Mindray Medical International Limited (MR), a leading Chinese medical devices company, reported first-quarter fiscal 2011 adjusted (excluding one-time expenses other than stock-based compensation expense) earnings per share of 32 cents, missing the Zacks Consensus Estimate of 34 cents. Reported net income rose 4.2% year over year to $37.7 million (or 32 cents per share) in the first quarter.
Revenues
Revenues surged 24% year over year to $180.9 million, exceeding the Zacks Consensus Estimate of $164 million. Mindray posted international sales (ex-China) of $108.5 million, up 29.6% year over year. Sales in China expanded 16.6% year over year to $72.5 million in the reported quarter.
Segment-wise Revenues
Patient Monitoring & Life Support Products (43.2% of total revenue) revenues increased 26.6% year over year in the quarter to $78.1 million. In-Vitro Diagnostic Products (25.6% of total revenue) sales were $46.3 million, up 22%.
Medical Imaging Systems(26.3% of total revenue) revenues were $47.6 million, a growth of 28.1%. Other revenues (4.9% of total revenue) dropped 1.9% to $8.9 million.
Margins
Adjusted gross profit was $101 million in the quarter, up 20.5% year over year. Adjusted gross margin of 55.9% was lower than 57.5% in the year-ago period.
Adjusted selling expenses were $32 million, or 17.7% of total net revenues, compared with 15.3% a year ago. Adjusted general and administrative expenses were $13.9 million, or 7.7% of revenues, compared with 8.1% a year ago. Adjusted research and development expenses were $17.6 million, or 9.7% of revenues, versus 9.4% in the prior-year quarter.
Adjusted operating income was $37.6 million in the quarter, a year-over-year increase of 4.5%. Adjusted operating margin was 20.8%, lower than 24.6% a year ago.
Balance Sheet and Cash Flow
As of March 31 2010, Mindray had $442.6 million in cash and liquid investments, up about 17.4% year over year. Net cash generated from operating activities during the first quarter was $32.3 million compared with $32.8 million a year ago. Capital expenditure amounted to $27.3 million compared with $15.4 million a year ago.
Outlook
Mindray provides guidance on a full year basis. The company maintains its revenue growth guidance of 16% for fiscal 2011. It also expects adjusted net income for the year to increase 10% year over year.
Mindray is a global Chinese medical devices company holding roughly 40% share of the Chinese health care market. Besides China, the company operates in North America, Europe and other Asian countries. Mindray competes with global devices manufacturers such as General Electric (GE), Philips (PHG) and Siemens (SI).
Mindray has a strong position in the low and mid segments of the medical devices market in China and is poised to benefit from the solid fundamentals of the Chinese health care sector. Its new product development initiatives, expanding international footprint (and revenues) and solid sales infrastructure remain encouraging.
Although Mindray’s strength is currently in the low and mid-end segments, the company is looking to carve a niche in the high-end markets. Moreover, the company is well positioned to benefit from the health care reforms in China. However, Mindray is exposed to intense competition-driven pricing pressure.
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