Chinese medical devices major Mindray Medical International Limited’s (MR) fourth-quarter fiscal 2011 adjusted (excluding one-time expenses other than stock-based compensation expense) earnings per share of 41 cents missed the Zacks Consensus Estimate of 42 cents. Reported net income moved up 14% year over year to $46.8 million (or 40 cents per share) in the quarter.
For the fiscal, adjusted earnings of $1.47 a share also trailed the Zacks Consensus Estimates of $1.54.
Revenues
Revenues were up sharply 25.2% year over year to $264.1 million, in the fourth quarter, sailing past the Zacks Consensus Estimate of $249 million. For fiscal 2011, revenues were $880.7 million, up 25.1%, beating the Zacks Consensus Estimate of $878 million.
During the fourth quarter, Mindray recorded ex-China sales of $146.5 million, up 20.9% year over year. Revenues in the domestic market increased 30.9% year over year to $117.6 million in the reported quarter. Emerging markets performed well.
Segment-wise Revenues
Patient Monitoring & Life Support Products (45.3% of total sales) sales grew 20.5% year over year in the reported quarter to $119.5 million. In-Vitro Diagnostic Products (24.2% of total revenue) revenues stood at $63.9 million, up 25.2%. Revenues from reagents grew, contributing 32.1% of In-Vitro Diagnostic segment sales during the quarter.
Medical Imaging Systems(24.6% of total sales) sales rose to $65.1 million, a growth of 28.5%. Other revenues (5.9% of total revenue) were up 54.4% to $15.7 million.
Margins
Adjusted gross profit amounted to $144.5 million in the quarter, higher 24% year over year. Adjusted gross margin of 54.7% was lower than 55.2% in the year-ago period.
Adjusted selling expenses were $50.2 million, or 19% of total net sales, compared with 19.2% a year ago. Adjusted general and administrative expenses were $16.7 million, or 6.3% of sales, versus 8.5% a year ago. Adjusted research and development expenses were $24.5 million, or 9.3% of sales, compared with 7.7% in the prior-year quarter.
Adjusted operating income was $53 million in the quarter, a year-over-year growth of 26.9%. Adjusted operating margin was 20.1%, slightly higher than 19.8% in the year-ago quarter.
Balance Sheet and Cash Flow
As of December 31, 2011, Mindray had $603.5 million in cash and liquid investments, up about 39.2% on a year-over-year basis. Net cash generated from operating activities was $96.4 million in the quarter, up 43.2%. Capital expenditure amounted to $26.2 million, up 19.6%.
Outlook
Mindray continues to provide guidance on a full year basis. The company forecasts sales growth in excess of 18% for fiscal 2012. It also expects adjusted net income for the year to increase a minimum of 13% year over year. The guidance does not take into account tax advantage on account of key software enterprise status. The forecast for capital expenditure, for fiscal 2012, is about $90 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 fiscal 2011, the company launched 13 new products.
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.
Mindray’s competitors, in different niche segments, include General Electric (GE), Philips (PHG) and Siemens (SI). Our Neutral recommendation is supported by a short-term Zacks #3 Rank (Hold).
GENL ELECTRIC (GE): Free Stock Analysis Report
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SIEMENS AG-ADR (SI): Free Stock Analysis Report
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