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Fresenius Medical Opens Manufacturing Plant in Malaysia

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Fresenius Medical Care (FMS - Free Report) recently announced the opening of its regional manufacturing plant in Bandar Enstek, Malaysia. The plant is a state-of-the-art facility and will be Fresenius Medical's regional manufacturing hub for Southeast Asia. In addition to supplying high-quality haemodialysis concentrates and disinfectants, the plant also produces Peritoneal Dialysis (“PD”) products necessary for advanced Continuous Ambulatory PD (“CAPD”) treatment.

PD is a form of dialysis that uses the natural lining of the patient's abdomen to filter waste from the blood. We feel that the plant would expand its presence in the fast-growing market. With about 43,000 dialysis patients in Malaysia the market has ample scope for growth. The plant in Bandar Enstek is the second plant of Fresenius Medical in Malaysia. At Ipoh, the company produces Water Treatment Systems to ensure high-quality water essential for dialysis. We anticipate that the latest development will help the company counter the pressure on margins.

Per management, the latest development is a significant step to boost the company’s long-term goal. Fresenius Medical has set up a strong long-term objective – ‘Growth-Strategy 2020’ – to formulate a few initiatives for attaining solid market traction.
Per the postulates of ‘Growth-Strategy 2020’, Fresenius aims to boost its revenues to $28 billion by 2020, corresponding to an average annual growth rate of around 10% by enhancing its core business and the Care Coordination unit.

For full-year 2017, Fresenius Medical estimates revenue growth of 8-10% at cc. Net income attributable to shareholders of the company is likely to increase around 7-9%.

Meanwhile, the stock represents a solid return of 13.4%, comparing favorably with the industry’s gain of just 9.6% over the last six months. Furthermore, Fresenius Medical promises a long-term expected earnings growth rate of almost 10.1%. This indicates chances of outperformance over the long haul.

Our Take

Fresenius Medical provides a wide range of Dialysis products in its own dialysis clinics and to third-party clinics. The company offers a wide array of Hemodyalisis, Peritoneal dialysis and Acute Dialysis products as well. However, the latest development is expected to fortify the company’s foothold in the Home dialysis market, particularly in the renal care space. Per reports from News 12 Long Island, the global renal dialysis market is expected to see a CAGR of 7.1% and reach a worth of $26.6 billion by 2023.

Zacks Rank & Key Picks

Fresenius Medical carries a Zacks Rank #3 (Hold). A few better-ranked medical stocks in the medical sector are Edwards Lifesciences Corporation (EW - Free Report) , Lantheus Holdings, Inc. (LNTH - Free Report) and Amedisys, Inc. (AMED - Free Report) .  Edwards Lifesciences currently sports a Zacks Rank #1 (Strong Buy), while Lantheus Holdings and Amedisys carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Edwards Lifesciences has a long-term expected earnings growth rate of 15.2%. The stock has rallied roughly 22.2% over the last six months.

Lantheus Holdings has a long-term expected earnings growth rate of 12.5%. The stock has gained 41.2% over the last six months.

Amedisys has a long-term expected earnings growth rate of 18.2%. The stock has gained around 5.3% over the last six months.

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