Our target price for Ariston is EUR5.1. We value Ariston on a combination of a DCF (assuming normalized/terminal growth of 3%/2%, a terminal EBIT margin of 8.5%, and a WACC of 8.3%) and a target multiple of 11x 2026E EV/EBITA, broadly in-line with the capital goods sector, rounding to the nearest EUR0.10.

Key downside risks to the achievement of our target price include: 1) A deeper and more prolonged downturn in the heat pump market, thanks to disruption to subsidies, weakness in broader consumer conditions, and switching to fossil products; 2) Competitive and pricing risk given the expansion of capacity in the heat pump market despite softer demand; 3) Structural risk, if there is a sharper fall in demand for gas boilers in favour of heat pumps; and 4) M&A risk, if the M&A strategy is not value creative.