NIBE Q2'25: Gradual recovery but valuation looks stretched

NIBE’s Q2 result was largely in line with our expectations, and we made only minor upside revisions to our earnings estimates. The company’s performance, outlook and market indicators continue to show signs of a recovery. However, in our view, the pace of the recovery will likely remain slow, due to a weak consumer confidence, a sluggish new-build market, currency headwinds from a strengthening SEK, and subsidy uncertainty in certain markets. In our view, short-term drivers remain weak, and the stock is already sufficiently priced in for high earnings growth (2025e P/E: 34x). As a result, we reiterate our Sell recommendation and target price of SEK 40.0 per share.

Q2 broadly in line with our expectations

NIBE’s Q2 organic revenue increased by a modest 0.3% year-on-year to ~10.1 BNSEK, in line with our estimates and slightly above consensus forecasts. At the business area level, revenue performance was mixed. Climate Solutions slightly exceeded both our and consensus forecasts, delivering organic growth of 4.7% year-on-year to SEK 6.8bn. Growth was primarily driven by a gradual recovery in the European market, particularly in Sweden, Germany, and the Netherlands. The Element business area (SEK 2.8bn, -1.5% y/y) performed in line with our expectations, while Stoves (SEK 0.7bn, -15.5% y/y) underperformed, reflecting weaker consumer demand in Europe. NIBE’s Q2 EBIT increased by 41% to 944 MSEK, roughly in line with our expectations but slightly higher than consensus forecast. On a business area level, Climate Solutions stood out slightly on the positive side, while Stoves disappointed. Overall, given the challenging operating environment, we believe the group’s profitability level (Q2’25 EBIT margin: 9.4%) was stable, supported by increased sales volumes, better productivity and good cost control. It is worth noting, however, that the comparison level is very low, and achieving profitability consistent with historical levels will necessitate higher sales growth.

We have kept our estimates largely intact

While we have slightly increased our revenue estimates for Climate Solutions, these gains are largely offset by lowered estimates for Stoves, with Element's outlook remaining largely intact. This results in only a marginal positive impact on overall group revenue. We continue to anticipate a slow recovery pace, as evidenced by the last two quarters, due to a weak consumer demand, a sluggish new-build market, currency headwinds from a strengthening SEK, and ongoing subsidy uncertainty in certain markets. Due to slight increase in revenue estimates, our absolute EBIT estimate for the coming years has also seen a slight uptick. We believe margins will be supported by a combination of volume growth and effective operational cost control, though this will be partially offset by increased depreciation from recent capacity investments. However, a significant margin recovery hinges on a stronger volume rebound than seen in the last quarter, which remains uncertain given the continued weakness in residential markets. Additionally, rising competition and capacity expansion outpacing demand raise the risk of structural overcapacity and potential margin pressure.

We reiterate our Sell recommendation

In our view, the valuation multiples are high in absolute terms (2025e P/E: 34x and EV/EBIT: 25x), and the DCF and relative valuation paints a similar picture. NIBE’s long-term track record of profitable growth is convincing, but the earnings outlook is slower, and we believe that in the current uncertain macroeconomic situation, overstretched multiples are unwarranted. Hence, we continue on the sidelines and wait for a better risk/reward ratio.