Mindray Medical International (MR)

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Business Overview

It offers approximately 40 products through its three segments: Patient Monitoring Devices, Diagnostic Laboratory Instruments, and Ultrasound Imaging Systems. The company's Patient Monitoring Devices segment primarily offers portable PM-9000 multi-parameter patient monitoring device and approximately 15 patient monitoring devices. The Diagnostic Laboratory Instruments segment offers a range of approximately 10 hematology and biochemistry analyzers that perform analysis on blood, urine, and other bodily fluid samples for clinical diagnosis and treatment. The Ultrasound Imaging Systems segment offers approximately 10 ultrasound imaging systems and it would introduce the color Doppler ultrasound imaging system for use in several clinical areas, such as urology, gynecology, obstetrics, and cardiology. The company sells its products primarily to distributors and directly to hospitals, clinics, government agencies, original design manufacturers, and original equipment manufacturers. It also offers its products in Asia and Europe. In addition, the company designs and develops equipment to customers? specifications. Mindray Medical International was incorporated in 2005 and is headquartered in Shenzhen, the People?s Republic of China.

The three segments made up one-third of the revenue last year. However, the growth in each division varies. Patient monitoring and life support showed growth of 30.2% over last year. However, In-Vitro diagnostic products saw 56.1% growth and the Medical Imaging division was up over 61%. The company received FDA approval for an additional 3 products during the quarter which expands their offering suite to the US. As of the end of the quarter, Mindray now has developed and manufactures over 40 products which are available in more than 140 countries.

Financials

Mindray Medical International Limited (MR) reported earnings earlier in 2008. After a tumultuous decline late in the first quarter, the stock had begun to rebound, and then moved decidedly higher on the announcement. Revenue came in at $89.3 million which was good for a 48.2% increase. More importantly, the company’s international revenue (outside its home country of China) was $45.6 million or 49.4% higher. Since management has continued to reaffirm its commitment to growing outside its primary China market, it was encouraging to see international sales make up more than half of total revenue. The company continues to enjoy a healthy 57% gross margin and net income came in at $28.4 million or 25 cents per share. Management noted its pride in the fact that the bottom line is actually growing more quickly than the revenue numbers, indicating strong operating leverage.

Trends and Forces

Changes in the the Tax Rate

China’s tax rate is undergoing transition and moving towards a flat 25% rate for most firms. There is an exception for “new and hi-tech enterprises” which would lower the tax rate to 15%. At this point, Mindray has failed to secure the designation and so the accounting takes into account a transition over the next 5 years to the new 25% rate. It may turn out that the company will be able to fall under the preferential treatment and if this happens, the additional tax paid will likely be deducted from future liabilities. However, this is not a guarantee and the higher tax rate would definitely be an incremental detriment to profits.

References