Mindray Medical Sees Lucrative Growth in China Orthopedics

Michelle Remo, “Big 4″ observer
September 26, 2012 /

In China’s medical gear market, acquisitions are a legitimate pathway to growth.Mindray Medical International ( MR ) appears to believe wholeheartedly in such a strategy.

In July, the firm completed the buy of a controlling stake in Wuhan Dragonbio Surgical Implant Co., which specializes in trauma, spine, joint and other surgical-care products. The seven-year-old company posted $7.7 million in 2011 sales.

That’s not even 1% of the $881 million in Mindray’s full-year sales the same year. Mindray officials, however, appear eager to capitalize on the growth opportunities. It notes that a report by consulting firm Frost & Sullivan estimates the Chinese orthopedics market at $1.1 billion in 2010 and growing at a compounded annual rate of more than 18% from 2010 to 2015.

“The orthopedic consumable market has high barriers to entry, but this deal will give us instant access to this promising and sizable market,” Minghe Cheng, Mindray’s chief strategic officer, said in a June 6 news release.

The global orthopedic market, Mindray estimates, was $30 billion in 2011 and growing 8% annually.

Incorporated in 1991, Mindray is already a major player in patient-monitoring, in-vitro diagnostic and medical imaging gear. In the second quarter, 57% of its $267.8 million in total revenue was overseas.
Mindray shares are still more than 22% below an all-time peak of 45.19 set in October 2007. But lately, the stock has shown strength.

On Aug. 7, Mindray cleared a four-month consolidation past a 34.17 buy point and rose 6% before moving sideways over the past seven weeks. That’s long enough to qualify as a flat base with a potential 36.46 buy point.

The stock holds an 1.8% annualized dividend yield. On April 10, Mindray paid 40 cents a share.

Its three-year Earnings Stability Factor is outstanding at 2 on a scale of zero (most stable) to 99 (most volatile). Mindray also scores high with a 94 Composite Rating.

It boasts eight years in a row of annual EPS growth (from 12 cents in 2003 to $1.57 in 2011). Return on equity was solid at 17.7% in 2011, but down from 21.3% in 2010. Analysts see earnings rising 6% to $1.67 a share this year and up 17% in 2013.


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