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Mindray Remains Neutral
We reiterate our Neutral rating on
Mindray Medical International Limited . Its 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) 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 million.
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% to $115.3 million. 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%. Recurring 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.
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 new products.
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 General Electric ( GE - Analyst Report) , Philips ( PHG - Analyst Report) and Siemens . Our Neutral recommendation is supported by a short-term Zacks #3 Rank (Hold).