Goldman Sachs maintains a Buy rating on Mindray Medical but lowers the target price to Rmb247 amid margin pressure

Overview

This report is Goldman Sachs' commentary on Mindray Medical's FY25 results. The company's FY25 revenue met expectations, but net profit missed. The core tension is that revenue is expected to return to positive growth in 2026, supported especially by overseas business and emerging businesses; however, on the profit side, VBP price cuts, gross margin pressure, higher R&D spending, and potential FX losses from RMB appreciation are likely to prevent net profit growth from recovering at the same pace.

Core views

Goldman Sachs maintains a Buy rating on Mindray Medical, believing the company remains a leading Chinese medical device player with market leadership in patient monitoring, medical imaging, and IVD, and benefits from healthcare infrastructure buildout, domestic substitution, overseas low-share expansion, and a cost-effective product portfolio. However, the report significantly lowers its 2026E and 2027E earnings forecasts, reflecting pressure on gross margin and expenses. The 2026E revenue forecast is cut by 2.4% to Rmb36,067mn and net profit by 18.6% to Rmb8,306mn; the 2027E revenue forecast is cut by 5.0% to Rmb39,846mn and net profit by 21.1% to Rmb9,270mn.

Analysis framework

The report follows FY25 actual results, the gap versus Goldman Sachs' forecasts, revenue breakdown by segment, domestic versus overseas performance, management's 2026 outlook, and the updated valuation model. On the revenue side, the key focus is whether domestic business turns positive, whether overseas growth continues to outpace China, and how much contribution comes from emerging businesses, especially APT Medical; on the profit side, the emphasis is on the impact of VBP price erosion, gross margin, R&D expense ratio, and exchange rate changes on net margins.

Methodology notes

• Valuation methodstwo-stage DCF

  Two-stage DCF valuation

  Goldman Sachs' 12-month target price of Rmb247 is based on a two-stage DCF valuation, with a terminal growth rate of 2% and a WACC of 9.5%; both assumptions are unchanged, and the valuation base is rolled forward to 2026.

• factor_analysisGS Factor Profile

  Goldman Sachs factor profile

  This framework compares a stock with the market and industry peers across growth, financial returns, valuation multiples, and composite score dimensions to provide investment context.

• event_riskM&A Rank

  M&A probability score

  Goldman Sachs uses M&A Rank to assess the probability that a company becomes an acquisition target; Mindray Medical is disclosed as M&A Rank 3, indicating a low probability, and it is typically not included in target price calculations.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Mindray Medical 300760.SZ

  Covered name in the report, with a maintained Buy rating

  Strengths

  A leading Chinese medical device company covering core areas such as PMLS, Medical Imaging, and IVD; overseas business continues to grow, with overseas revenue accounting for more than half in 2025; emerging businesses and APT Medical are growing rapidly; the product mix offers strong cost-effectiveness.

  Weaknesses

  FY25 net profit missed expectations, domestic business declined significantly, and core businesses were affected by VBP price cuts, channel destocking, and lower IVD reagent usage; R&D expense ratio and FX losses are pressuring net margins.

  Comparison

  The company's valuation is below the 5-year average forward P/E, which the report attributes mainly to policy risk; relative to the broader coverage universe, Goldman Sachs still rates it Buy.

  Risks

  Further VBP-related reductions in ex-factory prices for certain products, weaker-than-expected penetration into high-end hospitals in China, challenges entering North America and Europe, patent litigation risk, and unexpected changes in trade policy.

• APT Medical

  Part of Mindray Medical's emerging businesses

  Strengths

  Revenue grew 25% in FY25, in line with expectations when the company acquired it in 2024.

  Weaknesses

  As an emerging business, its scale and profit contribution still need to be validated against the core business.

  Comparison

  Compared with traditional core businesses such as PMLS, Medical Imaging, and IVD, APT Medical delivered higher growth in FY25.

  Risks

  The sustainability of growth, integration progress, and profit contribution still need to be monitored.

Key data

• FY25 revenueRmb33,282mn, -9% YoYBroadly in line with Goldman Sachs' forecast of Rmb33,442mn.
• FY25 net profitRmb8,136mn, -30% YoYBelow Goldman Sachs' forecast of Rmb8,771mn.
• FY25 overseas revenue growth+7% YoYOverseas revenue contribution rose to 53%.
• FY25 domestic revenue growth-23% YoYWeighed down by VBP price cuts, DRG/DIP-driven lower IVD reagent usage, and channel destocking in PMLS and Medical Imaging.
• 2026E revenue forecastRmb36,067mn, +8% YoYCut by 2.4% versus the previous forecast.
• 2026E net profit forecastRmb8,306mn, +2% YoYCut by 18.6% versus the previous forecast.
• 2027E revenue forecastRmb39,846mn, +10% YoYCut by 5.0% versus the previous forecast.
• 2027E net profit forecastRmb9,270mn, +12% YoYCut by 21.1% versus the previous forecast.
• Target priceRmb247The previous target price was Rmb285.
• Current price and upsideRmb170.77, potential upside of 44.6%Data corresponding to the 12-month target price disclosed in the report.

Impact & implications

The report is moderately positive for Mindray Medical from an investment perspective, but it places greater emphasis on uncertainty around the pace of margin recovery. Revenue recovery, driven by overseas expansion and emerging businesses, supports the Buy rating; however, the domestic core business still faces channel destocking, VBP price pressure, and the impact of DRG/DIP reform, so margin recovery is slower than revenue growth. The target price cut indicates that Goldman Sachs still recognizes the company's long-term competitiveness, but has revised down near- to medium-term earnings leverage.

Risks

• Further VBP impact on ex-factory prices for certain products.
• Progress into China's high-end hospital market is slower than expected.
• Challenges entering North America and Europe.
• Potential patent-related litigation risks.
• Unexpected changes in trade policy.
• Channel destocking in PMLS and Medical Imaging may continue.
• RMB appreciation may lead to FX losses.
• Higher R&D investment may continue to दबress net profit margins.

What to watch

• Whether domestic revenue returns to positive growth in 2026 as the company expects.
• Whether overseas revenue growth continues to outpace the China market.
• Whether channel inventory in PMLS and Medical Imaging can fall from around 3 months to the historical low of about 2 months.
• The subsequent impact of VBP on prices and gross margins for ultrasound, CLIA, and other products.
• The effect of DRG/DIP reform on IVD reagent volumes.
• Whether APT Medical and other emerging businesses can sustain high growth.
• The pace of recovery in medical equipment replacement programs and procurement activity.
• New product launches and their commercialization progress.
• Whether the impact of Middle East tensions on regional sales expands.