Modulight Q4'25: Small steps in the right direction

Translation: Original published in Finnish on 2/21/2026 at 5:48 pm EET.

Modulight's 2025 was characterized by growth. The business is developing in the right direction, but slowly. For Q4, revenue was below and earnings were above our estimates due to exceptionally low operating costs. The company did not provide guidance for the current year, for which we expect moderate growth and a narrowing loss. Modulight also announced a new growth-oriented strategy for 2026–27. We are lowering both our revenue and cost estimates for the coming years and the longer term, which moderately reduces our view of the stock's fair value. We lower our target price to EUR 1.2 (was EUR 1.3) and reiterate our Reduce recommendation.

Losses narrowed due to strict cost control

Modulight's Q4 revenue of 1.74 MEUR (Q4'24: 1.43 MEUR) was below our estimate (2.15 MEUR). Full-year revenue of 7.07 MEUR increased by an impressive 73% (2024: 4.10 MEUR). On a quarterly level, growth has stabilized since Q2’25 (1.96 MEUR). For the full year, Modulight reported that recurring revenue from the PPT model exceeded 1 MEUR. A large portion of this revenue still comes from clinical trials, but treatments for macular degeneration are growing in the background.

Q4'25 EBIT was -0.79 MEUR, which was significantly better than our forecast of -1.16 MEUR. The earnings beat was due to remarkably low material and operating costs, which we do not expect to remain at such low levels in the future. Virtually no materials were purchased in Q4, personnel costs were low due to temporary lay-offs, and other operating expenses were also at a historically low level. However, operating costs are likely to be lower than our previous estimates, as the number of employees appears to have decreased more than we assumed.

Cash flow from operating and investing activities in Q4 was -0.54 MEUR.  Net cash assets decreased to 6.86 MEUR from 12.86 MEUR in the previous year. In our view, the cash position may be sufficient to achieve an earnings turnaround. This requires the company to continue growing and to manage costs carefully, so there is no room for significant setbacks from the perspective of the sufficiency of current funding.

The new strategy period continues to pursue growth

The company did not provide guidance for 2026. The company's revenue has become more stable with the progress of the PPT model, but visibility is still limited. Uncertainty for the year is introduced by clinical trials, where the revenue generated will start to decline as patients move to follow-up and the number of treatments administered decreases. There is no external visibility into potential new studies. Modulight published a new strategy for 2026–27, which continues to pursue growth and improve profitability largely along the same lines as the previous strategy period.

We are lowering our revenue and cost forecasts

Based on the report, we are modestly lowering our revenue forecasts for the short and long term. The business is developing in the right direction, but the pace of change is more moderate than our previous estimate. We are also lowering our cost forecasts, which is why the changes to the earnings lines remain small.

Risks outweigh potential in the valuation

The valuation of the share is uncertain due to the unpredictability of earnings and cash flow turnaround. The valuation relies heavily on future projections, which carry a high degree of forecasting risk. EV/S multiples are 5.4x-4.0x for 2026-27, which we consider cautiously attractive based on the growth and profitability potential. Conversely, increased financial risk and signs of a flattening growth curve for revenue weaken the risk/reward ratio. The DCF model (EUR 1.2) indicates that the share has little upside. We emphasize that a sufficient expected return on the share requires continued positive development, for which we currently lack sufficient evidence.