China Medtech_ MNC medtech 4Q24 earnings takeaways_ Mindray riding on import substitution and AI; Tariff risks manageable for China medtech. Wed Feb 19 2025

Summary of J.P. Morgan's Asia Pacific Equity Research on China Medtech Industry Overview - The report focuses on the China Medtech industry, particularly the performance of multinational corporations (MNCs) and domestic players like Mindray in the context of recent earnings reports for Q4 2024 [2][5]. Key Points Market Dynamics - MNC medtech companies are adopting a cautious outlook for their operations in China for 2025, primarily due to volume-based procurement (VBP) policies and increasing domestic competition, which may lead to flat or declining sales expectations in areas such as in vitro diagnostics (IVD) [2][5]. - Companies like GE Healthcare and Danaher have reported negative impacts on their sales due to these challenges, with Danaher anticipating a US$150 million impact from VBP in 2025 [2][5]. Domestic Players' Performance - In contrast, domestic companies like Mindray are expected to benefit from import substitution dynamics and are positioned to gain market share in China [2][5]. - Mindray, as the largest domestic IVD player, is optimistic about its growth prospects, although it has not provided specific guidance for 2025 [5][6]. Technological Advancements - Mindray is leveraging AI technology in healthcare, having launched the QiYuan, a large language model (LLM) for critical care, in collaboration with Tencent. This positions Mindray favorably as hospitals increasingly adopt AI solutions [2][5]. - The company also introduced an AI-enabled platelet-counting technology in the EU, aimed at improving cancer diagnosis accuracy [5][6]. Tariff Risks - MNCs view US tariff risks as manageable. For instance, GE Healthcare expects a minor negative impact on its adjusted EBIT margin due to tariffs, while Siemens and Intuitive Surgical have strategies in place to mitigate these risks [6][7]. - Mindray's exposure to US tariffs is limited, with only about 7% of its total revenue coming from the US, suggesting that tariffs are not a significant concern for investors [6][7]. Earnings Summary - The report includes a summary of MNC medtech performance in China and globally, highlighting challenges faced by companies like GE Healthcare and Danaher, contrasted with the growth expectations for domestic players like Mindray and Microport [7]. Additional Insights - The report indicates that while MNCs face headwinds in China, they continue to experience robust growth in other regions, driven by technological advancements [2][5]. - The overall sentiment suggests that domestic medtech companies are well-positioned to capitalize on favorable local market dynamics, while MNCs may need to adapt their strategies to navigate the challenges in the Chinese market [5][6]. Conclusion - The China Medtech industry is characterized by a divergence in outlook between MNCs and domestic players, with domestic companies like Mindray poised to benefit from local market dynamics and technological innovations, while MNCs face challenges from regulatory policies and competition [2][5][6].