Mindray Medical posted a 1.9% fall in 2014-second quarter adjusted
earnings per share to $0.53, but inched past the Zacks Consensus
Estimate by $0.01. Net revenues improved 8.9% y/y, driven by strong
international sales. Sluggish purchasing and marketing activities
in the Chinese healthcare industry continue to have an unfavorable
impact on the company's domestic sales. Revenues from certain key
emerging markets are also affected by unfavorable foreign exchange
and political issues. The company expects 2014 net revenues to grow
at least 10% over 2013, lower than the earlier guidance of 15%.
However, Mindray maintains a decent product pipeline and brings out
several products each year. Therefore, we maintain our Neutral
recommendation on Mindray and set a target price of $31.00.
Mindray Medical International Limited (MR), headquartered in
Shenzhen, China, commenced operations in 1991. The company conducts
much of its business through its consolidated operating subsidiary,
Shenzhen Mindray, which was established in 1999. Mindray owns about
99.9% of the equity of Shenzhen Mindray. It maintains its global
operational headquarters (HQ) in Shenzhen while the U.S. HQ is in
Mahwah, New Jersey.
Mindray is a developer, manufacturer and seller of medical
devices globally. It has three segments, namely Patient Monitoring
and Life Support products, In-Vitro Diagnostic products and Medical
Mindray's largest segment, Patient Monitoring and Life Support
(36.3% of total revenues in the first half of 2014), includes
products such as patient monitoring devices (PMD), anesthesia
devices, defibrillators, surgical lights, and beds. Generally, PMDs
measure real-time, concurrent, or dynamic physiological parameters
such as heart rate, blood pressure, respiration, and temperature.
In China, the company is the leading player in the patient
The In-Vitro Diagnostics segment or IVD (28.6%) includes
products in 5 instrument categories used for diagnostic testing:
hematology analysis products, biochemistry analysis products, urine
sediment analysis products, microbiology analysis products and
coagulation analysis products. In addition, the company
manufactures and sells over 150 separate reagents for both
hematology and biochemistry analyzers. Reagents are a major source
of recurring revenue.
The Medical Imaging Systems segment (25.4%) includes the
following product lines: black and white ultrasound, color
ultrasound, and digital radiography. Historically, this product
segment has consisted primarily of portable and mobile ultrasound
The Others segment (9.7%) derives revenues from provision of
after-sales services along with research and development services
performed for original design manufacturers (ODM). This segment
also includes revenues from acquired business, such as orthopedic
products, endoscope devices and healthcare IT solutions products
that are outside the other three business segments.
Mindray sells products through different distribution channels
in various parts of the world. In the U.S., U.K., France, Germany
and the Netherlands, the company sells its products through a
direct sales model. In China, it sells its goods mainly to
third-party distributors. It had one of the largest distribution
and sales networks for medical devices in that country with over
1,300 distributors and about 1,900 sales and sales support
personnel. Outside China, Mindray marketed its products through
more than 1,500 third-party distributors and its sales force of
about 900 people. In 2013, revenues from China accounted for 45.4%
of the company's total revenues and revenues from international
operations accounted for 54.6% of the company's total revenues.
The company ensured after-sales service to distributors and
hospitals in China through local offices. It also provides
after-sales service for medical facilities based in the U.S., the
U.K., France and Germany. The company extends after-sales care for
its other international customers through its distribution
Mindray maintains R&D facilities in Shenzhen, Beijing,
Nanjing, Chengdu, Xi'An and Shanghai in China. The company runs
R&D operations in Seattle, Washington, Mahwah, New Jersey,
Stockholm, Sweden and Miami, Florida. It manufactures the majority
of its products at its three plants located in Shenzhen, and one
facility in Nanjing, China. Mindray also assembles and stores a
number of products at its Mahwah, New Jersey facility.
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