Analyst Comment

NIBE: German policy reversal increases risk, but the heavy share price reaction feels exaggerated

Summary

The German government's decision to repeal parts of its heating law is expected to negatively impact the German heat pump market, a critical area for NIBE's growth.
This policy reversal increases the medium-term risk for NIBE's Climate Solutions business, as it reduces regulatory pressure on German households to adopt renewable heating solutions.
Despite the policy change, NIBE's diversified presence in multiple geographic markets and the long-term demand for energy-efficient heat pumps support a positive outlook for the company.
The recent 12% decline in NIBE's share price is viewed as an exaggerated reaction to the policy shift, given the company's strong structural demand prospects.

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The German government’s decision to scrap key parts of its contentious heating law is an unfortunate development that we believe will have a negative impact on the German heat pump market. While it is currently difficult to determine the exact extent of the impact on NIBE, Germany remains a critical market and a primary growth driver for the company. In our view, this policy reversal increases the risk profile for the Climate Solutions business area in the medium term, as it reduces the regulatory pressure on German households to transition to renewable heating solutions.

The share price reaction seems heavy in our opinion

According to Reuters, Germany's coalition parties announced that they have agreed to repeal the current heating law introduced by the previous government, which required new heating systems to use at least 65% renewable energy. In our view, the previous legislation has been a key driver for heat pump adoption in Germany, where subsidy applications have shown strong growth, and sales increased 55% in 2025, albeit from a low base. The new legislation allows for the continued installation of traditional boilers, which we believe lowers the immediate incentive for consumers to switch to heat pump technology. While it is currently difficult to determine the exact extent of the impact on NIBE, Germany is a critical market for the company, constituting around 15% of Climate Solutions’ revenue. Although the German market is a key pillar, we highlight that NIBE has a broad presence across several other geographic markets, which provides diversification. In addition, political decisions regarding heat pump subsidies have caused significant short-term fluctuation, but we maintain our view that heat pumps will remain a central component of the energy transition owing to their energy efficiency, environmental advantages, and long-term cost savings. We believe this supports a continued strong structural demand for NIBE’s products over the long term. Consequently, although the policy shift elevates the medium-term risk profile for Climate Solutions, we believe the recent 12% share price decline seems heavy.

Nibe Industrier operates in the manufacturing industry and focuses on the development, manufacture and distribution of heat pumps and energy solutions. The company's products are aimed at private individuals and companies looking for energy-efficient solutions. The business is global with a main presence in Europe. Nibe Industrier was founded in 1989 and has its headquarters in Markaryd, Sweden.

Key Estimate Figures13.02

	2025	26e	27e
Revenue	40,841.0	42,964.0	46,404.9
growth-%	0.8 %	5.2 %	8.0 %
EBIT (adj.)	4,303.0	5,034.8	5,669.5
EBIT-% (adj.)	10.5 %	11.7 %	12.2 %
EPS (adj.)	1.22	1.61	1.90
Dividend	0.35	0.55	0.65
Dividend %	1.0 %	1.6 %	1.8 %
P/E (adj.)	29.2	21.8	18.4
EV/EBITDA	14.2	11.7	10.4