BEIJING (Reuters) – Mindray Medical International Ltd., China’s No. 2 maker of patient monitoring devices, said on Tuesday it was looking at acquisitions as a key strategy for expanding overseas, its fastest growing market.
Overseas markets accounted for more than half of total sales in the first quarter and could reach as much as 70 percent within three years, executives told Reuters in a telephone interview after the company released first-quarter results.
"We are are taking a very aggressive attitude toward mergers and acquisitions. It is a key part of our strategy," said Xu Hang, chairman and co-chief executive of the company.
Mindray said it had looked at many potential acquisition targets but was not currently in any negotiations. Firms that would add to Mindray’s overseas distribution channels, product line or technology base were priorities, Xu said.
The United States and Europe account for over 70 percent of the world’s spending on health care equipment, compared to the tiny 5 percent for China, he said.
Mindray slightly raised its 2007 revenue and profit estimates on Tuesday, representing an expected increase of about 43 percent for the top and bottom line.
"We should be able to maintain that growth" into next year, said Li Xiting, president and co-chief executive.
Li cited the company’s rapid expansion into large overseas markets, Mindray’s branding efforts and spending by regional governments in China on rural health care as the reasons for his optimism.
Mindray earlier reported first-quarter 2007 net revenue increased 24.7 percent over the same period last year, factoring out the impact of a government tender in 2006.
First quarter 2007 GAAP net income rose 78.9 percent to 122.4 million yuan (US$15.8 million).
Besides monitoring devices, the company’s production lines in China also turn out diagnostic instruments and ultrasound imaging systems.
"Our company has a high growth rate, high profitability and high cash flow, " said Xu. The company carries no debt and has no need to seek additional funding from capital markets.
Easing the funding worries is some $200 million in cash which can be used to fund possible takeovers and finance its expanding research and development, another key pillar to maintaining its profit margins.
Mindray will spend up to 435 million yuan this year on a new R&D centre and expand its research and development staff by 25 percent to 1,000, it said.
Gross profit rose 45 percent in the first quarter as sales in the United States doubled. The company expects five new products that are being rolled out before the end of the year to help continue that momentum.
New products are crucial for Mindray because old products see a 5-10 percent annual erosion in prices on average. The company aims to introduce 7-9 new products every year.
"Our new product pipeline is not drying up," said Joyce Hsu, the firms’s chief financial officer.
The two chief executives and another founder of the company together own about 43 percent of Mindray.