Mindray Medical: A Solid Play in the Rising Chinese Healthcare Sector

Jun.15.11 | About: Mindray Medical (MR)

Healthcare will be a rising sector in the Chinese economy as the country develops. The one child policy has accelerated the aging of the country's demographics and along with increased incomes, demand for quality healthcare medical technology will surge. Buying Mindray Medical (NYSE:MR) is an excellent play on the growing medical sector in China while it's trading at cheap valuations.

Mindray Medical is the largest medical technology company that produces hospital equipment in China. Products it manufactures include life support machinery, ultrasound technology, anesthesia systems and in-vitro diagnostic products. In addition Mindray Medical has significantly less of the regulatory and political risks that concern the approval of drugs in the pharmaceutical business. With a strong sales distribution network in the US and Europe, the company is also geographically diversified.

Financially, the company fundamentally is very strong. Mindray Medical has no long-term debt and has a marginal amount (0.006 debt/equity ratio) of short term debt. Earnings have grown 35% over the past five years and are expected to continue to grow at a 17% annual rate. The company is highly profitable and efficient with a 21.3% profit margin and a 17% return on investment capital while paying a 1.11% dividend.

I think that Mindray Medical is a buying opportunity because it is trading cheaply with just 9% above its 52 week low in price and P/E ratio. The recent market turmoil has pulled back much of its previous break out. There is also an abnormally large short float (17%) for a company with strong fundamentals, making MR ripe for a short squeeze.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in MR over the next 72 hours.