please summarise this report: 

Investment Thesis
 
= Heating and ventilation company seen as an ESG winner and valued at >35x FY'24
consensus earnings thanks to leading position in heat pumps.
 
+ Heat pumps form under 50% of group revenues. Remaining products include
woodburning stoves, heating elements, air conditioning units, and washing machines.
 
+ Heat pump market booming thanks to EU targets but massive production capacity
additions from NIBE and rivals, plus Asian imports, mean sector can commoditise,
sending ~15% EBIT margins downwards.
 
+ Highly recession vulnerable, with significant new-build exposure. Construction data
turning south in key Nordic and German markets.
 
+ We sit 20% below consensus for FY'24, and a more appropriate 20x FY'24 PE multiple
gives 65% downside from here to our SEK 35 price target.
 
NIBE is priced for perfection at 5x consensus sales and 36x consensus PE for FY'23. The
company’s heat pumps have been a significant beneficiary of the trend towards
increasingly environmentally aware building regulations and energy efficiency, with
additional interest thanks to the recent high gas prices across Europe. Heat pump
installation is supported by the REPowerEU scheme to reduce dependence on Russian
fossil fuels by 2030.
 
The company appears to be one of the better-run Swedish roll-ups, in comparison to
others that we have covered — namely Sinch (Short), Embracer (Short) and Storskogen (No
Current Recommendation — NCR). The acquisition rate has been slower and P&L
performance plus cash flow have been consistently good over a number of years.
However, in our view, the stock has become massively overhyped at this level as an ESG
winner with cutting edge technology.
 
In practice, we see this as a typical HVAC company, which should command an earnings
multiple of ~20x, where heat pumps form well under half the revenue and which are not a
new unique technology — they are in fact similar to air conditioning systems. We believe
the company is highly sensitive to economic conditions and deterioration of new builds
that we are starting to see in their key Nordic and German markets. Capacity additions
from European rivals in heat pumps plus Asian imports also leave the 15% margin in
Climate Solutions highly vulnerable — we expect this to trend downwards in the medium
term as heat pumps commoditise. We sit ~>20% below consensus FY'24 EBIT estimates.
 
We therefore initiate on NIBE with a Short recommendation, with 65% downside potential
to our SEK 35 price target. Upcoming Q3 and Q4 results ca Respond with at most 500 words.
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