
The heat pump industry is booming, with demand exceeding supply - indeed, we have had 
the perfect conditions for the sector, thanks to high gas prices and cut-off of Russian gas 
supplies, plus high subsidies from governments. 
However, as we explore in this note, we believe current price levels of heat pumps are only 
sustainable with significant subsidy, which will not be sustainable as installation numbers 
increase - indeed, at German levels of subsidy, heat pump subsidies per year would cost 
0.5% of total EU government expenditure, about 10% of the annual EU defence budget. 
Current plans to completely ban fossil fuel installations in Germany from January 2024 
also appear unrealistic to us. 
Payback time against gas boilers can be nearly 20 years without subsidy and this will need 
to fall to drive mass adoption. Asian manufacturers such as LG and Samsung (both No 
Current Recommendation - NCR) have been gaining market share with cheaper products, 
and there are also capacity additions from European manufacturers. 
Thus we believe pricing will come down, putting pressure on both revenue growth and, 
more importantly, margins in the medium term - which are at --15% and can fall to single 
digits. It is in H2'23 and FY'24 that we expect to see the first signs of such pricing pressure 
affecting NIBE's revenues. 
We reiterate our Short recommendation, with N60% downside potential, although bring up 
our price target slightly to SEK 42 per share to account for continued strong company 
performance and thus an increase to our FY'23 and FY'24 earnings estimates. 
Germany - Heat Pump Economics 
In Germany, the drive away from natural gas to renewables is higher than almost anywhere 
due to the particularly high previous usage of Russian natural gas. The German 
government has banned new fossil-fuel heating installations unless they are part of a 
system that runs on >65% renewables, starting in January 2024. 
We look at the payback time for a customer when installing a heat pump compared to a 
new gas boiler in Germany to see if the economics stack up both for German households 
and the government. We have seen various payback periods mentioned, and therefore 
attempt to come up with our own estimate of the payback time for an air source heat 
pump that can power heating and hot water in a typical single-family house, which is 
150sqm and uses 24,000 kWh of gas per year for heating and hot water. 
• Estimates of the average costs of an air to water heat pump vary in Germany. 
Energieheld mention €1 8,750 for a 15 Give two different versions of responses. Please separate the responses with 6 asterisk symbols: ******.
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