Solventum Corp Easy to Overlook, Hard to Replace. Buy at $95 PT.

研报英文原文证据摘录

Solventum Corp Easy to Overlook, Hard to Replace. Buy at $95 PT.

Capital Allocation Strategy is Sound and AI Displacement Worries Are Overdone From To % ch Cons.

Q1 1.48 1.48 0 1.48

A key component of our positive outlook is our belief that investors are overly

Q2E 1.87 1.87 0 1.91

discounting SOLV's capital allocation strategy. We think recent actions suggest

Q3E 1.43 1.44 1 1.40

otherwise. Management's decision to direct deal proceeds (both of which were Q4E 1.76 1.77 0 1.79

successfully priced in our opinion) toward debt reduction reflects a disciplined 12/26E 6.54 6.55 0 6.55

framework rather than a desire to pursue scale for scale's sake. From our simple math, 12/27E 7.13 7.18 1 7.08

the resulting reduction in interest expense alone represents a meaningful and 12/28E 7.74 7.98 3 7.75

underappreciated source of EPS upside. On AI worries, we argue that large health

systems have spent decades integrating SOLV's technology into the core reimbursement Patrick Wood

Analyst

and administrative workflows, and that the switching costs and pure operational risk of

patrick.wood@ubs.com

disruption would likely be prohibitive. +1-212-713 3018

Valuation: $95 PT, Assume Buy Jayna Francis

Associate Analyst

Our $95 PT is derived by applying a ~13x NTM P/E multiple on our rolled forward jayna.francis@ubs.com

estimates. Our 13x multiple is derived by weighting the company's core operating +1-212-713 4939

segments (MedSurg, Dental, HIS) by sales composition and applying appropriate

Priya Sachdeva

multiples based on where the company stands relative to peers (see analysis enclosed). Analyst

priya.sachdeva@ubs.com

+1-212-713 4193

Highlights (US$m) 12/23 12/24 12/25 12/26E 12/27E 12/28E 12/29E 12/30E

Revenues 8,197 8,253 8,325 8,199 8,543 8,969 9,437 9,930