Zimmer Biomet Holdings Inc Looking Hip. Buy at $115 PT.

Research evidence excerpt

Zimmer Biomet Holdings Inc Looking Hip. Buy at $115 PT.

BS, diluted) (USD)

of care. The fear from the market is that this will result in price pressure in implant

12/26E

providers, but our new deep dive work suggests that's unlikely, both given historical From To % ch Cons.

precedent and given we think most facilities can find similar savings in their base Q1 1.73 1.91 10 2.09

operations, particularly through improved infection control. For context, at 2% we're Q2E 2.10 2.00 -5 2.01

looking at about $520 of required savings on average which is very achievable from our Q3E 2.09 1.89 -9 1.88

work (i.e. typical case at $26,150 x 2%). Equally, it may spur uptake of products like Q4E 2.44 2.49 2 2.51

PersonaIQ from ZBH, which track patients over time and lower costs. We also think the 12/26E 8.35 8.29 -1 8.48

market is underestimating the strength of capital allocation at ZBH, being one of the few 12/27E 8.95 9.05 1 8.99

businesses careful on degree of M&A spend (75% of Monogram's was CVR tied), and 12/28E 9.70 9.53 -2 9.60

committed to returning capital (executing a $1.5bn buyback for c. 10% of the market

Patrick Wood

cap). Analyst

patrick.wood@ubs.com

Assume coverage at Buy with a $115 PT +1-212-713 3018

Our PT of $115 is derived by applying a 13x NTM P/E multiple to our rolled forward Priya Sachdeva

estimates. ZBH is trading on c. 10.1x 2027 P/E, which when examined relative to peers Analyst

suggests expectations of c. LSD sales growth - matching buyside feedback. While this is priya.sachdeva@ubs.com

aligned with Q1 (+2.9%) we think the normalized rate is closer to MSD. Relative to the +1-212-713 4193

peers MSD growth, capital returns ($1.5bn buyback), >75% cash conversion, and Olwyn Bartis

reasonable ROIC at 13% (incl. goodwill), should benchmark closer to 13x.