NIBE Industrier AB (NDRBF): A Contrarian Play on HVAC’s Quiet Recovery

The HVAC sector has been a graveyard for optimism in 2025, with investors fleeing cyclical stocks amid macroeconomic headwinds and lingering supply chain distortions. But in the shadows of this pessimism lies an overlooked opportunity: NIBE Industrier AB (NDRBF), a Swedish HVAC and heat pump specialist, has quietly executed a turnaround that defies the bearish consensus. With an 850% year-over-year surge in adjusted EPS, a normalized inventory landscape, and a return to predictable demand cycles, NIBE is positioned to capitalize on a cyclical rebound—provided investors dare to look past the noise.

The Contrarian’s Catalyst: EPS Turnaround and Inventory Truths

Let’s start with the numbers. In Q1 2025, NIBE’s adjusted EPS skyrocketed to SEK 0.19, a staggering 850% jump from SEK 0.02 in Q1 2024. This isn’t a fluke. The company has slashed costs, improved margins to 8.1% from 5.4% a year earlier, and stabilized its core heat pump business after years of inventory overhang.

The key underappreciated driver here is inventory normalization. European distribution chains, once clogged with excess stock, have finally reached equilibrium. NIBE’s Q1 report highlights that inventories across its supply chain are now at levels where order intake aligns with actual deliveries, a stark contrast to the “distorted demand” of prior quarters. In Germany, the last major holdout, inventory reductions have now created a clean slate for demand to flow directly to manufacturers like NIBE.

This matters because it removes a critical drag on pricing power and demand visibility. Analysts fixated on short-term sales growth (a modest 1.9% rise to SEK 9.67 billion) are missing the bigger picture: the HVAC sector is now entering a phase of sustainable, seasonally driven demand. As NIBE noted, the return to “traditional seasonal patterns” means weaker first-half activity will give way to stronger second-half sales—a rhythm that rewards companies with lean inventories and stable supply chains.

Why the “Moderate Sell” Consensus is Wrong

The consensus view on NIBE is stuck in 2023’s reality. Analysts cite a strengthening Swedish krona and political risks like tariff fluctuations as reasons to stay on the sidelines. But this ignores NIBE’s structural advantages:

1. Regionalized Supply Chains: By localizing production and sub-suppliers within Europe, NIBE has insulated itself from trade barriers while cutting logistics costs.
2. Heat Pump Tailwinds: The EU’s push for decarbonization and energy independence is a multiyear tailwind for heat pump demand—a market where NIBE holds 24% of Western Europe’s residential heat pump market.
3. Margin Resilience: Even with currency headwinds, NIBE’s cost-cutting and pricing discipline have already delivered a 51.6% jump in operating profit year-over-year.

The market’s skepticism is also backward-looking. The 850% EPS surge and inventory reset are not one-off events but markers of a sustainable operational turnaround.

A Contrarian’s Blueprint: Buy the Dip, Own the Cycle

This is a classic contrarian setup. NIBE’s stock is trading at a discount to its 5-year average P/E ratio despite margin improvements and a clearer path to demand growth. The recent pullback—driven by macro fears and a cautious sector outlook—offers a rare entry point.

Here’s the play:
- Buy on dips: Use the next correction (likely tied to broader market volatility) to accumulate shares.
- Focus on the second half: NIBE’s seasonally strong H2 performance and inventory-driven demand should push EPS higher, potentially triggering a re-rating.
- Hold for the cycle: The HVAC recovery isn’t a quarter-long event—it’s a multiyear shift toward energy-efficient systems, and NIBE is a leader in the right technologies.

Risks? Yes. Overrated? Definitely.

The Swedish krona’s strength and trade barriers are real, but NIBE’s hedging strategies and localized supply chains limit their impact. Meanwhile, the company’s adjusted net debt/EBITDA ratio of 1.2x leaves ample flexibility to navigate turbulence.

Conclusion: The Smart Money is on NIBE’s Turnaround

When the market is fixated on short-term noise, that’s when contrarians strike. NIBE Industrier’s Q1 results signal a company that’s not just surviving but thriving in a normalized HVAC landscape. The inventory reset, margin expansion, and strategic positioning are all hallmarks of a stock ready to outperform once the recovery narrative takes hold.

Act now: The dip is coming. When it does, it’s time to buy NDRBF. The cyclical rebound in HVAC isn’t a bet—it’s a math problem. And NIBE’s numbers add up.