French taxes (from 1 July) + Dutch increases; FY26 adds nearly €90m more. Levies rose 3.2% in 2025; the group paid €5.21bn in fees. With French public finances strained, further increases are a live risk, not a one-off.
• ▮Margin compression. Recurring EBITDA margin 25.8% (2024) → 24.5% (2025) → guided 23–24% (2026). Management aims to mitigate the tax drag by 2027.
• ▮Lottery resilience. The monopoly grew while everything else fell — the defensive anchor; a EUROMILLIONS relaunch (2027) is a catalyst.
• ▮Kindred drag. Online declined (-13% in Q3’25) amid NL/UK regulatory tightening; H2’26 GGR growth is guided but unproven.
• ▮The dividend question. ~€2.10/share (~9% yield) is FCF-backed but exceeds reported EPS (~€0.95; ~220% payout) — covered on an adjusted ~€2.4–2.5 basis (~80% payout). Sustainability hinges on the 2026–28 earnings recovery.

Financials

Figures in EUR. A strong 2024, a tax-hit 2025, a transition 2026 — with a reported-vs-adjusted earnings gap to watch.

Earnings-quality flag. Reported TTM EPS (~€0.95) is depressed by Kindred acquisition amortisation, integration costs and the tax step-up; adjusted/forward EPS is ~€2.4–2.6. The dividend is covered on adjusted/FCF metrics but NOT on reported EPS — a genuine sustainability watch if the recovery disappoints. Net debt and EV/EBITDA (~6.7×) are OUR estimates.

Forecast

Management guides a second-half-weighted 2026 and a return to high-single-digit growth across 2025–28.

• ▮Lottery: resilient growth continues; the EUROMILLIONS relaunch (2027) is the next product catalyst.
• ▮Online (Kindred): guided to return to GGR growth in H2’26 via action plans — the key uncertainty after a declining run.
• ▮Tax mitigation: management targets offsetting the tax drag by 2027 (pricing, cost, mix) — the swing factor for margin recovery.
• ▮Cost + integration: Kindred synergies and cost discipline support the margin floor at 23–24%.
• ▮Our read: a credible recovery, but back-end-loaded and tax-dependent; on ~€900m EBITDA, ~6.7× EV/EBITDA is cheap if the tax environment merely stabilises — the open question is whether it does.

Valuation & Scenarios

At ~€23 (mkt cap ~€4.2bn, net debt ~€1.8bn → EV ~€6.0bn) on €902m EBITDA, FDJ trades ~6.7× EV/EBITDA and ~9–10× forward P/E with a ~9% yield — cheap for a lottery-anchored business, reflecting the tax overhang. Our €26 PT (~+12%, near the street average) reflects a modest recovery, not a full re-rate, given the structural tax risk.

Risks & Verdict

The risks are dominated by French fiscal/regulatory policy.

• ▮French gaming-tax escalation (the big one). Recurring increases (~€90m in 2025 and again in 2026) compress margins; French budget pressures make further hikes plausible — a structural drag.
• ▮Dividend sustainability. ~9% yield is attractive but the payout exceeds reported EPS; a weak recovery or further tax could force a cut.
• ▮Kindred / online. Declining revenue and NL/UK regulatory tightening; the guided H2 recovery is unproven.
• ▮Leverage. ~€1.8bn net debt from the Kindred deal limits flexibility under margin pressure.
• ▮Integration. Absorbing Kindred across multiple European jurisdictions carries execution risk.
• ▮Concession. Long-dated French lottery exclusivity is secure, but ultimately a government-granted right.

VERDICT: HOLD · PT €26 (~+12%). A genuinely high-quality, defensive lottery monopoly paying a fat ~9% yield at a cheap ~6.7× EV/EBITDA after a ~30% derating — but the recurring French gaming-tax grind and a dividend that is stretched on reported earnings keep the risk/reward balanced rather than compelling. Own it for the monopoly + income if you trust the 2026–28 recovery and the dividend; we prefer Allwyn (BUY, special situation) within the lottery pair for its clearer catalysts and higher-growth PrizePicks option. Anchors the lottery-operator segment alongside Allwyn.

SOURCES & FLAGS. Price ~€23 (Investing.com/TradingView, 10 Jun 2026; ticker FDJU; ISIN FR0013451333; 52-wk €22.12–34.04; mkt cap ~€4.2bn). Fundamentals from company results + coverage (FY24 rev €3,065m +17% / PF €3,788m, recurring EBITDA €792m / 25.8% margin / PF €964m, net profit €399m, adj net profit €490m, dividend €2.05 / 77% payout, net debt €1.8bn, Kindred 2024 rev €918m / EBITDA €223m; FY25 recurring EBITDA €902m -6.5% / 24.5% margin, NGR €3.49bn -2.7%, GGR €8.7bn, levies +3.2% / €5.21bn fees; Q1’26 French L&RB rev €627m -2%; FY26 guide margin 23–24% + ~€90m further taxes, H2-weighted; EUROMILLIONS relaunch 2027) via igamingbusiness, BusinessWire, Seeking Alpha, Stockopedia, Investing.com, TradingView. Kindred acquired Oct 2024 (~€2.5bn, 91.77%→100% squeeze-out). CEO Stéphane Pallez; CFO Dan Lévy (from May 2026). Street 3 Buy / 2 Sell; avg target ~€26.9. Net debt, EV/EBITDA (~6.7×) and the adjusted-EPS reconciliation are OUR estimates. Rating, PT and scenarios are OUR assessment.

DISCLAIMER. Internal research note for informational purposes; not investment advice, an offer, or a solicitation.