Mindray Medical Debuts on ChiNext with RMB 85.427 Billion Market Cap, Largest IPO in Board's History

VCBeat (WeChat ID: vcbeat) has learned that on October 16, 2018, Shenzhen Mindray Bio-Medical Electronics Co., Ltd. (hereinafter referred to as “Mindray Medical”) was listed on the ChiNext board of the Shenzhen Stock Exchange, with the stock abbreviation “Mindray Medical", stock code“300760”, triggering a temporary trading halt after surging at the open and hitting the 44% price increase limit for new listings. The issue price was RMB 48.8 per share, the opening price was RMB 58.56 per share, the current price is RMB 70.27 per share, and the current market capitalization stands at RMB 85.427 billion.

According to the previously submitted prospectus, Mindray Medical will issue no more than 121.6 million shares in this listing, raising a total of RMB 5.93 billion, surpassing the RMB 5.5 billion record set by CATL.The largest IPO in the history of the ChiNext board.Previously, industry analysts predicted that once Mindray Medical successfully listed, it was poised to become another ChiNext-listed company with a market capitalization exceeding RMB 100 billion.Mindray has also become the latest company to return to China after delisting from the United States, following 360 and WuXi AppTec.

Mindray Medical was established in 1991 and is headquartered in Shenzhen. It is primarily engaged in the research and development, manufacturing, marketing, and servicing of medical devices, committed to providing high-quality products and services to healthcare institutions worldwide. The company has 57 wholly-owned or controlled subsidiaries globally, including 18 within China and 39 across North America, Europe, Asia, Africa, and Latin America.

The Company’s products primarily cover three major fields: patient monitoring and life support, in vitro diagnostics, and medical imaging. With the most comprehensive product portfolio among its domestic peers, it is China’s largest and a globally leading supplier of medical devices and solutions.In 2017, Mindray Medical's main business revenue reached RMB 11.132 billion, with Patient Monitoring & Life Support, In Vitro Diagnostics, and Medical Imaging accounting for 38.05%, 33.60%, and 26.37%, respectively.

Source: Mindray's Prospectus

To date, Mindray’s global sales have expanded to more than 190 countries and regions.In China, nearly 110,000 medical institutions and over 99% of Grade III Class A hospitals are using Mindray’s equipment. Overseas, according to media reports, Mindray accounts for one in every five newly purchased patient monitors and one in every eight anesthesia machines in U.S. operating rooms. Additionally, Mindray’s ultrasound systems rank among the top three in the U.S. point-of-care (POC) market.

It is fair to say that Mindray Medical, as a unicorn in China's medical device industry, is truly well-deserved.

Mindray Medical disclosed that its operating revenues for 2015 to 2017 were RMB 8.011 billion, RMB 9.032 billion, and RMB 11.174 billion, respectively, with corresponding net profits attributable to shareholders of the listed company amounting to RMB 910 million, RMB 1.6 billion, and RMB 2.589 billion. The company’s total assets stood at RMB 14.438 billion. In the first half of 2018, the company recorded an operating revenue of RMB 6.808 billion and a net profit attributable to shareholders of the listed company of RMB 1.87 billion.

Data Source: Mindray’s Prospectus

Mindray Medical is undoubtedly the domestic leader in terms of both operating revenue and net profit attributable to shareholders. Among its publicly listed peers, such as Shinva Medical, Lepu Medical, and Yuwell Medical, in terms of revenue scale,Mindray Medical was the company with the highest net profit attributable to shareholders after deducting non-recurring gains and losses on the ChiNext Board in the first half of 2018.

Based on Mindray Medical’s issue price of RMB 48.8, its initial market capitalization after listing exceeded RMB 59 billion. Calculated based on the first-day 44% price surge limit, it would take only four additional consecutive daily limit-ups for its total market capitalization to surpass that of Contemporary Amperex Technology Co., Limited (CATL), the company with the highest market cap on the ChiNext board, thereby claiming the top spot on the ChiNext.

The aforementioned achievements have, to some extent, benefited from Mindray Medical’s M&A strategy. Data shows that Mindray Medical has carried out multiple acquisitions in recent years. In 2008, Mindray Medical acquired the patient monitoring business of U.S.-based Datascope. From 2011 to 2013, it acquired ten companies, including Shenzhen Mindray Technology, Suzhou Huisen, Zhejiang Greenland, Changsha Tiandiren, Hangzhou Guangdian, Wuhan Degebayer, Shanghai Yiguang, Zonare, Ulco, and Beijing Pulisheng. In 2014, it acquired Shanghai Changdao.

During the reporting period, Mindray’s overseas sales revenue amounted to RMB 4.304 billion, RMB 4.516 billion, and RMB 5.143 billion, accounting for 53.72%, 50.00%, and 46.02% of its total operating revenue for the respective periods. The international market has become a key strategic direction for Mindray Medical’s future development.

In addition, according to the prospectus, the funds raised by Mindray Medical in this offering will be allocated to seven projects: expansion of the Guangming production base, construction of the Nanjing Mindray Surgical Products Manufacturing Center, construction of the Nanjing Mindray Biological Reagents Manufacturing Center, upgrading of the R&D and innovation platform, upgrading of the marketing and service system, information system development, repayment of bank loans, and supplementation of working capital.

Although Mindray Medical is the leading enterprise in China's medical device industry, its path to going public was not smooth.

In fact, as early as 2006, Mindray Medical listed on the New York Stock Exchange (NYSE) through its U.S.-listed platform, Mindray International. On March 6, 2016, Mindray Medical announced the completion of its $3.3 billion privatization and delisting, returning to the domestic market in pursuit of higher valuations on China’s A-share market.

On May 26, 2017, Mindray Medical disclosed its prospectus in China for the first time, but voluntarily applied to terminate the review on February 13, 2018. More than a month after the termination of its IPO, Mindray released its IPO prospectus again at the end of March 2018, and subsequently updated the prospectus this May. The company initially planned to list on the SME Board, later switching to the ChiNext Board, with the fundraising scale slightly reduced from RMB 6.626 billion to RMB 6.34 billion.

Amid the ongoing US-China trade war, Mindray Medical, as the leading domestic medical device manufacturer, is undoubtedly at the center of the storm.

Mindray, a global leader in medical devices, operates 39 overseas subsidiaries across more than 30 countries in North America, Europe, Asia, Africa, and Latin America. In terms of geographic revenue sources, domestic and overseas revenues are roughly equal, with domestic growth slightly outpacing the negligible growth seen in overseas markets.

In terms of overseas revenue sources, although the company’s products are sold to more than 190 countries and regions, the majority originates from the United States and Europe. From 2015 to 2017, revenue from the U.S. accounted for 15.5%, 15.3%, and 12.9% of the company’s total revenue, respectively, with the proportion reaching 9.7% in the first quarter of this year.

The United States has designated high-performance medical devices as a key sector for additional tariffs. Mindray Medical’s monitors, color Doppler ultrasound systems, anesthesia machines, and related accessories exported to the U.S. were included in the previous list of products targeted for tariff hikes. According to Mindray’s prospectus, overseas revenue accounted for approximately half of the company’s total income over the past three years. Fluctuations in the RMB exchange rate and escalating Sino-U.S. trade friction are expected to adversely impact the company’s sales.

In this regard, the company also candidly stated in its May prospectus that“If the United States imposes a 25% tariff on Chinese medical device products, and the Company is unable to pass the costs on to downstream customers, it may have a certain negative impact on the profit margins of the Company’s products sold in the United States.”

Amidst numerous challenges and difficulties, Mindray Medical has finally made ample preparations and made a strong debut on the ChiNext board. We have also seen the hope of domestically produced medical devices.