Mindray Beats, Keeps Guidance - Analyst Blog
09 Agosto 2011 - 4:45PM
Zacks
Mindray Medical
International Limited (MR), a prominent Chinese medical
devices company, reported second-quarter fiscal 2011 adjusted
(excluding one-time expenses other than stock-based compensation
expense) earnings per share of 42 cents, beating the Zacks
Consensus Estimate of 38 cents. Reported net income climbed 6% year
over year to $44.8 million (or 37 cents per share) in the second
quarter.
Revenues
Sales jumped 21.2% year over year
to $217.3 million, exceeding the Zacks Consensus Estimate of $210
million. Mindray posted ex-China sales of $126.6 million, up 18.5%
year over year. Revenues in China expanded 25.3% year over year to
$90.7 million in the reported quarter.
Segment-wise
Revenues
Patient Monitoring & Life
Support Products (42.8% of total sales) revenues increased 12.3%
year over year in the reported quarter to $93 million. In-Vitro
Diagnostic Products (25.9% of total revenue) sales were $56.4
million, up 30.5%.
Medical Imaging Systems (25.6% of
total sales) revenues were $55.7 million, a growth of 30.6%. Other
revenues (5.7% of total revenue) were up 15.3% to $12.2
million.
Margins
Adjusted gross profit was $125.2
million in the quarter, higher 18.3% year over year. Adjusted gross
margin of 57.6% was below 59% in the year-ago period.
Adjusted selling expenses were
$38.5 million, or 17.7% of total net sales, compared with 14.5% a
year ago. Adjusted general and administrative expenses were $16.7
million, or 7.7% of sales, compared with 8.4% a year ago. Adjusted
research and development expenses were $17.4 million, or 8% of
sales, versus 7.6% in the prior-year quarter.
Adjusted operating income was $52.5
million in the quarter, a year-over-year hike of 2.6%. Adjusted
operating margin was 24.2%, lower than 28.6% in the year-ago
quarter.
Balance Sheet and Cash
Flow
As of June 30, 2011, Mindray had
$467.1 million in cash and liquid investments, up about 5.5% on a
sequential basis. Net cash generated from operating activities was
$33.8 million in the second quarter compared with $19.8 million a
year ago. Capital expenditure amounted to $17 million compared with
$11.3 million a year ago.
Outlook
Mindray continues to provide
guidance on a full year basis. The company maintains its sales
growth guidance of 16% for fiscal 2011. It also forecasts adjusted
net income for the year to increase 10% year over year. The
guidance does not take into account tax advantage on account of key
software enterprise status ($7.6 million and $8.6 million in the
first quarters of 2011 and 2010, respectively) and assumes a
corporate tax rate of 15% on the Shenzhen subsidiary. The forecast
for capital expenditure, for fiscal 2011, remains in the range of
$70 million to $80 million.
Mindray is a bellwether in the
Chinese MedTech industry with a solid international presence. It
operates in three segments: Patient Monitoring, In-vitro
Diagnostics and Medical Imaging. 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. The company
plans to bring to market 7 to 10 new products in fiscal 2011 after
introducing several new products in fiscal 2010. New products
contribute in a major way to Mindray’s revenues.
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. The company expects
Chinese government tender sales to be a smaller portion of its
domestic revenues.
Mindray’s competitors, in different
niche segments, include General Electric (GE),
Philips (PHG) and Siemens (SI).
We currently have a long-term Neutral rating on the stock.
GENL ELECTRIC (GE): Free Stock Analysis Report
MINDRAY MEDICAL (MR): Free Stock Analysis Report
KONINKLIJKE PHL (PHG): Free Stock Analysis Report
SIEMENS AG-ADR (SI): Free Stock Analysis Report
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