Mixed Bag from Mindray First Quarter

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This is the report. From the Conference call, it appears they made a mistake on the announcement, I believe there was a typo on the first bullet (should be 40% rather than 24.7% YoY if exclude the large bid in 2006)

My comments on the results:  

1) Revenue: although the growth in China is not good, the growth in the US is very impressive. In stock we don’t simply look back at the past, we look at the future. I think the China market should stablize at certain point (I don’t know when). In China there is this thing called “blindly worship foreign products”, for instance, in the hospitals the patients usually think the equipment or devices made in the US, Japan or Germany are better than domestic products (Mindray etc). In the past the larger hosptials would rather buy expensive foreign products because they can charge higher fees from the service. This policy has been changed by the goverment (although people’s mindset are more difficult to change).

In the US market, it seems Mindray is using its low cost to get into some uncontested markets (low hanging fruits), so the growth will be sustained for a while.   

2) Profit margin improved 4.6% Year over Year (56.1% vs. 51.5%). This is related to growth shift mentioned above because the US market is more profitable. Another reason is the lower cost in Sales and General Administration.   

My comments on the conference all:

It did not run as well as in the past. Two reasons:

1) Language problems. The call is supposed to be conducted in English, but some callers and management are using Chinese for convenience.  

2) Communication problems. Some analysts like to ask “direct” questions, such as “where is the growth come from”, “why the 5% price drop YoY”, etc. They are just trying to write a nice report. They seemed know the finance and metrics, but not the business. Price drop is very normal in this business.

On the other hand, management were a bit defensive about those type of the questions. I think it would be better if they let Joyce Hsu took over the conference, as they did in the past.

But conference call should not be a big deal if we look at the long term. The way they run the business is much more important,…

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