Citi: Mindray’s third-quarter revenue rose but profit fell: Can a domestic diagnostics recovery and overseas expansion offset cost pressures?

Why did profit fall despite third-quarter revenue growth?

In the third quarter of 2026, Mindray reported revenue of 9.4 billion yuan, up 2.9% year on year; net profit of 2.4 billion yuan, down 4.6%; and net profit attributable to shareholders excluding one-off items of 2.5 billion yuan, down 1.6%. Citi said overall results were broadly in line with expectations.
Gross margin fell 1.1 percentage points year on year to 61.4%, partly because higher electronic component prices added approximately 110 million yuan in costs and because of domestic pricing pressure. The finance expense ratio rose 1.2 percentage points, mainly due to foreign exchange losses, while net margin fell 2 percentage points to 25.5%.
Expenses did not deteriorate across the board: the third-quarter operating expense ratio fell to 27.8% from 28.7% a year earlier. On the company’s disclosed basis excluding the impact of foreign exchange losses, revenue and profit rose 6.0% and 1.8% year on year, respectively.

In the first nine months of 2026, domestic in vitro diagnostics (IVD) revenue rose 2% year on year, with the chemiluminescence business growing 5%, supported by greater penetration among major customers and higher reagent volumes. Management expects domestic revenue to return to growth in 2026 and grow faster in 2027, targeting domestic IVD growth of more than 10% in 2027.
Management expects the number of regional laboratory centers with installations to rise from approximately 60 in 2026 to more than 150 in 2027. Citi also noted that centralized procurement could help the company gain IVD market share, but could weigh on operations if higher sales volumes do not offset declines in ex-factory prices.

In the first nine months of 2026, overseas revenue rose 11% year on year, or 16% in US dollar terms, and accounted for 53% of total revenue. Revenue grew by nearly 20% in Europe and approximately 18% and 14% in Latin America and Asia-Pacific, respectively.
Management believes deeper penetration in developed markets, new product launches and improved coverage of US customers could support overseas revenue growth of approximately 15% at constant exchange rates in 2027.
Minimally invasive surgery and interventional businesses drove revenue growth of more than 20% year on year in emerging businesses in the first nine months; management expects these businesses to grow by more than 20% again in 2027.

Citi forecasts revenue of 39.283 billion yuan in 2027, up 11.7% year on year, and net profit of 9.384 billion yuan, up 18.1%. By comparison, the bank expects revenue growth of 5.7% and a net profit decline of 2.3% in 2026.
Cost constraints remain a challenge for the profit recovery: the report estimates incremental costs from higher electronic component prices at approximately 100 million yuan in the fourth quarter of 2026 and 300 million to 400 million yuan in 2027. Citi’s model forecasts overall gross margin declining from 58.6% in 2026 to 58.3% in 2027.
Citi made only minor adjustments to its earnings per share forecasts for 2026 through 2028 and maintained its buy rating and target price of 248 yuan, based on a discounted cash flow valuation by business segment.