NIBE Q4'24: Turning up the heat on the recovery

NIBE’s Q4 report came in somewhat below our expectations, mainly due to stronger FX headwinds than we had expected. However, the underlying organic growth and margins were strong, especially in the important Climate Solutions business area, which gives us more confidence in the current turnaround. Despite the recent surge in the share price, we still believe that the valuation (P/E 2026-2027: 25x and 21x) is attractive. As a result, we reiterate our Accumulate Recommendation but increase our target price to SEK 44 per share (prev. SEK 38 per share), mainly due to increased estimates and slightly reduced risk profile.

Recovery continues with strong margins

In our view, NIBE finished the year strongly, showing clear signs that the turnaround is progressing in the right direction. Climate Solutions stood out on the positive side, with organic growth adj. for currency effects at 8.7%. While reported revenue growth was slightly below our expectations due to a large negative FX impact, we view it as positive that Climate Solutions, which is the company’s largest business area and where most expectations lie, continues to show a gradual recovery, especially in the European market. While the Element business area also continues to show a gradual recovery, driven by positive development in the rail-based transport and HVAC segment, Stoves remained a drag, mainly due to a weak European market.

In Q4'25, NIBE’s adj. EBIT rose 27% to 1,438 MSEK, beating consensus and roughly meeting our expectations in absolute terms. In our view, Climate Solutions performed strongly and above our expectations, with a 15.7% adj. EBIT margin, returning the full-year margin to the historical 13-15% range. Stoves also surprised positively with a 10.2% margin despite sales declines and tariffs, supporting a potential return to its 10-13% target range in 2026. Element’s margin improved through productivity and cost control, though it missed our estimates. In the lower lines of the income statement, adjusted EPS increased to 0.48 SEK, in line with our expectations.

Earnings estimates slightly up

In our view, NIBE’s performance and market data continue to indicate a gradual recovery. In Germany, one of NIBE’s key markets, heat pump sales rose 55% in 2025, and subsidy applications grew 29% year-over-year in Q4’25, pointing to sustained momentum. Other European markets, such as Sweden, the Netherlands, Poland, and Denmark, also show signs of recovery, with heat pump sales up by double digits in 2025. While the overall picture points to strengthening end-consumer demand across most markets, several near-term headwinds persist, including a continued sluggish new-build market, currency headwinds from a strengthening SEK, and subsidy-related uncertainty in some regions, such as the US and France.

Overall, we have slightly lowered our near-term revenue estimates, reflecting the continued strengthening of the SEK as well as a somewhat slower-than-expected recovery in Element and, in particular, Stoves during Q4. However, our EBIT estimates have been revised slightly upwards despite the lower revenue forecast, driven by better productivity and operational cost control than we had previously expected, particularly within the important Climate Solutions business area.

We still view the risk/reward as attractive

We believe that NIBE’s valuation is high on actual earnings basis (adj. P/E LTM: 32x). Although we expect downward pressure on LTM earnings multiples, we believe that the strong medium-term earnings growth, coupled with a slight dividend yield of some 1-2%, offers a total expected return above our required return. Additionally, the DCF value is also sufficiently higher than the current share price. We therefore consider the risk/reward ratio quite good at the current share price level.