Domestic leader in the medical device industry
? Mindray’s operations remain resilient despite short-term volatility. The COVID-19
outbreak and lockdowns are expected to have a negative impact on sales of IVD
reagents, but this is likely to be offset by strong demand for COVID-19-related products.
? Form a long-term point of view, we believe product sales will be driven by the
implementation of a new medical infrastructure program, and as the more hospitals
have signed up for Mindray’s IT solutions, this will further boost the acceptance of
Mindray’s equipment.
? Revenue from new businesses almost doubled in 2021, and the growth momentum
continued in 1Q22. We believe the high growth rate of these four new business
segments will continue in the coming years. The centralized procurement of orthopedics
consumables will further push Mindray’s orthopedics product sales volume.
? We think Mindray’s outlook in both the domestic and global markets has high clarity for
the next three years. The key investment themes are as follows: a) domestically, the
implementation of new medical infrastructure will provide tremendous opportunities for
Mindray, given its domestic industry-leading position; and b) internationally, because of
COVID-19, its brand name is more recognized overseas.
? We adjusted our 2022E, 2023E and 2024E EPS forecasts to Rmb7.96, 9.70 and 11.66,
respectively, similar to our previous projection. We reiterate our ADD rating with a new
target price of Rmb518, based on 65x 2022 PER (about Mindray’s historical average
PER+1SD) with a premium over its peers’ average (50x) and Mindray’s historical PER
average (54.7x), as Mindray is the domestic medical device industry leader and is
expected to deliver stable performance despite macro headwinds.
Overall growth momentum continues
Mindray’s overall revenue increased 20.2% to Rmb25.27bn in 2021, and attributable net
income increased 20.2% to Rmb8.00bn. In 1Q22, revenue and attributable net profit were
Rmb6.94bn (+20.1%) and Rmb2.11bn (+22.7%), respectively. In 2021, the patient
monitoring and life support segment contributed Rmb11.15bn (+11.5%), the IVD segment
contributed Rmb8.45bn (+27.1%), and the imaging segment contributed 5.43bn (+29.3%),
which accounted for 44.1%, 33.4% and 21.5%, respectively, of total revenue. We estimate
that the COVID-19 outbreak in 2Q22 in several cities had a negative effect on sales of IVD
reagents, but this will be offset by the increasing demand for COVID-19-related products.
In the long term, we are optimistic about Mindray’s development in the next three years,
since a) as the leading domestic medical devices player, it will benefit more from the
implement of the medical infrastructure program; and b) sales will be further boosted as
the acceptance of Mindray’s IT solutions increases.
A clear leader in some sub-segments in China
Mindray ranks first in market share in several business segments. In 2021, its patient
monitoring devices and anesthesia machines ranked no.1 in the China market and no.3
globally. In 2021, Mindray’s hematology analysis equipment also had the highest market
share in China, and its chemiluminescence immunoassay and ultrasound improved to
second place domestically. Therefore, Mindray has already established a leading position
in its three primary business segments. We believe that as the leading medical device
player, Mindray will benefit more from China’s medical new infrastructure program. Since
March 2020, China has released several policies aimed at improving medical
infrastructure, including ICUs, fever clinics and infectious disease hospitals. The increasing
construction of medical infrastructure will drive a sales increase for Mindray in both the
next two to three years and the longer time frame.