Piper Jaffray Comments On Mindray Medical Following Management Meeting

According to Piper Jaffray, Mindray Medical MR management appeared quite confident in their "at least 16%" revenue growth guidance for 2011, although explicitly communicated the possibility of operating de-leverage due to increasing investment in S&M and R&D. Piper believes overall 2-3% operating margin decline in 2011 might be possible, however, management has a certain level of flexibility in controlling operating expenses for bottom-line profit growth. It believes MR is more of a top-line-driven story and continue to expect China sales to outperform investor expectations in 2011. The "at least 16% growth" could be a result of healthy ex-China growth including low-teens growth in the U.S. driven by new product launches and potentially 20% growth in developing countries led by Latin American and CIS regions, and increasing government spending in 2011 vs. 2010, which could potentially benefit both MR tender and non-tender business. MR management expects competition among MNCs in China to intensify in 2011, however, it believes that it has adequately factored in the potential impact from increasing competition in its reduced gross margin and increasing S&M spending. Piper Jaffray has a $33 PT and Overweight rating on MR MR closed Monday at $27.64