On the eve of the long holiday, the A-share market performed well. Following a single-day northbound capital inflow that hit a record high since the opening of the Mainland Stock Connect on April 26, the three major A-share indices collectively surged in the intraday market on April 29, and the Shanghai Composite Index once again reached 3,100 points, returning to the annual line.

Among them, Mindray Healthcare, the leading medical device company that just released its 2023 report and 2024 quarterly report, also rose sharply with an excellent report card, with an intraday increase of more than 6%. The net capital inflow reached 420 million yuan on the same day, and the net purchase of Land Stock Connect reached 227 million yuan, showing impressive performance.

Chart 1: Mindray Healthcare's stock price performance

Data source: WIND, Gelonghui compiled data as of April 29, 2024

Both revenue and net profit to mother increased

The capital market votes with its feet. The underlying logic is Mindray Healthcare's report card. In particular, if you look at it over a longer period of time, the company can overcome the fluctuations of the industry cycle and remain “stable” as always.

On the revenue side, Mindray Healthcare's operating income reached a new high against the backdrop of external environmental challenges.For the full year of 2023, the company achieved revenue of 34.932 billion yuan, an increase of 15.04% year-on-year, and a compound growth rate of 18.07% over the past ten years. In the first quarter of 2024, the company achieved revenue of 9.373 billion yuan, an increase of 12.06% over the previous year.

On the expenditure side, Mindray Healthcare innovates and iterates, and R&D investment continues to increase.In 2023, the company invested 3.779 billion yuan in R&D, an increase of 18.43% over the previous year, accounting for 10.82% of revenue. R&D investment in the first quarter of 2024 was 1,030 billion yuan, accounting for 10.99% of revenue.

On the profit side, Mindray Healthcare continued to maintain a net profit growth rate of more than 20%, and its operating performance showed high-quality development.In 2023, the company's net profit to mother was 11.582 billion yuan, up 20.56% year-on-year, and the compound growth rate over the past ten years reached 26.87%. Net profit from mother for the first quarter of 2024 was $3.160 billion, up 22.90% year on year. In terms of net profit margin, the company's net interest rate in 2023 was 22.85%, up 1.56 pct year on year; net interest rate for the first quarter of 2024 rose to 33.73%, up 2.98 pct year on year.

Chart 2: Mindray Healthcare's operating income (left) and net profit to mother (right) performance

Data source: WIND, compiled by Gelonghui

Looking at it by business segment,In the field of in vitro diagnosis, routine diagnosis and treatment in the domestic market showed a remarkable recovery trend, while the customer base in the international market was also rapidly expanding, showing a strong breakthrough momentum.

In 2023, the company's in vitro diagnosis revenue reached 12.421 billion yuan, a significant increase of 21.12% over the previous year. It is worth mentioning that the international in vitro diagnosis business has achieved compound growth of more than 30% for two consecutive years, demonstrating the company's strong competitiveness in the global market.

Among them, the BC-7500 series products performed particularly well. The number of installed machines has broken the 2,000 mark, further consolidating the company's leading position in the domestic blood cell market. The excellent performance and market recognition of this series of products brought the company a revenue contribution of more than 1 billion yuan, making it the first product in the company's history to successfully exceed 1 billion yuan in revenue in the third year of listing. This is undoubtedly a high recognition of the company's R&D strength and market layout.

In the field of life information and support business, the company's technical level has risen to the forefront of the world, and the penetration rate of high-end hospitals is expected to increase at the same time as overseas market share.

In 2023, the company's life information and support business achieved remarkable results, achieving revenue of 15.252 billion yuan, an increase of 13.81% over the previous year. Among them, the minimally invasive surgery business grew particularly prominent, exceeding 30%, and the market share of hard mirror systems also successfully increased to the third largest in China. In overseas markets, since capacity supply resumed in the second quarter of 2023, the company's performance increased by more than 20% year-on-year in the second half of the year, showing a strong growth trend, and is expected to maintain a steady and rapid growth trend for a long time in the future.

In the field of medical imaging, the company's high-end breakthroughs have reached new heights, and it continues to strive for ultra-high-end products.

In 2023, the company achieved revenue of 7.034 billion yuan in the medical imaging business, an increase of 8.82% over the previous year, further consolidating its leading position in the domestic market. It is worth mentioning that with strong product competitiveness and a high standard compliance system, the company successfully seized the opportunity to increase its market share in the current environment, surpassed the original number one imported brand in the market for the first time, and became the leader in the domestic ultrasound market. Furthermore, at the end of 2023, the company released ResonA20, the first ultra-high-end ultrasound platform made in China, marking that the company's ultrasound technology has reached a world-class level.

In overseas markets, the company has also increased its coverage of the high-end market, driving the growth of high-end overseas ultrasound models by more than 25%, significantly accelerating the breakthrough process of high-end customers. This series of achievements not only helped the ultrasound business achieve the third largest position in the world for the first time, but also highlighted the company's strong strength and broad prospects in the global medical imaging field.

Chart 3: Revenue performance of Mindray Healthcare's business segments in 2023

Data source: Company official account, compiled by Gelonghui

Additionally, Mindray HealthcareIt has also continued the previous major dividend plan to enhance investor confidence.

According to the 2023 dividend plan issued by Mindray Healthcare, the company plans to distribute a cash dividend of 15 yuan for every 10 shares. In addition to the cash dividends already paid in the third quarter of 2023, the total dividend amount for 2023 reached 7.032 billion yuan, an increase of 28.89% over the previous year, and the dividend ratio also rose to 60.72%, fully demonstrating its respect and feedback for shareholders' interests.

High-end customer base breakthroughs have accelerated, and developing countries have become new growth engines

It is worth noting that with high-quality products, services and rapid delivery capabilities around the world, Mindray Healthcare received a large number of orders in both domestic and international markets in 2023, achieving a breakthrough in the high-end customer base among many top local medical institutions.

Among them,In the domestic marketThe company has achieved integrated, integrated, and digital intelligent solutions from the middle to the high-end, from departments to the entire hospital, covering nearly 110,000 medical institutions and more than 99% of the top three hospitals, and has ranked TOP1 in multiple business lines. The accelerated expansion effect of domestic production is evident.

In overseas marketsThe company has been engaged in market cultivation and brand building for a long time. The global market share of monitors, anesthesia machines, ventilators, defibrillators, blood cells, and ultrasound in 2023 has achieved the top three positions in the market, and has performed brilliantly in terms of breaking through the breadth and depth of the high-end customer base.

In terms of breadth,Following breakthroughs in the new high-end customer base of over 700, over 700, and over 680 respectively from 2020 to 2022, the company will fill the gaps in nearly 950 new overseas high-end customer groups in 2023. As the new high-end customer base continues to grow, it is expected that it will continue to bring new business orders to the company in the future.

Looking at it in depth,In 2023, based on the original high-end customer base, the company developed a multi-product business line, and the penetration rate continued to increase. More than 730 high-end customer groups in overseas markets achieved horizontal breakthroughs. Many of these emerging markets achieved large-scale breakthroughs, and is becoming a new engine for performance growth.

Chart 4: The Company's High-End Breakthrough Achievements Overseas in 2023

Data source: Company announcements, compiled by Gelonhui

Go overseas and attack a wider market

Looking at the medical device industry as a whole, no matter what segment the circuit is, we need to pay attention to one thing, and that is the overseas situation. This not only means a wider market market demand, but also more sufficient profit margin for products.

Looking back at the internationalization process of medical devices in China, their development trajectory shows remarkable characteristics of the times. From the early “Made in China” stage, which mainly focused on medical consumables, to now, with new development opportunities brought by new medical infrastructure and the wave of digital intelligence, China's medical device industry has reached a new level of “made in China”. This transformation is not only a transformation of products from low-end to mid-range and high-end, but also an accurate grasp and adaptation to global market needs.

With the continuous development of the medical device industry, the global requirements for the medical device supply chain are becoming more and more strict, which also places higher demands on the production capacity of medical devices in China. Therefore, in the face of global market competition and supply chain challenges, Chinese medical device companies need to continuously improve their technological innovation capabilities, product quality, and production capacity scale to meet possible challenges such as limited production capacity and ensure that they maintain a leading position in the global medical device market.

As an outstanding representative of “Made in China” for local medical devices, Mindray Healthcare has shown extraordinary insight in the forward-looking layout of overseas markets and has taken the lead in breaking through market challenges.

In November 2023, Mindray Healthcare completed a transaction to acquire 75% of DiaSys Diagnostic Systems GmbH (hereinafter referred to as “DiaSys”) in cash, and DiaSys has officially become a holding subsidiary of Mindray. In the future, DiaSys is expected to support breakthroughs in the supply chain and R&D platforms in Europe, Asia Pacific and Latin America, supporting breakthroughs in the overseas medium and large sample size customer base, improve the development of in vitro diagnostic products and supporting supply of quality control calibration products, accelerate the international layout of the company's in vitro diagnostic business and enhance product competitiveness, and achieve breakthroughs in the customer base.

Chart 5: Trends in China's medical device exports

Data source: Guojin Securities, compiled by Gelonghui

Summarize

From people who are good, to people who are good, it is painstaking research from low-end products to high-end products.

From being superior and being strong, to nobody having anything, from high-end products to exploring and breaking the game in new fields.

From following to leading the way and even pioneering, this shift in role will not only bring Mindray Healthcare's current steady and solid business situation, but will also be the source of future performance growth.

Facing an accessible market space of over 450 billion yuan overseas, Mindray Healthcare's current international revenue is only 13.5 billion yuan, and the corresponding market share is only in single digits. The ceiling for upward development is particularly high, and there is huge room for imagination (data as of 2023). As stated in the brokerage ratings, “the strong are not afraid of ups and downs, and the momentum for development continues”, and the future is worth looking forward to.

Chart 6: Mindray Healthcare's brokerage ratings in the past month

Data source: WIND, compiled by Gelonghui