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May 19, 2022
The three-year epidemic has changed the ecology of many industries, and also changed the wealth map on the rich list. For example, Zhang Yong and his wife, the bosses of Haidilao, fell to the top of Singapore’s richest man last year, and they were replaced by Li Xiting, the founder of the “Medical Equipment Mao” Mindray Medical (300670.SZ), the protagonist of Ji Today.
Not only that, with the half of May, the annual reports of most A-share listed companies have been disclosed. In the list of listed company chairman remuneration, Li Xiting ranks first, with an annual salary of 25.3349 million yuan.
In fact, with Mindray Medical's performance and a market value of nearly 400 billion yuan, Li Xiting's salary level is not worth making a fuss about. According to the financial report data, Mindray Medical's total revenue in 2021 will be 25.27 billion yuan, a year-on-year increase of 20.18%; the net profit attributable to the parent is 8.002 billion yuan, a year-on-year increase of 20.19%.
／ 01 ／What does the rise of "medicine mao" depend on?
The current management style of a company is often inseparable from the successful experience of its founders, as is Mindray Medical.
In the early 1990s, Li Xiting, who was 40 years old at the time, took Xu Hang, Cheng Minghe and others to leave Shenzhen Anke, which is known as the "Whampoa Military Academy" for domestic medical equipment, and founded Mindray Medical.
At first, Mindray, who had no foundation, could only be engaged in the agency of foreign medical equipment, but after accumulating some funds, Li Xiting, who was born in technology, was determined to take the road of independent research and development. However, the research and development of medical devices has great requirements for capital investment. The company was once in financial difficulties and relied on the Shenzhen government to come forward to overcome the difficulties.
Since then, in order to solve the problem of shortage of research and development funds, in 1994, when the domestic venture capital industry was in the ascendant, Li Xiting went to Wall Street to raise funds and successfully obtained 2 million US dollars of venture capital. This has improved Mindray's international vision and development ideas.
The first product developed by Mindray Medical is a "single-parameter blood oxygen saturation monitor". At that time, this product was not outstanding compared with foreign products, and Mindray was still a new brand with limited competitiveness. As a result, Mindray Medical chose to start from low-tier cities, taking high cost performance as its competitive advantage, and "surrounding cities from rural areas", and gradually gained a firm foothold.
Since then, although the development of Mindray Medical has had twists and turns, the core concept of the company's business development has been determined and has been adhered to until now.
First, insist on self-development and be willing to invest money. In recent years, Mindray's R&D expenses have accounted for about 10% of its total revenue, and the growth rates are above double digits. In 2020 and 2021, the growth rates will reach 27.54% and 35.03%, respectively, exceeding revenue growth.
Second, make good use of capital operation to help the company develop. This is evident from the fact that Mindray Medical was listed in the United States as early as 2006. Since then, Mindray Medical has operated a series of mergers and acquisitions, based on which a wide range of product layouts and technological breakthroughs have been achieved.
Third, continue to promote the strategy of "encircling cities from rural areas", from China to the world. At present, Mindray Medical has firmly established its position as the domestic leader and is moving from domestic to international. This trend was rapidly promoted in the early stage of the outbreak due to the surge in foreign demand.
In this regard, Li Xiting once said: "It turns out that some of the top hospitals in Western Europe and North America that we could not enter have entered through this epidemic."
However, judging from the 2021 annual report, Mindray Medical's domestic business accounted for 60%, and this proportion was 52.84% in the same period in 2020. In contrast, Mindray's international business growth in 2021 seems to be less than ideal, with the proportion dropping from 47.16% to 39.61%.
Therefore, whether Mindray Medical can gain a firm foothold in the international market through the epidemic is currently being questioned by the market.
In fact, not only in the international market, but also in the grasp of domestic epidemic opportunities and the "Sword of Damocles" in centralized procurement, which have also added a lot of uncertainty to the future of Mindray Medical. What is the specific situation? It starts with the three main businesses of Mindray Medical.
／ 02 ／High-end still needs to break through
Mindray Medical's main business is divided into three parts, namely life information and support, in vitro diagnosis (IVD) and medical imaging.
To put it simply, the products in the field of life information and support mainly include monitors, anesthesia machines, ventilators, etc.; the products in the field of in vitro diagnosis mainly include blood cell detection, biochemical analysis and detection, chemiluminescence immunoassay, etc.; the main products in the field of medical imaging include: Color Doppler, MRI, Ultrasound, etc.
The 2021 annual report shows that the life information and support revenue reached 11.153 billion yuan, a year-on-year increase of 10.92%, accounting for 44.14% of the revenue; the in vitro diagnostic business achieved revenue of 8.449 billion yuan, a year-on-year increase 27.13%, accounting for 33.43%; medical imaging achieved revenue of 5.426 billion yuan, a year-on-year increase of 29.31%, accounting for 21.47%.
From the growth of main products, it can be seen that the reason for the low growth of the life information and support segment is affected by the sluggish growth of monitors.
Under the leadership of Li Xiting, Mindray Medical's first self-developed product was a monitor. Since then, thanks to the acquisition of the old American company Datascope in 2008, Mindray has achieved the first domestic market share and the third international level in the field of monitors, and is the representative of Mindray in the field of high-end products.
However, monitor growth is currently stagnant, and the reason for this is that the market has limited room for growth. From 2009 to 2019, the domestic penetration rate only increased from 20% to 30%, and the ceiling is within reach.
The most high-end products have the worst growth, which has to be said to be a headache for Mindray Medical.
In fact, among the three major businesses, the market size in the field of in vitro diagnostics is the most impressive and the ceiling is also the highest. According to public data, the global in vitro diagnostics market in 2019 was worth US$71.4 billion (about 500 billion RMB), maintaining a compound growth rate of 4.87% from 2014 to 2019. Among them, chemiluminescent reagents are the most impressive.
However, Mindray Medical started late in this field and launched its first chemiluminescence immunoassay system in 2013, losing its first-mover advantage. At present, 80% of the domestic chemiluminescence market is occupied by the four foreign giants (Roche, Abbott, Siemens, and Beckman), and the rest of the market is divided up by domestic companies such as Mindray Medical, New Industries, and Antu Biology.
Of course, although Mindray Medical entered the market late, it has developed rapidly with its channel advantages. In order to control costs and improve gross profit margins, Mindray Medical also acquired Haiti Biological, the upstream raw material supplier of the global in vitro diagnostic head, with 4 billion yuan in cash last year.
It can be seen that Mindray Medical is ambitious in the field of in vitro diagnostics, trying to replicate the development path of monitors in the past.
However, times have changed, and although Li Xiting has immigrated to Singapore, the company still cannot escape the storms of the domestic market.
On July 30, 2021, there was rumors of centralized procurement of medical equipment in Anhui, and Mindray plunged 8.44% that day. Then, on August 19, Anhui released the "Announcement on Negotiating Negotiations for Centralized Procurement of Clinical Test Reagents in Public Medical Institutions in Anhui Province", taking the lead in opening the procurement of provincial clinical test reagents in bulk. The next day, in vitro diagnostic companies plunged in panic, and Mindray Medical plunged 17.05%, the largest single-day drop in its A shares.
The highly anticipated in vitro diagnostic business was poured cold water, and the panic in the market is understandable. In fact, in the long run, although "centralized procurement" will dilute profits, for Mindray, which is in a weak position in the market, it may also be an opportunity for it to realize import substitution.
In general, Mindray Medical's individual products or sectors have encountered certain troubles, but in the context of new domestic medical infrastructure, the overall demand for medical devices is still there. Mindray, as the leader of the domestic industry, its overall performance growth is still expected to continue. . From the perspective of investors, after the sharp adjustment, has this big white horse stock of medical equipment hit the bottom?
/ 03 / The market value of 230 billion has evaporated, and institutions are still hesitating
In the current sluggish capital market environment, if compared with Hengrui Medicine, the leader in pharmaceutical stocks, the performance of Mindray Medical, the "pharmaceutical weapon", is barely acceptable.
As of the close on May 17, Mindray Medical's share price was fixed at 302.8 yuan per share, with a total market value of about 365 billion yuan. Compared with the highest point of 502 yuan per share in July last year, it has dropped by 39%, and the total market value has evaporated by more than 230 billion yuan. And Hengrui Medicine fell from 97.23 yuan/share to the current 29.93 yuan/share, a drop of nearly 70%.
In fact, Mindray Medical and Hengrui Medicine, as the leader of medical equipment and the leader of innovative drugs respectively, can have such performance, which is related to the characteristics of their respective industries.
The medical device industry is different from the pharmaceutical industry. If the latter develops a new drug, the performance growth brought by it is often immediate, showing a pulse-like effect. The medical device industry where Mindray is located is different. Medical device products often have a long service life. The replacement of equipment requires a process, and the growth rate is slow but relatively stable.
On Mindray Medical, its performance growth in recent years has been stable, and the growth rate is not slow. In the context of more than a year, the performance is better than traditional medical star stocks such as Hengrui Medicine, Aier Eye, WuXi AppTec and Changchun High-tech.
After all, a long-term stable performance growth of more than 20% corresponds to a dynamic PE of more than 40 times, which is not expensive.
On the other hand, Mindray Medical has been the focus of institutional research in recent years, especially the number of reception institutions has exceeded 3,000 for two consecutive years, ranking first in A-shares. Data shows that more than 550 institutions have recently conducted research on Mindray, and their attention has not diminished. Of course, it should be noted that although institutions are still concerned, Mindray's stock price is still in a downward channel.
Research is research, and many institutions seem to be hesitating when it comes to real money. After all, the current megatrend is known to remain fraught with uncertainty.
With the decline of Mindray's share price, Li Xiting's net worth evaporated by more than 35 billion yuan in one year. But he seems more open to the ups and downs of the stock market.
"Listing is for financing development, not for making money for individuals," said Li Xiting.
In an interview with the media, Li Xiting was optimistic about Mindray's capital situation. "There is no bank loan, and there are nearly 20 billion cash in the account. The construction of the company's bases is all its own funds."
This may also be the basis for Mindray's continued investment in research and development. However, judging from the financial report data, at the end of the first quarter of this year, the company's total monetary capital was 14.898 billion yuan, down 10.51% year-on-year. At the end of 2021, it was 15.361 billion yuan, a year-on-year decrease of 3.17%, the first decline since landing A shares.
This trend does not seem to be as optimistic as Li Xiting's performance.
Of course, overall, Mindray Medical's performance growth is still relatively stable, and it has few competitors in the domestic market. "Minray learns Roche, and the whole country learns Mindray" is not empty talk. However, this also shows from the side that Mindray Medical, which has grown through "surrounding cities from rural areas", still needs to continue to work hard if it wants to truly gain a foothold in the international market, especially to develop more high-end products.
With tens of billions of cash in hand, anything is possible.
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