Multitude’s Q4 results exceeded our expectations due to lower-than-expected impairment losses, where the trend has also been positive in the last few quarters. In addition, the business is growing well organically, which enables the cost structure to scale. With a good momentum in these, the guidance set for 2025 seems attainable. Despite the positive stock reaction valuation remains low and we see the risk/reward ratio to be attractive. We raise our target price to EUR 6.0 (was EUR 5.7) and reiterate our Accumulate recommendation.

Stronger-than-expected profit development

Multitude’s net operating profit grew approximately 8% to 57.7 MEUR as we expected. The development was mostly as expected between the business units, but the smallest business unit Wholesale Banking showcased impressive and higher-than-expected growth (net interest income +119%), which we find promising.

Even though we had raised our estimates slightly before the results, Q4 profit still was somewhat higher than we anticipated. Multitude’s earnings before taxes was at 8.6 MEUR in Q4 (estimate 7.2 MEUR) more than doubling from comparison period. The number one explaining factor behind the higher-than-expected earnings and the improvement was impairment losses, where the trend has been very positive after Q1’24. According to the company, this is a result of improved scoring and underwriting among other things. Also, the cost structure seems to scale quite well with growth at the moment resulting in a lowering cost/income ratio. All in all, Multitude managed to reach its guidance for 2024 set over three years ago of 50% annual EBIT growth (from low levels), which naturally is a positive sign of the managements say/do ratio.

Multitude’s board proposed a EUR 0.44 dividend, which clearly exceeded our expectation of EUR 0.22. The company highlighted that the extraordinary dividend of EUR 0.20 is truly a one-time dividend and thus the dividend level will most likely be lower going forward.

No changes to 2025-2026 guidance

Multitude’s guidance for 2025 and 2026 remains unchanged. The company expects to reach a net profit level of 23 MEUR in 2025 and 30 MEUR in 2026. Given the actualized 2024 numbers (2024 net profit 20.2 MEUR), the improvement for 2025 doesn’t seem that demanding. The company seemed rather positive about the trend seen in impairment losses and we expect the lowering ratio of impairment losses to support the profit improvements going forward. Continued organic growth naturally also plays an important role in earnings growth as it enables the cost structure to continue to scale. Other positive factors supporting earnings growth going forward are, for example, increased fee income from the new embedded finance partner in Poland (Consumer Banking) and the new payment solutions customers (Wholesale Banking) as well as the Lea Bank investment, which is seen in results from associates.

Risk/reward ratio still attractive

In our view, the acceptable P/B for Multitude is currently in the range of 0.7-1.0x, derived from assumptions about sustainable return on equity and cost of equity. Treating the perpetual bonds on the balance sheet as debt, Multitude's current P/B is 0.7x, which is at the lower end of the range, suggesting a very modest valuation. Our dividend discount model also suggests upside potential. Compared to its peer group, the valuation is also trading at a clear discount, both in P/E and P/B multiples. Thus, with all measures the valuation seems low. Taken the good momentum of the business into account, that the 2024 showcased, we see the risk/reward to be attractive.