Chinese medical devices maker, Mindray Medical International Limited (MR) posted an 18.4% rise in adjusted earnings per share to 58 cents for the 2013-fourth quarter from 49 cents a year ago, and topped the Zacks Consensus Estimate by 8 cents per share.
Adjusted net earnings rose 18.9% year-over-year to $70.1 million from $58.9 million in the fourth quarter of 2012. Reported earnings increased 34.8% to $75.2 million or 63 cents per share from $55.8 million or 47 cents per share in the 2012-fourth quarter.
Net revenues grew 16.5% to $368.4 million, above the Zacks Consensus Estimate of $348.0 million. International sales continued to be stronger than the domestic market.
International revenues grew 23.8% to $208.0 million while revenues from China grew at a slower pace of 8.3% to $160.4 million due to delays in purchasing activities.
Segment Revenues
Revenues from Patient Monitoring & Life Support Products rose 5.7% to $142.8 million from $135.0 million in the prior-year quarter, contributing 38.8% to overall net revenues.
Revenues from In-Vitro Diagnostic Products went up 15.7% to $95.9 million from $82.9 million in the prior-year quarter, contributing 26.0% to net revenues. Reagents sales accounted for 41.4% of segment revenues.
Revenues from Medical Imaging Systems escalated 28.7% to $97.0 million from $75.4 million in the 2012-quarter, contributing 26.3% to net revenues.
Revenues from Others (including sales from the orthopedics business, service revenues from extended warranties, sales of accessories and repair service revenues for post-warranty period) zoomed 43.3% to $32.7 million from $22.8 million a year ago, contributing 8.9% to overall net revenues.
Margins
Adjusted gross profit rose 12.6% to $207.8 million but gross margin declined 200 basis points (bps) to 56.4% in the quarter. Adjusted operating profit went up 14.1% to $72.0 million but operating margin dipped 50 bps to 19.5% from 20.0% a year ago.
Full Year Results
For full year 2013, MR reported a 25.5% spike in adjusted earnings per share to $2.07 from $1.65 a year ago and surpassed the Zacks Consensus Estimate of $1.95. Adjusted net earnings improved 26.1% to $249.4 million from $197.7 million in the fourth quarter of 2012.
Revenues in the year scaled up 14.5% to $1,214.0 million, exceeding the Zacks Consensus Estimate of $1,211.0 million.
Adjusted gross profit was up 14.6% to $693.9 million and gross margin inched up 10 bps to 19.6% in the year. Adjusted operating profit went up 13.7% to $238.0 million but operating margin ebbed 10 bps to 19.6% in the year.
Financial Position
MR had $385.2 million in cash and cash equivalents as of Dec 31, 2013, up 55.4% from $247.9 million as of Dec 31, 2012. Total bank loans more than tripled to $475.7 million from $135.1 million as of Dec 31, 2012.
In 2013, cash flow from operating activities went down 5.4% to $307.9 million from $325.7 million in 2012. Capital expenditure surged 66.3% to $109.1 million compared with $65.6 million a year ago.
2014 Guidance
MR expects 2014 net revenues to grow at least 15% over 2013 based on strengths in Western Europe and some emerging markets as well as gradual improvement in China. The company also anticipates capital expenditures of $160 million for the year.
Our Take
MR is a bellwether in the Chinese MedTech industry with a solid international presence. A key distinction with domestic competitors is that the majority of its products have CE Mark and/or Food and Drug Administration (FDA) clearance. MR maintains a decent product pipeline and brings out several new products each year.
New products contribute in a major way to the company’s revenues. However, a sluggish market in China is a matter of concern for the company’s earnings.
Currently, MR carries a Zacks Rank #1 (Strong Buy). Other players that are also performing well in the medical instruments industry include Cynosure, Inc. (CYNO), Natus Medical Inc. (BABY) and Syneron Medical Ltd. (ELOS). All of them carry a Zacks Rank #1 (Strong Buy).
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