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Mindray Meets Q2 Earnings Estimates

Zacks Equity Research

Chinese medical devices maker, Mindray Medical International Ltd (MR) posted a 17.8% rise in 2013-second-quarter adjusted earnings per share to 53 cents from 45 cents a year ago and met the Zacks Consensus Estimate. Reported net earnings rose 19.3% year-over-year to $62.1 million from $52.0 million in the second quarter of 2012.

Net revenues grew 14.7% to $307.2 million but missed the Zacks Consensus Estimate of $319 million. Thanks to MR’s strong China sales that surged 27.9% to $147.4 million, representing 48.0% of the company's total net revenues. International sales were $159.7 million, up 4.7% a year ago.

Segment Revenues

Revenues from Patient Monitoring & Life Support Products rose 2.3% to $117.2 million from $114.6 million in the second quarter of 2012, contributing 38.2% to overall net revenues in the quarter.

Revenues from In-Vitro Diagnostic Products went up 19.5% to $88.3 million from $73.9 million in the prior-year quarter, contributing 28.7% to net revenues. Reagents sales accounted for 36.6% of this segment's net revenues.

Revenues from Medical Imaging Systems escalated 18.6% to $76.1 million from $64.1 million in the 2012-quarter, contributing 24.8% to net revenues.

Revenues from Others (including sales from the orthopedics business, service revenues from extended warranties, sales of accessories and repair service revenues for post-warranty period) soared 68.7% to $25.5 million from $15.1 million a year ago, contributing 8.3% to overall net revenues.

Financial Position

MR had $195.4 million in cash and cash equivalents as of Jun 30, 2013, down 21.2% from $247.9 million as of Dec 31, 2012. Total bank loans stood at $195.1 million, up 44.3% from $135.1 million as of Dec 31, 2012.

In the first six months of 2013, cash flow from operating activities fell 2.3% to $118.6 million from $121.5 million in the same period of 2012, due to unfavorable changes in current assets and liabilities, net of effects of acquisitions. Capital expenditure increased 22.6% to $40.2 million compared with $32.8 million a year ago.


Mindray provides guidance on a full-year basis. The company raised its revenue guidance as it expects at least 18% rise in revenues over 2012. However, MR reiterated adjusted net earnings guidance, anticipating at least 15% rise from 2012.

The guidance excludes any tax benefit related to the National Key Software Enterprise status and assumes a corporate income tax rate of 15% for the Shenzhen subsidiary. Mindray also expects capital expenditures of $130 million for the year.

Our Take

Mindray is a bellwether in the Chinese MedTech industry with a solid international presence. A key distinction with domestic competitors is that the majority of Mindray’s products have CE Mark and/or Food and Drug Administration (:FDA) clearance.

MR maintains a decent product pipeline and brings out several new products each year. New products contribute in a major way to the company’s revenues.

Currently, the stock carries a Zacks Rank #2 (Buy). Other stocks that are also performing well in the medical instruments industry include Thoratec Corporation (THOR) and Cyberonics Inc. (CYBX), both with a Zacks Rank #1 (Strong Buy), and IDEXX Laboratories, Inc. (IDXX) with a Zacks Rank #2 (Buy).

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