MR Montage Resources Corporation

Chinese medical devices major, Mindray Medical International Limited (MR) reported first-quarter 2013 adjusted (excluding one-time expenses other than stock-based compensation expense) earnings per share of 50 cents beating the Zacks Consensus Estimate of 42 cents.

Reported net income rose 56.8% year over year to $57.4 million (or 48 cents per share) in the quarter.

Revenues

Revenues were up 10.5% year over year to $242.1 million in the first quarter, missing the Zacks Consensus Estimate of $257 million. 

During the reported quarter, Mindray recorded ex-China sales of $130.8 million, up 2.8% year over year. Revenues in China increased 21.2% year over year to $111.3 million in the reported quarter.

Segment-wise Revenues

Patient Monitoring & Life Support Products (41.1% of total sales) revenues grew 3.9% year over year in the reported quarter to $99.4 million. In-Vitro Diagnostic Products (28.2% of total revenue) revenues were $68.3 million, up 20.7%. Revenues from reagents contributed 36.4% of In-Vitro Diagnostic segment sales during the quarter. 

Medical Imaging Systems (22% of total sales) sales rose to $53.2 million, up 0.7%. Other revenues (8.7% of total revenue) were up 52.7% to $21.2 million.

Margins

Adjusted gross profit amounted to $140.7 million in the quarter, higher by 15.9% year over year. Adjusted gross margin was 58.1%, higher than 55.5% in the year-ago period.

Adjusted selling expenses were $44.9 million, or 18.5% of total net sales, compared with 17.5% a year ago. Adjusted general and administrative expenses were $24.2 million, or 10% of sales, versus 8.7% a year ago. Adjusted research and development expenses were $25.3 million, or 10.5% of sales, compared with 10.7% in the prior-year quarter.

Adjusted operating income stood at $46.3 million in the quarter, up 14.3% year over year. Adjusted operating margin was 19.1%, higher than the 18.5% in the year-ago quarter.

Balance Sheet and Cash Flow

As of Mar 31, 2013, Mindray had $891 million in cash and liquid investments, up about 3.3% from a year ago. Long-term bank loan stood at $59.9 million, up 19.8% from a year ago.

Outlook

Mindray provides guidance on a full year basis. The company maintained its forecast for revenue growth of 17% or more for 2013. It continues to expect adjusted net income for the year to increase by a minimum of 15% year over year. The guidance does not take into account tax advantage of $19.4 million on account of software business status during 2011 and 2012, received in 2013. The guidance incorporates an income tax rate of 15% for the Shenzhen subsidiary. The forecast for capital expenditure for 2013 is about $130 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 2012, the company launched 10 new products and acquired four companies.

The company has entered the premium segment globally, where its competitive advantage is still unclear. Moreover, on the negative side, health care reforms in China and the U.S. may reduce demand for Mindray’s products. Competition is fierce and will lead to price erosion over time.

The stock carrries a Zacks Rank #2 (Buy). Other stocks such as Accuray Incorporated (ARAY), Heartware International Inc. (HTWR) and Intuitive Surgical, Inc. (ISRG) also carry a Zacks Rank #2 (Buy) and are expected to do well.
 

 
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MINDRAY MEDICAL (MR): Free Stock Analysis Report
 
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