Morgan Stanley: Mindray Bio-Medical: Competing for Domestic IVD Share as Overseas Growth Leads, but Costs Will Weigh on Gross Margin

Why is domestic growth expected to accelerate in 2027?

Management reiterated that it expects the China business to achieve positive growth in 2026 and grow faster in 2027, supported by 10% growth in IVD, 20% growth in new businesses, and a diminishing impact from destocking.
The company sees centralized equipment procurement as an opportunity to expand its share: it wins approximately 50% of such tenders, above its overall market share in some products, such as its approximately 33% share of the ultrasound market.
Morgan Stanley maintained its Overweight rating and a price target of 210 yuan; the bank forecasts revenue of 38.514 billion yuan in 2027, above the 35.109 billion yuan expected for 2026.

The company plans to expand its share by entering top-tier hospitals in China and increasing installations of high-throughput laboratory automation lines. It targets 10% growth in China in vitro diagnostics (IVD) revenue in 2027 and aims to become China's largest IVD company over the medium term.
As of the third quarter of 2026, the company's shares of China's biochemistry, chemiluminescence immunoassay and coagulation markets had reached 20%, 12% and 17%, respectively.
Pricing remains a constraint. Under Anhui's latest pricing guidelines for clinical laboratory tests, prices for approximately 50% of items are unchanged, service prices for approximately 30% are reduced by about 20%, and prices for the remaining items rise. The company expects approximately 30% of reagent sales in 2027 to be subject to factory-gate price cuts of about 10%, with the overall average price decline in the low to mid-single-digit percentages; the outcome depends on pricing policies in more provinces.

Management expects overseas growth to continue outpacing China, driven mainly by emerging markets; based on existing orders, growth in Europe and the US is also expected to accelerate in 2027. In the first nine months of 2026, the India business grew 25%, while Mexico and Turkey each grew about 40%.
The company expects the launch of its ultra-high-end cardiac ultrasound system to generate incremental growth, including in major developed markets. Overseas IVD remains at an early stage, and with foreign brands having established direct sales channels, the company plans to enter developed markets through partners.

The company expects its gross margin to decline slightly further in 2027 as higher prices for raw materials such as chips, resistors and capacitors result in a cost impact of approximately 300 million to 400 million yuan.
The domestic IVD revenue target therefore depends on new installations and market-share gains, while also absorbing reagent price cuts; the company's overall gross margin will also be affected by rising raw material costs.