The Lottery Corporation Ltd (ASX: TLC) share price has dropped over the last few weeks, as the chart below shows. This could be the right time to look at the business.
Lottery Corporation operates lotteries and Keno products in Australia. It's exclusively licenced to operate all of Australia's state lotteries, aside from Western Australia. It also distributes through almost 4,000 retail outlets nationally and digital channels. It operates Keno in most states and territories except Western Australia, Tasmania, and the Northern Territory.
Lottery Corporation has a strong market position and is predicted by analysts to deliver profit growth in the coming years. Let's take a look at its prospects through the eyes of the broker UBS.
Bullish view on the Lottery Corporation share price
UBS currently has a buy rating on Lottery Corporation shares, with a price target of $6.35, indicating a potential return of more than 10% over the next year, as of the time of writing.
The broker noted that FY25 was better than expected on both revenue and costs, which also beat guidance, with earnings per share (EPS) finishing 3% higher than UBS' estimates.
UBS says that the company is displaying a signal of earnings quality of the standalone business. Digital penetration growth of 2.7 percentage points compared to the first half of FY25 was "encouraging". Another encouraging fact was that 62% of new customers were aged under 45 (which are typically cohorts with higher spending per player ahead).
The broker also said that FY26 capital expenditure guidance suggested a step-up of $20 million (and to remain elevated until FY29) to reinvest into digital transformation and infrastructure. This could have longer-term benefits for the Lottery Corporation share price.
UBS then said:
TLC had previously flagged that Powerball was due for the next game innovation after the Saturday Lotto price increases became effective in May this year. However we had expected the timing to stay on rhythm for a change in ~May next year. The scale of increase too, at +17%, is larger than we have observed in recent history (Sat +13% in 2025, WW +9% in 2024, PB +9% in 2023, Oz +7% in 2022). We had not previously included this Powerball price increase in our forecasts, but estimate it is worth ~$40m pa in EBITDA with 7.5mths to contribution in FY26.
The FY25 result has led to a modest lift in our forecasts and valuation which were already above consensus. We remain positive on the medium-to-long term 'growth formula' for TLC earnings leading to high single digit or low double digit EPS growth. This is based on nominal GDP top line, structural shift towards digital, and fixed cost and financial leverage.
Profit growth projected
UBS predicts that the business could deliver a net profit of $439 million in FY26, and this could rise every year to reach $542 million in FY30. Profit (growth) is a key factor for most businesses, including the Lottery Corporation share price. So, it has a promising outlook.
