Medicine: Healthy Growth But Margins Squeezed 医疗行业增长良好 但是利润率受到冲击
Two companies in the medical space, Mindray Medical (NYSE: MR) and Wuxi PharmaTech (NYSE: WX) have just released preliminary results showing China’s spending boom on healthcare reform is likely to continue into 2012, but margins will come under growing pressure as Beijing seeks the good value in its multibillion dollar drive to overhaul the nation’s healthcare system. Mindray, which makes medical devices, has given preliminary results saying its revenue grew a healthy 25 percent to nearly $900 million last year, thanks in large part to Beijing’s overhaul that is part of its effort to build a nationwide network of clinics providing basic affordable healthcare for everyone. (company announcement) But while revenue growth was strong, non-GAAP profits will be up more modestly by “no less than 10 percent,” according to the company. It was also somewhat guarded on 2012, saying revenue growth for this year would be 18 percent or more. The company actually gets almost half of its revenue from China, while the other half comes from global markets, which it said would continue to be challenging this year. I suspect its revenue forecast for 2012 is quite conservative, and it could easily match its 2011 revenue growth rate of 25 percent in 2012 if China continues its strong spending on health care reform, pushing its top line past the $1 billion mark. But margins will continue to come under pressure amid weak global spending and fierce competition for lucrative Chinese contracts, and its profit could end up growing at about half that rate. Meantime, Wuxi PharmaTech, a drug maker, has provided more limited guidance, saying its 2011 revenue should come in around $404 million, up a similar 21 percent from 2011. (company announcement) Like Mindray, I would expect the company’s profit growth, which jumped 71 percent in 2010 but has fallen to the mid-teens in recent quarters, to trail its revenue growth, again for the same reasons of growing competition. On the whole, 2012 looks set to be a strong year for health care as China is likely to keep up its spending on reform, but margins will come under growing pressure as profit growth stabilizes in a healthy but not overly exciting 10-20 percent range.
Bottom line: China’s continued spending on health care reform will give medical firms a nice lift in 2012, but growing competition will put profit growth under pressure.
Related postings 相关文章:
◙ Simcere Suffers Side Effects of Health Care Reform
◙ Mindray Turns Focus to Home With M&A
◙ Bristol-Myers, EMC Tap China Priorities With New Tie-Ups 趁中国政策导向东风 百时美施贵宝与EMC联姻本土企业
