Mindray Reports Preliminary Results

Zacks

Chinese medical devices major Mindray Medical International Limited (MR) announced selected unaudited preliminary 2012 results and also provided sales guidance for 2013. The company will report detailed results on February 25.

Mindray expects 2012 net revenues to grow roughly 20% year over year to $1,056 million. According to the company, strong domestic sales coupled with growth in key emerging markets have contributed significantly to top-line growth in 2012. It has also acquired four companies in 2012 to expand its business. The Zacks Consensus Estimate for 2012 revenues is $1,057 million.

Further, Mindray estimates adjusted revenues to increase 16% to $207 million in the fourth quarter of 2012, which is in line with the Zacks Consensus Estimate. Adjusted revenues exclude tax-related one-time benefit associated with the key software enterprise status ($7.6 million in the first quarter of 2011) and assume a 15% corporate income tax rate related to the Shenzhen subsidiary.

Management announced that it has achieved significant operating leverage and generated strong cash flow in 2012. The Zacks Consensus Estimate for 2012 earnings per share is $1.69.

Mindray is a bellwether in the Chinese MedTech industry with a solid international presence. Majority of the products from Mindray have received CE Mark and/or Food and Drug Administration (“FDA”) clearance, which distinguishes the company from its domestic competitors.

Mindray maintains a decent product pipeline and brings out several new products each year. New products contribute in a major way to Mindray’s revenues. In 2012, the company launched 10 new products.

For 2013, Mindray projected revenue growth of 17% on the back of solid sales in China and in other emerging markets. It plans to invest in research and development and engage in mergers and acquisitions as well as strategic alliances to expand its product offerings. The company aims to roll out 7 to 10 new products this year. Moreover, the company will step up its sales, marketing and service efforts in certain markets and continue to focus on bottom-line growth as well.

Mindray’s competitors, in different niche segments, include Philips (PHG) and Siemens (SI) and GE Healthcare, a part of General Electric (GE). The company has entered the premium segment globally, where its competitive advantage is still unclear. However, health care reforms in China and the U.S. may reduce demand for Mindray’s products. The company also faces fierce competition, which leads to price erosion over time.

The stock currently carries a short-term Zacks Rank #4 (Sell).
 

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