Navigating near-term pressures; expect growth to resume in 2026E

Navigatingnear-termpressures;expectgrowthtoresume in 2026E Target PriceRMB204.54(Previous TPRMB249.21)Up/Downside23.3%Current PriceRMB165.90 Mindray reportedrevenue of RMB33.3bn (-9.4% YoY) and attributable net profitof RMB8.1bn(-30.3% YoY)in2025, 2%/ 12% below our estimates, respectively.The weak domestic business was the primary drag, which was attributable todomestic hospital budget constraints andpolicy pressures in IVD market.Attributable NPM dropped 7.3ppts YoY in2025,reflecting domestic price cuts,FX losses, and higher overseas selling expenses.Looking ahead, we expect thedomestic business to bottom outin 2026E, while overseasbusinessremainsthekeygrowth driver.With resilient overseas growth, ongoing IVDshare gains, andrapidscaling in emerging businesses,we believe Mindray remains wellpositioned for along-term recovery.However,margin pressuremaypersistgiventhe implementation ofchemiluminescence VBP, FX volatility, and a highereffective tax rate. China Healthcare Jill WU, CFA(852) 3900 0842jillwu@cmbi.com.hk Cathy WANG(852) 3916 1729cathywang@cmbi.com.hk Overseas business remains resilient, led byEurope.Overseas revenuegrew7.4% YoY to RMB17.7bnin 2025, accounting for53% of total revenue.The overseas growthmoderated amid inflation, geopolitical disruptions, anddelayed procurement in developing markets. Even so, Europe delivered astrong17% YoYincrease, supported by Mindray’s growing localizationandintelligent solutions, whicheffectively addressedlocallabor shortages. Weexpect overseas growth to reaccelerate in 2026E asMindraydeepens localoperations and expands into higher-end accounts. Stock Data Shareholding Structure Expect domestic business tobottomoutin 2026E.Domestic revenuedeclined23.0% YoY to RMB15.6bnin 2025, pressuredbyreducedhospitalprocurementbudget and ongoingpolicy headwindsincluding DRG/DIP andVBP. Despite these near-term headwinds,we remainpositiveon Mindray’sdomestic IVDbusiness, whereMindray continuesto execute on its “DoubleBig” strategy focused on top-tier hospitals and large-volume customers.In2025,revenue from these key customers grew nearly 20%YoY andrepresented45% of domestic IVDreagentrevenue.We project a return topositivegrowthin domestic businessin 2026E, underpinned byongoing IVDshare gains and a growing revenue mix from emerging businesses. Emerging businessesare becomingthe next growthdriver.Emergingbusinessrevenuerose 38.9% YoY to RMB5.4bn, accounting for 16% of totalrevenue,making it Mindray’s fastest-growing segment.This segmentincludes minimally invasive interventions (APT Medical), minimally invasivesurgery and animal care.We think the long-term growth isdrivenbyan agingpopulation,adoption ofminimally invasive procedures, andgrowthin pethealthcare. Withenriching product pipelines,we believe these businessescan become a meaningful long-term growthdriver. Source: FactSet Maintain BUY.Given the lower-than-expected earnings in 2025, we lowerour2026Erevenue/earnings forecast by6%/23%,respectively,and reviseourtarget price to RMB204.54, based on a9-year DCF(WACC: 9.1%,terminal growth: 3.0%, unchanged).Earnings Summary Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, in whole or in part, certifiesthat with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is,or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securitiesand Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to thedate of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business daysafter the date of issue of this report; (3) serve as an officer of any of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies coveredin this report. CMBIGM RatingsBUY : Stock with potential return of over 15% over next 12 monthsHOLD: Stock with potential return of +15% to-10% over next 12 monthsSELL: Stock with potential loss of over 10% over next 12 monthsNOT RATED: Stock is not rated byCMBIGM :Industry expected to outperform the relevant broad market benchmark over next 12 months:Industry expected to perform in-line with the relevant broad market benchmark over next 12 months:Industry expected to underperform the relevant broad market benchmark over next 12 months CMB InternationalGlobal MarketsLimited Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong, Tel: (852) 3900 0888 Fax: (852)3900 0800CMB InternationalGlobal MarketsLimited (“CMBIGM”) is a wholl