Chinese medical devices major
Mindray Medical International Limited
) first-quarter fiscal 2012 adjusted (excluding one-time expenses
other than stock-based compensation expense) earnings per share of
32 cents missed the Zacks Consensus Estimate of 35 cents. Reported
net income moved lower 3.1% year over year to $36.6 million (or 31
cents per share) in the quarter.
Sales were up sharply 21.1% year over year to $219 million, in
the first quarter, beating the Zacks Consensus Estimate of $217
During the reported quarter, Mindray recorded ex-China sales of
$127.2 million, up 17.3% year over year. Revenues in the Chinese
market increased 26.8% year over year to $91.8 million in the
reported quarter. Emerging markets performed well with growth of
Patient Monitoring & Life Support Products (43.7% of total
sales) revenues grew 22.5% year over year in the reported quarter
to $95.7 million. In-Vitro Diagnostic Products (25.8% of total
revenue) sales were $56.6 million, up 22.4%. Revenues from reagents
grew, contributing 31.5% of In-Vitro Diagnostic segment sales
during the quarter.
Medical Imaging Systems(24.1% of total sales) revenues rose to
$52.8 million, a growth of 11%. Other revenues (6.4% of total
revenue) were up 55.6% to $13.9 million.
Adjusted gross profit stood at $121.4 million in the quarter,
higher 20.2% year over year. Adjusted gross margin of 55.5% was
lower than 55.9% in the year-ago period.
Adjusted selling expenses were $38.4 million, or 17.5% of total
net sales, compared with 17.7% a year ago. Adjusted general and
administrative expenses were $19.1 million, or 8.7% of sales,
versus 7.7% a year ago. Adjusted research and development expenses
were $23.4 million, or 10.7% of sales, compared with 9.7% in the
Adjusted operating income amounted to $40.5 million in the
quarter, a year-over-year growth of 7.9%. Adjusted operating margin
was 18.5%, lower than 20.8% in the year-ago quarter.
Balance Sheet and Cash Flow
As of March 31, 2012, Mindray had $664.2 million in cash and
liquid investments, up about 10.1% on a sequential basis. Net cash
generated from operating activities was $60.1 million in the
quarter while capital expenditure amounted to $16.2 million.
Mindray continues to provide guidance on a full year basis. The
company forecasts sales growth in excess of 18% for fiscal 2012. It
also expects adjusted net income for the year to increase a minimum
of 13% year over year. 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
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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