2025-06-09 01:42Summary of Conference Call Notes on China Healthcare Sector Industry Overview - The European Union (EU) is considering a proposal to limit Chinese medical device suppliers from participating in EU public procurement contracts, which could impact the medtech industry significantly [1][2]. Key Points on Regulatory Changes - The EU established the International Procurement Instrument (IPI) regulation in 2022, which led to an investigation into Chinese medical devices in 2024. The EU believes that certain practices by the Chinese government are hindering EU access to China's public procurement market for medical devices [2]. - Under the IPI regulation, Chinese-made medical device bidders could face penalties when competing for contracts exceeding EUR5 million, including score deductions or exclusion from the procurement process. This regulation is valid for five years, with a possible five-year extension [2]. Company-Specific Impacts Mindray - Mindray derives approximately 9% of its total revenue from exports to Europe, with no single contracts exceeding EUR5 million as of 2024. Therefore, the proposed regulation is expected to have a limited impact on the company [4]. - Mindray plans to focus on localized manufacturing to adapt to the global trade environment [4]. - The company is rated as a "Buy" due to strong domestic market growth and potential for increased overseas revenue, supported by a cost-effective product portfolio [14]. United Imaging - United Imaging's revenue from Europe accounts for about 4% of its total revenue, which includes income from non-EU regions. The company has high-end products priced above EUR5 million, which could be affected by the proposed restrictions [9]. - In the event of restrictions, the company anticipates a manageable impact of approximately 1% on total revenue [9]. - United Imaging is exploring several strategies to mitigate potential impacts, including establishing production lines within the EU and focusing on the private hospital market [11]. - The company is also rated as a "Buy," with expectations of revenue growth and improved gross profit margins due to increased service-related revenue [15]. Financial Projections and Risks Mindray - The 12-month target price for Mindray is set at RMB 300, based on a two-stage DCF valuation. Key risks include potential impacts from value-based pricing (VBP) policies, challenges in entering North American and European markets, and patent-related lawsuits [17]. United Imaging - The 12-month target price for United Imaging is RMB 173, with risks including supply chain issues, raw material costs, and macroeconomic downturns in China [18]. Conclusion - The proposed EU regulations could significantly affect Chinese medtech companies, particularly Mindray and United Imaging. However, both companies have strategies in place to mitigate risks and continue to show potential for growth in their respective markets [3][15].