Chinese medical devices major
Mindray Medical International Limited
) second-quarter 2012 adjusted (excluding one-time expenses other
than stock-based compensation expense) earnings per share of 45
cents beat the Zacks Consensus Estimate of 44 cents. Reported net
income moved up 16.1% year over year to $52 million (or 44 cents
per share) in the quarter.
Revenues were up sharply 23.3% year over year to $267.8 million,
in the second quarter, beating the Zacks Consensus Estimate of $258
During the reported quarter, Mindray recorded outside-China
sales of $152.5 million, up 20.5% year over year. Revenues in China
increased 27.1% year over year to $115.3 million in the reported
quarter. The company performed well in other emerging markets with
growth of 21.1%.
Patient Monitoring & Life Support Products (42.8% of total
sales) sales grew 23.3% year over year in the reported quarter to
$114.6 million. In-Vitro Diagnostic Products (27.6% of total
revenue) revenues were $73.9 million, up 31.1%. Revenues from
reagents contributed 34.4% of In-Vitro Diagnostic segment sales
during the quarter.
Medical Imaging Systems (24% of total sales) sales rose to $64.1
million, a growth of 15.1%. Other revenues (5.6% of total revenue)
were up 24.4% to $15.1 million.
Adjusted gross profit amounted to $154.8 million in the quarter,
higher 23.7% year over year. Adjusted gross margin was 57.8%
slightly higher than 57.6% in the year-ago period.
Adjusted selling expenses were $45.5 million, or 17% of total
net sales, compared with 17.7% a year ago. Adjusted general and
administrative expenses were $23.3 million, or 8.7% of sales,
versus 7.7% a year ago. Adjusted research and development expenses
were $22.5 million, or 8.4% of sales, compared with 8% in the
Adjusted operating income stood at $63.5 million in the quarter,
a year-over-year growth of 20.9%. Adjusted operating margin was
23.7%, lower than 24.2% in the year-ago quarter.
Balance Sheet and Cash Flow
As of June 30, 2012, Mindray had $710.1 million in cash and
liquid investments, up about 52% from the year ago. Long-term bank
loan stood at $85.1 million, up 143.3% from a year ago. Net cash
generated from operating activities was $61.4 million in the
quarter (up 81.6% year over year) while capital expenditure
amounted to $16.7 million.
Mindray provides guidance on a full year basis. The company
continues to forecast sales growth in excess of 18% for 2012. It
also expects adjusted net income for the year to increase by a
minimum of 15% year over year (a minimum of 13% earlier). The
guidance does not take into account any tax advantage on account of
key software enterprise status. The forecast for capital
expenditure for fiscal 2012 is about $90 million.
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.
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 fiscal 2011, the company launched 13
The company has entered the premium segment globally, where its
competitive advantage is still unclear. Also, on the negative side,
health care reform in China and the U.S. may reduce demand for
Mindray's products. Competition is fierce and leads to price
erosion over time.
Mindray's competitors, in different niche segments, include GE
Healthcare, a part of
). Our Neutral recommendation is supported by a short-term Zacks #3
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