Philips Ready to Start from a Clean Sheet

Running up to the CMD on 10 February, we initiate coverage on Philips with an Accumulate rating and a €27.5 TP. While we see potential for the company to positively surprise with its 2028 margin ambitions, investors will likely focus on the phasing, as 2026 margins will still be held back by tariff normalization. Nevertheless, with the majority of Respironics-related uncertainty now behind us, we believe Philips has room to increase shareholder returns and potentially announce a new share buyback program. Although we believe Philips is back on track after several challenging recall years, we note that much of the turnaround is already reflected in the current valuation, with the shares now trading at a discount to peers similar to the level seen before the recall.