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Chinese medical devices maker, Mindray Medical International Limited (MR - Analyst Report) posted an 18.4% rise in adjusted earnings per share to 58 cents for the 2013-fourth quarter from 49 cents a year ago, and topped the Zacks Consensus Estimate by 8 cents per share.

Adjusted net earnings rose 18.9% year-over-year to $70.1 million from $58.9 million in the fourth quarter of 2012. Reported earnings increased 34.8% to $75.2 million or 63 cents per share from $55.8 million or 47 cents per share in the 2012-fourth quarter.

Net revenues grew 16.5% to $368.4 million, above the Zacks Consensus Estimate of $348.0 million. International sales continued to be stronger than the domestic market.  

International revenues grew 23.8% to $208.0 million while revenues from China grew at a slower pace of 8.3% to $160.4 million due to delays in purchasing activities.

Segment Revenues

Revenues from Patient Monitoring & Life Support Products rose 5.7% to $142.8 million from $135.0 million in the prior-year quarter, contributing 38.8% to overall net revenues.

Revenues from In-Vitro Diagnostic Products went up 15.7% to $95.9 million from $82.9 million in the prior-year quarter, contributing 26.0% to net revenues. Reagents sales accounted for 41.4% of segment revenues.

Revenues from Medical Imaging Systems escalated 28.7% to $97.0 million from $75.4 million in the 2012-quarter, contributing 26.3% 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) zoomed 43.3% to $32.7 million from $22.8 million a year ago, contributing 8.9% to overall net revenues.


Adjusted gross profit rose 12.6% to $207.8 million but gross margin declined 200 basis points (bps) to 56.4% in the quarter. Adjusted operating profit went up 14.1% to $72.0 million but operating margin dipped 50 bps to 19.5% from 20.0% a year ago.

Full Year Results

For full year 2013, MR reported a 25.5% spike in adjusted earnings per share to $2.07 from $1.65 a year ago and surpassed the Zacks Consensus Estimate of $1.95. Adjusted net earnings improved 26.1% to $249.4 million from $197.7 million in the fourth quarter of 2012.

Revenues in the year scaled up 14.5% to $1,214.0 million, exceeding the Zacks Consensus Estimate of $1,211.0 million.

Adjusted gross profit was up 14.6% to $693.9 million and gross margin inched up 10 bps to 19.6% in the year. Adjusted operating profit went up 13.7% to $238.0 million but operating margin ebbed 10 bps to 19.6% in the year.

Financial Position

MR had $385.2 million in cash and cash equivalents as of Dec 31, 2013, up 55.4% from $247.9 million as of Dec 31, 2012. Total bank loans more than tripled to $475.7 million from $135.1 million as of Dec 31, 2012.

In 2013, cash flow from operating activities went down 5.4% to $307.9 million from $325.7 million in 2012. Capital expenditure surged 66.3% to $109.1 million compared with $65.6 million a year ago.

2014 Guidance

MR expects 2014 net revenues to grow at least 15% over 2013 based on strengths in Western Europe and some emerging markets as well as gradual improvement in China. The company also anticipates capital expenditures of $160 million for the year.

Our Take

MR is a bellwether in the Chinese MedTech industry with a solid international presence. A key distinction with domestic competitors is that the majority of its 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. However, a sluggish market in China is a matter of concern for the company’s earnings.

Currently, MR carries a Zacks Rank #1 (Strong Buy). Other players that are also performing well in the medical instruments industry include Cynosure, Inc. (CYNO - Snapshot Report), Natus Medical Inc. (BABY - Snapshot Report) and Syneron Medical Ltd. (ELOS - Snapshot Report). All of them carry a Zacks Rank #1 (Strong Buy).

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