Mindray (.SZ)_ Earnings Review_ 3Q24 results miss on domestic demand pressure; eyes on trade-in; Buy

Summary of Mindray (300760.SZ) Earnings Review for 3Q24 Company Overview - Company: Mindray (300760.SZ) - Industry: Medical Technology (Medtech) Device Manufacturing - Focus Areas: Patient Monitoring Systems, Medical Imaging, In Vitro Diagnostics (IVD) Key Financial Results - 3Q24 Earnings: Rmb3.1 billion, a decrease of 9.3% year-over-year (y/y) and 21.6% below Goldman Sachs estimates (GSe) [2][3] - 3Q24 Revenue: Rmb9.0 billion, an increase of 1.4% y/y but 11.2% below GSe [2] - Domestic Revenue: Decreased by 9.7% y/y in 3Q24; if excluding APT Medical consolidation, the decrease is 19.5% y/y [2] - Revenue Breakdown: - PMLS (Patient Monitoring and Life Support): -49% y/y - Medical Imaging: -10% y/y - IVD: +1% y/y - Overseas Revenue Growth: Increased by 18.3% y/y in 3Q24, driven by regions such as Asia, Europe, and Latin America [2] Segment Performance - Domestic Segments: - PMLS: Revenue decreased significantly by 49% y/y - Medical Imaging: Revenue decreased by 10% y/y - IVD: Revenue remained stable with a 1% increase y/y - Overseas Segments: - PMLS: Increased by 8% y/y - Medical Imaging: Increased by 12% y/y - IVD: Increased by 30% y/y [2] Margins and Expenses - Gross Profit Margin (GPM): 64.9% in 9M24, compared to 64.2% in 9M23 [3] - R&D Expenses: Increased by 24.3% y/y in 3Q24, leading to a slight decrease in EBIT margin to 40.1% from 41.9% y/y [3] Future Outlook and Estimates - Revenue Estimates for 2024: Revised down by 4.5% to Rmb38.014 billion [7] - Earnings Estimates: Adjusted down by 7.4% for 2024E, 2025E, and 2026E due to weak domestic demand and slower trade-in program implementation [6][7] - 12-Month Price Target: Lowered to Rmb400 from Rmb430, maintaining a "Buy" rating [6][9] Investment Thesis - Market Position: Mindray is a leading medtech device manufacturer in China, with 61% of its 2023 revenue coming from the domestic market. - Growth Drivers: Strong healthcare infrastructure development and domestic substitution in China, along with potential growth in overseas markets due to low market share and cost-effective products. - Risks: Policy risks, impact from Value-Based Procurement (VBP), and challenges in entering North American and European markets [8][9]. Key Catalysts - Recovery in procurement activities - Updates on the medical device trade-in program - Launch of new products [8] Conclusion Mindray's 3Q24 results reflect significant challenges in domestic demand, particularly in key segments. However, the company continues to show robust growth in overseas markets. The revised earnings estimates and price target indicate cautious optimism, with a focus on potential recovery catalysts in the near future.