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Mindray Medical International Limited
Risk Level *
Type of Stock Large-Blend
Industry Med Instruments
Zacks Industry Rank * 159 out of 267
We maintain our recommendation on Mindray at Neutral. Its
earnings per share of $0.53 were in line with the Zacks
Consensus Estimate in the second quarter of 2013.
Mindray is a bellwether in the Chinese medical devices
industry. The company has a large domestic sales
infrastructure, which gives it better access to medium-sized
county hospitals. In China, it beats other multinationals on
price and defeats local players who have cheaper products,
on brand recognition. In western markets, the company
targets mid-market and price-sensitive customers. Mindray
maintains a decent product pipeline and brings out several
products each year. It has entered the premium segment
globally but its competitive advantage is still unclear.
Uncertainties in healthcare reforms in the U.S. have
reduced demand for Mindray s products. Moreover,
competition is fierce and leads to price erosion over time.
Current Recommendation

Prior Recommendation
Date of Last Change

Current Price (10/07/13)
Target Price
52-Week High $43.74
52-Week Low $30.17
One-Year Return (%) 17.03
Beta 1.23
Average Daily Volume (sh) 596,874

Shares Outstanding (mil) 117
Market Capitalization ($mil) $4,574
Short Interest Ratio (days) 15.60
Institutional Ownership (%) 72
Insider Ownership (%) N/A

Annual Cash Dividend $0.46
Dividend Yield (%) 1.18

5-Yr. Historical Growth Rates

Sales (%) 17.7
Earnings Per Share (%) 11.6
Dividend (%) 19.1

P/E using TTM EPS 20.4
P/E using 2013 Estimate 19.2
P/E using 2014 Estimate 17.9

Zacks Rank *: Short Term
1 3 months outlook 2 - Buy
* Definition / Disclosure on last page


Revenue Estimates
(In millions of $)
Q1 Q2 Q3 Q4 Year
(Mar) (Jun) (Sep) (Dec) (Dec)
2011 181 A 217 A 218 A 264 A 881 A
2012 219 A 268 A 257 A 316 A 1,060 A
2013 242 A 307 A 331 E 366 E 1,246 E
2014 291 E 358 E 367 E 455 E 1,471 E
* Quarterly revenue does not add up to the annual figure due to rounding off.
Earnings Per Share Estimates
(EPS is operating earnings before non-recurring items, but including employee
stock options expenses)
Q1 Q2 Q3 Q4 Year
(Mar) (Jun) (Sep) (Dec) (Dec)

$0.33 A $0.39 A $0.33 A $0.41 A $1.47 A

$0.32 A $0.45 A $0.39 A $0.49 A $1.65 A

$0.50 A $0.53 A $0.43 E $0.57 E $2.03 E

$0.40 E $0.53 E $0.49 E $0.76 E $2.18 E
* Quarterly EPS does not add up to the annual figure due to rounding off.
Projected EPS Growth - Next 5 Years % 16

October 08, 2013

Equity Research MR | Page 2

Mindray Medical International Limited (MR), headquartered in Shenzhen, China, commenced operations
in 1991. The company conducts much of its business through its consolidated operating subsidiary,
Shenzhen Mindray, which was established in 1999. Mindray owns about 99.9% of the equity of
Shenzhen Mindray. It maintains its global operational headquarters (HQ) in Shenzhen while the U.S. HQ
is in Mahwah, New Jersey.
Mindray is a developer, manufacturer and seller of medical devices globally. It has three segments,
namely Patient Monitoring and Life Support products, In-Vitro Diagnostic products and Medical
Imaging Systems.
Mindray s largest segment, Patient Monitoring and Life Support (39.4% of total revenues in the first
half of 2013), includes products such as patient monitoring devices (PMD), anesthesia devices,
defibrillators, surgical lights, and beds. Generally, PMDs measure real-time, concurrent, or dynamic
physiological parameters such as heart rate, blood pressure, respiration, and temperature. In China, the
company is the leading player in the patient monitoring market.
The In-Vitro Diagnostics segment or IVD (28.5%) includes products in 5 instrument categories used for
diagnostic testing: hematology analysis products, biochemistry analysis products, urine sediment
analysis products, microbiology analysis products and coagulation analysis products. In addition, the
company manufactures and sells over 150 separate reagents for both hematology and biochemistry
analyzers. Reagents are a major source of recurring revenue.
The Medical Imaging Systems segment (23.5%) includes the following product lines: black and white
ultrasound, color ultrasound, and digital radiography. Historically, this product segment has consisted
primarily of portable and mobile ultrasound systems.
The Others segment (8.6%) derives revenues from provision of after-sales services along with research
and development services performed for original design manufacturers (ODM). This segment also
includes revenues from acquired business, such as orthopedic products, endoscope devices and
healthcare IT solutions products that are outside the other three business segments.
Mindray sells products through different distribution channels in various parts of the world. In the U.S.,
U.K., France, Germany and the Netherlands, the company sells its products through a direct sales
model. In China, it sells its goods mainly to third-party distributors. It had one of the largest distribution
and sales networks for medical devices in that country with over 1,300 distributors and about 1,900 sales
and sales support personnel. Outside China, Mindray marketed its products through more than 1,500
third-party distributors and its sales force of about 900 people.
The company ensured after-sales service to distributors and hospitals in China through local offices. It
also provides after-sales service for medical facilities based in the U.S., the U.K., France and Germany.
The company extends after-sales care for its other international customers through its distribution
Mindray maintains R&D facilities in Shenzhen, Beijing, Nanjing, Chengdu, Xi An and Shanghai in China.
The company runs R&D operations in Seattle, Washington, Mahwah, New Jersey, Stockholm, Sweden
and Miami, Florida. It manufactures the majority of its products at its three plants located in Shenzhen,
and one facility in Nanjing, China. Mindray also assembles and stores a number of products at its
Mahwah, New Jersey facility.
Equity Research MR | Page 3


Mindray represents one of the best quality names in the Chinese healthcare sector and is a
bellwether for the medical device industry in that country. The company has one of the largest sales,
distribution and service networks of medical device companies in China. Its distribution network
widens its client reach and enhances its ability to penetrate the Chinese market. Through the
acquisition of Datascope, Mindray obtained a direct sales and service infrastructure in the U.S. and
Europe. Mindray has the largest customer support and service team for medical devices in China.
This enables the company to provide technical support, training, warranty, maintenance and repair
services to end users as well as distributor support.

Its superior sales infrastructure has provided Mindray with significantly better access to China s small-
and medium-sized hospitals than its competitors. In other words, Mindray s strongest presence is in
county-level hospitals. In this segment, the company sells its products at a moderate premium over
domestic competitors, while it beats global majors, such as General Electric, Philips and Siemens, on
the basis of price. Brand recognition, in the end, enables Mindray to beat Chinese competitors at Tier
II and Tier III hospitals. In the developed countries too, Mindray has successfully garnered market
share by targeting mid-market, potentially more price-sensitive, customers who may be looking for
medical devices offered at lower prices than global brands.

New products contribute in a major way to the Mindray s revenues. In April 2013, it demonstrated 60
new products at the 69th China International Medical Equipment Fair ("CMEF") in Shenzhen, China.
The company s client base is widely dispersed on a net revenues basis and is marked by low client
concentration. Moreover, the company has a solid product pipeline.

Mindray s domestic business is doing well. Its business in China is now almost entirely non-tender,
which provides a direct source of funds that is good for the company s days sales outstanding. Sales
in China are bolstered by three factors, namely, higher healthcare spending by the government in
county hospitals where Mindray has a strong presence; the company s efforts in restructuring its
sales outfit and enhanced growth in in-vitro diagnostics reagents and medical imaging product sales.

Mindray acquired ZONARE Medical Systems, a leader in ultrasound technology, in July 2013. The
acquisition has created significant opportunities for the company to expand its foothold in the high-
end radiology market in developed countries like U.S., Canada, Scandinavia and Germany. Mindray
stands to gain from its U.S. based sales setup and R&D abilities. Synergies are expected from
Mindray s streamlined manufacturing process and ZONARE S marketing capability.

Healthcare related reform measures in the U.S. and China has negatively impacted Mindray s
business by creating uncertainties reducing demand for its products. Furthermore, uncertainty about
the implementation of reforms may limit spending in the short term. Moreover, the company is facing
a stiff capital spending environment in North America, which is hampering top line growth.

The medical device industry is characterized by quick product development, rapid technological
advances, intense competition and a strong emphasis on proprietary products. Mindray faces direct
competition both locally in China and in overseas markets.
Equity Research MR | Page 4

The average selling prices (ASP) of Mindray s products usually diminish over time due to normal
price erosion. In recent years, consolidation among health-care providers and the formation of group
purchasing organizations, or GPOs, have resulted in significant pricing pressure on the company.

Mindray continues to realign its sales force and build its brand image to penetrate the high-end
market. Since the company s strength is currently in the low-priced or mid-market segments, we do
not expect any immediate runaway impact from this new strategy. In fact, Mindray s attempt to
transition its brand to the premium segment is fraught with uncertainty.

Mindray has traditionally generated a part of its domestic revenues from government tender sales.
Tenders in China are a discretionary decision of the government and can vary from year to year. It
forecasts that uncertainty and low tender volumes will continue in the future.
Mindray Meets Q2 Earnings Estimates

Aug 5, 2013
Chinese medical devices maker, Mindray Medical International posted a 17.8% rise in 2013-second-
quarter adjusted earnings per share to $0.53 from $0.45 a year ago and met the Zacks Consensus
Estimate. Reported net earnings rose 19.3% year-over-year to $62.1 million from $52.0 million in the
second quarter of 2012.
Net revenues grew 14.7% to $307.2 million but missed the Zacks Consensus Estimate of $319 million.
Thanks to Mindray s strong China sales that surged 27.9% to $147.4 million, representing 48.0% of the
company's total net revenues. International sales were $159.7 million, up 4.7% a year ago.
Segment Revenues
Revenues from Patient Monitoring & Life Support Products rose 2.3% to $117.2 million from $114.6
million in the second quarter of 2012, contributing 38.2% to overall net revenues in the quarter.
Revenues from In-Vitro Diagnostic Products went up 19.5% to $88.3 million from $73.9 million in the
prior-year quarter, contributing 28.7% to net revenues. Reagents sales accounted for 36.6% of this
segment's net revenues.
Revenues from Medical Imaging Systems escalated 18.6% to $76.1 million from $64.1 million in the
2012-quarter, contributing 24.8% 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) soared 68.7% to
$25.5 million from $15.1 million a year ago, contributing 8.3% to overall net revenues.
Financial Position
MR had $195.4 million in cash and cash equivalents as of Jun 30, 2013, down 21.2% from $247.9 million
as of Dec 31, 2012. Total bank loans stood at $195.1 million, up 44.3% from $135.1 million as of Dec 31,
In the first six months of 2013, cash flow from operating activities fell 2.3% to $118.6 million from $121.5
million in the same period of 2012, due to unfavorable changes in current assets and liabilities, net of
Equity Research MR | Page 5

effects of acquisitions. Capital expenditure increased 22.6% to $40.2 million compared with $32.8 million
a year ago.
Mindray provides guidance on a full-year basis. The company raised its revenue guidance as it expects
at least 18% rise in revenues over 2012. However, MR reiterated adjusted net earnings guidance,
anticipating at least 15% rise from 2012.
The guidance excludes any tax benefit related to the National Key Software Enterprise status and
assumes a corporate income tax rate of 15% for the Shenzhen subsidiary. Mindray also expects capital
expenditures of $130 million for the year.
Currently, shares of Mindray are trading at 19.2x our 2013 EPS estimate of $2.03. Mindray s current
trailing 12-month earnings multiple is 20.4x, compared to the 46.5x average for the peer group and 17.0x
for the S&P 500. Over the last five years, the company s shares have traded in a range of 16.4x to 31.5x,
trailing 12-month earnings. The stock is trading at a significant discount to the peer group, based on
forward earnings estimates. The current P/E, which is closer to the lower end of the historical range, is at
a 62.1% discount to the peer group for 2013. As such, we maintain our Neutral recommendation on the
stock with a price target of $41.00, based on 20.2x our 2013 EPS estimate.
Key Indicators

Est. 5-Yr

Mindray Medical International Limited 19.2 17.9 16.7 23.1 20.4 31.5 16.4

Industry Average 50.7 40.5 18.3 21.5 46.5 186.1 25.9
S&P 500 15.4 14.4 10.7 13.7 17.0 27.7 12.0

IDEXX Laboratories, Inc. (IDXX) 29.3 26.4 14.5 24.3 30.8 34.2 15.8
Teleflex Incorporated (TFX) 16.9 14.7 10.4 5.5 18.4 19.4 9.9
Sirona Dental Systems Inc. (SIRO) 17.6 15.7 12.0 14.5 21.0 24.0 6.6
Masimo Corporation (MASI) 22.9 21.7 14.3 21.6 24.5 43.8 18.0
TTM is trailing 12 months; F1 is 2013 and F2 is 2014, CF is operating cash flow

5-Yr High
5-Yr Low
Last Qtr.
Div Yield
Last Qtr.
Mindray Medical
International Limited 3.2 7.0 2.6 16.8 0.1 1.2 16.6

Industry Average
6.7 6.7 6.7 -52.6 -0.1 0.1 -16.3
S&P 500
4.5 9.8 2.9 24.3


Equity Research MR | Page 6

Earnings Surprise and Estimate Revision History

Equity Research MR | Page 7 The Online Stock Research Community

Discover what other investors are saying about Mindray Medical (MR) at

The analysts contributing to this report do not hold any shares of MR. The EPS and revenue forecasts are the Zacks Consensus
estimates. Additionally, the analysts contributing to this report certify that the views expressed herein accurately reflect the analysts personal
views as to the subject securities and issuers. Zacks certifies that no part of the analysts compensation was, is, or will be, directly or indirectly,
related to the specific recommendation or views expressed by the analyst in the report. Additional information on the securities mentioned in this
report is available upon request. This report is based on data obtained from sources we believe to be reliable, but is not guaranteed as to
accuracy and does not purport to be complete. Because of individual objectives, the report should not be construed as advice designed to meet
the particular investment needs of any investor. Any opinions expressed herein are subject to change. This report is not to be construed as an
offer or the solicitation of an offer to buy or sell the securities herein mentioned. Zacks or its officers, employees or customers may have a
position long or short in the securities mentioned and buy or sell the securities from time to time. Zacks uses the following rating system for the
securities it covers. Outperform- Zacks expects that the subject company will outperform the broader U.S. equity market over the next six to
twelve months. Neutral- Zacks expects that the company will perform in line with the broader U.S. equity market over the next six to twelve
months. Underperform- Zacks expects the company will under perform the broader U.S. Equity market over the next six to twelve months. The
current distribution of Zacks Ratings is as follows on the 1033 companies covered: Outperform - 15.0%, Neutral - 78.6%, Underperform

Data is as of midnight on the business day immediately prior to this publication.
Our recommendation for each stock is closely linked to the Zacks Rank, which results from a proprietary quantitative model using trends in
earnings estimate revisions. This model is proven most effective for judging the timeliness of a stock over the next 1 to 3 months. The model
assigns each stock a rank from 1 through 5. Zacks Rank 1 = Strong Buy. Zacks Rank 2 = Buy. Zacks Rank 3 = Hold. Zacks Rank 4 = Sell. Zacks
Rank 5 = Strong Sell. We also provide a Zacks Industry Rank for each company which provides an idea of the near-term attractiveness of a
company s industry group. We have 264 industry groups in total. Thus, the Zacks Industry Rank is a number between 1 and 264. In terms of
investment attractiveness, the higher the rank the better. Historically, the top half of the industries has outperformed the general market. In
determining Risk Level, we rely on a proprietary quantitative model that divides the entire universe of stocks into five groups, based on each
stock s historical price volatility. The first group has stocks with the lowest values and are deemed Low Risk, while the 5
group has the highest
values and are designated High Risk. Designations of Below-Average Risk, Average Risk, and Above-Average Risk correspond to the
second, third, and fourth groups of stocks, respectively.
Analyst Sreemoyee Pyne
Copy Editor

Content Editor Souvik Guha
Lead Analyst Souvik Guha
QCA Souvik Guha
Reason for Update Earnings