NIBE Q2'25 preview: Recovery stuck on low heat

We have made slight downwards revisions to our short-and medium-term forecasts for NIBE, in light of a slower-than-expected recovery. In our view, short-term drivers remain weak, and the stock is already sufficiently priced in for high earnings growth (2025e P/E: 33x). As a result, we believe that the risk/reward is weak. Consequently, we turn to a Sell recommendation (prev. Reduce) and reiterate our target price of SEK 40.0 per share.

We expect a continued slow recovery in Q2

NIBE will publish its Q2 results on Friday, August 22, at 8.00 am CEST. With our updated estimates, we expect NIBE’s Q2 revenue was 10,128 MSEK, roughly in line with consensus, reflecting a slight organic growth of some 1% (y/y). While we expect around 3% organic growth in Climate Solutions business area, supported by normalized inventory levels in Europe, we anticipate that the Group’s Q2 revenue will be partly offset by softer performance in Element and Stoves business areas. This is mainly due to a weak new property construction market and still elevated component inventories, as well as sluggish consumer demand. In addition, we see currency headwinds from a strengthening SEK affecting reported revenue growth negatively. We estimate absolute EBIT to increase from 669 MSEK in Q2’24 to 936 MSEK in Q2’25,  roughly in line with consensus, supported by increased revenue and improved capacity utilization. Additionally, the cost-savings program, reflected in lower SG&A expenses, should support EBIT, although this will be partly offset by increased depreciation due to recent capacity expansions.

In the company’s upcoming report, we will watch closely for any comments regarding tariffs, the inventory situation, and the pricing landscape, where excess inventory at the manufacturing level could lead to downward pressure on prices.

We have adjusted our estimates, reflecting a slower recovery

In our view, it is increasingly evident that the market has bottomed out. Subsidy applications in Germany and the UK continue to trend positively, and Q2 heat pump sales show positive development in countries such as Sweden (Q2’25: +23% y/y) and Germany (Q2’25: 75% y/y). While normalized inventory levels across most European distribution channels support this view, the pace of recovery has been slower than our expectations. Near-term challenges remain, including a weak economic environment, a prolonged recovery in the new-build market, currency headwinds from a stronger SEK, and subsidy uncertainty in some European markets.

In light of these factors, we have revised down our revenue and earnings estimates by some 1-3% and 2-5%, respectively, for 2025-2027. We now expect NIBE to grow its revenue by some 3% for the current year and around 6-7% for the coming years, driven by a gradual recovery in consumer demand. However, downside risks to estimates persist given uncertainty around subsidies in, i.e., Germany and France, as well as the prevailing geopolitical uncertainties. While we expect increased revenue to provide some operating leverage, we still believe it will be very challenging for the company to return to historical operating margin levels already in 2025.

Risk/reward remains weak

In our view, the valuation multiples are high in absolute terms (2025e P/E: 33x and EV/EBIT: 24x), 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.