NIBE Q3'25: Recovery progressing in the right direction

While NIBE’s Q3 report came in somewhat below our expectations, we believe the overall picture remains unchanged: a gradual recovery in sales volumes and margins continues moving in the right direction. Therefore, we view the market’s reaction, driving the share price down 13%, as somewhat exaggerated and see it as creating an even more attractive entry point into the company’s compelling long-term investment story. As a result, we reiterate our Accumulate recommendation but lower our target price slightly to SEK 38.0 per share (prev. SEK 40.0), mainly due to lower estimates.

Investment case dependent on a volume rebound

Over its long history, NIBE has grown into an international group within heating solutions and energy control. In our view, NIBE’s investment case relies on continued investments in product development and strategic acquisitions to support long-term structural growth in energy-efficient heating solutions and drive a sales-led margin recovery. While the biggest positive driver for NIBE is sales growth, the main near-term risks to achieving this include intensified competition, regulatory uncertainty around long-term subsidies, and a weak economic environment.

Q3 came in slightly lower than our expectations

NIBE’s Q3 organic revenue increased by a modest 1.1% year-on-year to ~10.1 BNSEK, slightly below our estimates and consensus forecasts. Adjusted for FX, organic growth amounted to 6.1%, as the stronger SEK continued to weigh on reported figures. At the business area level, Climate Solutions performed slightly slower than our estimates, delivering FX-adjusted organic growth of 7.9% y/y. The Element business area (8.8% FX-adjusted y/y growth) exceeded our expectations, while Stoves (-1.6% FX-adjusted y/y growth) underperformed, reflecting softer consumer demand in Europe.

NIBE’s Q3 EBIT increased by 25% to 1,139 MSEK, roughly in line with our and consensus forecasts. On a business area level, Climate Solutions and Element performed well, while Stoves again disappointed. Overall, given the challenging operating environment, we view the group’s profitability level (Q3’25 EBIT margin: 11.3%) as rather solid and slightly better than anticipated, supported by increased sales volumes, improved productivity, and good cost control.

We made some downwards revisions to our estimates

While management’s margin commentary for 2025 was slightly more cautious this quarter, it was broadly in line with our expectations, with Climate Solutions expected to operate near the lower end of its margin range, Element tracking about one percentage point below its target range, and Stoves requiring a few more quarters to normalize. Although we believe that NIBE’s performance and market indicators continue to point to a gradual recovery, supported by improving heat pump demand in Europe and stable conditions in the US, we reduced our revenue estimates slightly, mainly due to a slower-than-expected recovery in Stoves and lingering headwinds such as a weak new-build market, currency pressure from a stronger SEK, and subsidy uncertainty in some regions. As a result, our absolute EBIT estimates were also revised slightly downward.

We still view the risk/reward as attractive

We believe that NIBE’s valuation is relatively high on actual earnings basis (adj. P/E LTM Q3’25: 28x). Although we expect some downward pressure on LTM earnings multiples, we believe that the medium-term earnings growth of some good 10-15% 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.