Mindray, a Chinese medical equipment manufacturer, reported robust performance in the first half of 2024 (1H24), achieving a revenue of RMB20.5 billion, a 11.1% year-over-year (YoY) increase, and an attributable net profit of RMB7.6 billion, up 17.4% YoY. Despite facing regulatory adjustments in the healthcare sector and delays in medical equipment renewals projects, leading to a 12% YoY decrease in revenue from the domestic equipment business, Mindray's performance was bolstered by the rapid growth of its in vitro diagnostics (IVD) business and the domestic high-end/ultra-high-end ultrasound business.
Key highlights include:
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Domestic Equipment Business Pressure: The continued delay in bidding and procurement activities led to a 12% YoY decrease in revenue from the domestic equipment business. This was notably impacted by the Patient Monitoring and Life Support (PMLS) product segment, which experienced a 7.6% YoY decrease in revenue, including a significant drop in domestic revenue.
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Accelerating Shift Towards Consumables: The IVD reagent business was minimally affected by domestic industry regulations, growing by 28% YoY to RMB7.7 billion, accounting for over 37% of total revenue. Domestic IVD revenue grew by over 25%, and domestic reagent revenue increased by 30%, with reagent revenue representing over 80% of domestic IVD revenue. Mindray successfully penetrated over 60 overseas third-party chain laboratories in 1H24 and installed the first MT 8000 TLA, driving a more than 30% YoY increase in overseas IVD revenue.
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Minimally Invasive Surgery Business Growth: The company's minimally invasive surgery business grew by 90% YoY in 1H24, and through the acquisition of APT Medical, it filled the gap in its cardiovascular consumables business.
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Financial Outlook: The report maintains a BUY rating for Mindray, adjusting the target price to RMB 352.84 based on a 9-year discounted cash flow (DCF) model. This reflects a 40.7% upside compared to the current price of RMB 250.80. The company's gross margin improved by 0.7 ppt YoY to 66.3% in 1H24, driven by the increase in the revenue share from IVD reagents and high-end ultrasounds.
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Share Performance: Over the last 12 months, the stock price has performed relatively well, showing a 1.1% increase against the benchmark, with a total return of 25.2% over the past year.
In summary, Mindray demonstrates resilience and growth potential despite challenges in the domestic equipment business, driven by a strategic shift towards consumables and international expansion. The company's diversified business segments and strategic acquisitions position it for sustainable growth.
