Strong July Hospital Equipment Bidding, Accelerating Domestic Substitution

Overview

This Goldman Sachs report focuses on changes in bidding data for the Chinese medical equipment market and updates investment views on two leading domestic device companies, Mindray Medical and United Imaging. The core conclusion is that July 2026 bidding data continues and reinforces industry recovery signals. Equipment procurement recovery is shifting from expectation to verifiable fact, and the trend of domestic manufacturers gaining share is becoming clearer. The report maintains Buy ratings for both companies, primarily supported by the rebound in bidding, accelerated domestic substitution, rising service revenue share for United Imaging, and high growth in Mindray's emerging businesses.

Core views

At the industry level, Goldman Sachs believes July bidding data provides new evidence that the equipment market has entered a sustainable recovery phase. Total bidding amounts for nine major medical equipment categories rose 34% YoY and 9% QoQ in July, broadly consistent with team expectations. The report attributes this improvement to two main threads: first, local governments are becoming more familiar with and simplifying the execution process for equipment trade-in policies, with more projects expected to be completed within 2026; although total annual funding may be lower than previous years, the pace of bidding execution will be significantly faster. Second, product upgrades at the hospital level are creating replacement demand, particularly as newer, technologically advanced high-end equipment begins entering procurement lists. Looking ahead to August, Goldman Sachs expects these two driving factors to persist, with bidding growth likely to remain positive YoY.

Analysis framework

The report uses bidding data as a leading verification indicator for industry prosperity, judging the breadth, intensity, and rhythmic differences of recovery through monthly bidding amount changes by category, then mapping these to specific company growth logic. For company valuations, both stocks use a two-stage DCF model to derive 12-month target prices, reflecting a relative cash flow discounting valuation approach; it also emphasizes Mindray's forward P/E below its 5-year average and United Imaging's P/E near its median since listing, indicating the role of valuation anchors in assessing risk-reward ratios. The report also着力 distinguishes between policy pressure and domestic substitution as opposing forces: policies such as VBP and DRG suppress terminal prices but also amplify hospitals' motivation for cost-sensitive domestic substitution. Understanding this hedging relationship is key to institutional judgment on whether demand can sustainably recover.

Methodology notes

• Industry/Industrial Analysis FrameworkVolume-price decomposition

  Using hospital bidding data as an immediate proxy indicator for volume, comparing bidding value changes across categories

  Bidding data is a leading indicator for equipment procurement landing. By tracking month-on-month and year-on-year monetary changes, one can verify industry prosperity direction earlier than company financial reports. The report uses bidding data for nine major categories to corroborate the recovery judgment.

• Valuation MethodDCF Cash Flow Discounting

  Two-stage DCF valuation model, setting WACC and perpetual growth rate

  A two-stage DCF was used for both Mindray and United Imaging to derive 12-month target prices, assuming WACC of 9.5% and 9% respectively, and a perpetual growth rate of 2%. This reflects a valuation approach based on discounting future cash flows rather than simple P/E multiples.

• Company Fundamentals and Financial FrameworkDuPont analysis

  Focusing on the pull of gross margin, net margin, and service revenue share on profitability

  A core logic for United Imaging is that after installed base expansion, the share of recurring service income rises, driving gross margin improvement. This is essentially about improving profit quality through changes in revenue structure, similar to dissecting profitability along the gross/net profit chain.

• Competition and Strategy FrameworkMoat / competitive advantage

  Under the logic of domestic substitution, the erosion of share by local leaders against imported brands

  The report repeatedly emphasizes United Imaging's continuous share gains in categories like CT/MRI/LINAC/DSA, with growth rates higher than overseas rivals like Philips, Siemens, and GE. This is a typical analysis of competitive advantage and share transfer.

• Cycle and Prosperity FrameworkProsperity Inflection Point Analysis

  Identifying inflection point signals for medical equipment procurement recovering from pressure

  The core purpose of the report is to verify via July bidding data that the industry is entering a recovery phase, belonging to forward-looking analysis of whether prosperity inflection points are established and sustainable.

Asset mapping & comparison

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

• Shenzhen Mindray Bio-Medical Electronics (300760.SZ)

  Equipment bidding rebound directly benefits equipment sales; accelerated domestic substitution favors its full line of cost-effective local products; emerging businesses and overseas markets serve as additional growth engines.

  Strengths

  Solid industry leadership position, comprehensive cost-effective product series, low overseas share leaving room for improvement.

  Weaknesses

  Domestic IVD faces pressure from VBP and DRG, with terminal prices dropping 40-50%; equipment sales remain weak.

  Comparison

  Relative to peers, Mindray's forward P/E is below its 5-year average, mainly reflecting policy risks.

  Risks

  Further VBP pressuring ex-factory prices, breakthroughs in Tier-3A hospitals falling short of expectations, difficulties entering North American and European markets, patent litigation, unexpected changes in trade policies.

• Shanghai United Imaging Healthcare (688271.SS)

  Bidding rebound combined with share gains in categories like CT/MRI/LINAC/DSA makes equipment sales growth highly certain.

  Strengths

  Local leader in large imaging equipment, core product shares rising, service revenue growing with installed base.

  Weaknesses

  Supply dependency on high-end chips and raw materials like helium.

  Comparison

  H1 2026 growth +25%, significantly outperforming overseas rivals like Philips, Siemens, and GE.

  Risks

  Chip supply chain risks, raw material (helium) supply risks, Chinese macroeconomic downturn, potential VBP risks.

Key data

• August Equipment Bidding Performance (9 Major Categories)+34% YoY, +9% QoQBroadly consistent with Goldman Sachs expectations, reinforcing the sustainable recovery judgment.
• MRI Bidding Amount+64% YoY in JulyWas +5% in June, showing significant improvement.
• LINAC Bidding Amount+115% YoY in JulyWas +32% in June, accelerating significantly.
• CT Bidding Amount+42% YoY in JulyWas +22% in June, showing clear recovery.
• United Imaging H1 2026 Bidding Growth+25% YoYCompared to Philips +2%, Siemens -1%, GE -9%.
• Mindray 2024 China Revenue Share55%China market is Mindray's largest revenue source.
• Mindray 2026 Operational GuidanceDomestic IVD growth >10%, Emerging Business >20%, Overseas USD Revenue >15%Partially offset by weak domestic equipment sales and currency headwinds.
• United Imaging Dual-Wide Detector Dual-Source CT SystemuCT SiriuX sold 5 units, ASP RMB 27 millionHigh-end new products have begun generating sales.

Impact & implications

Goldman Sachs believes that the continuous improvement in bidding data means the medical equipment industry is moving out of previous policy suppression, with procurement demand gradually releasing. For domestic leaders, this is confirmed by share data: United Imaging's share in core categories continues to rise, with growth far exceeding overseas rivals, and the domestic substitution logic is translating into tangible orders. For Mindray, the rebound in equipment sales can partially offset price pressures from domestic IVD, VBP, and DRG, while emerging businesses and overseas growth provide a second growth curve. Overall, institutions judge that both companies' future revenue and profitability are expected to return to a growth track, which is the core basis for maintaining Buy ratings and target prices implying significant upside. For the industry, the recovery in equipment procurement also signals the landing of special medical funds and the warming up of hospital capital expenditure, worthy of being used as a window for tracking subsequent rhythms of China's medical infrastructure and fiscal support.

Risks

• VBP further depressing ex-factory prices for some products
• Penetration progress in high-tier hospitals falling short of expectations
• Key supply chain risks such as chips
• Raw material (helium) supply risks
• Obstacles in entering European and US markets, compliance risks such as patent litigation

What to watch

• Subsequent monthly hospital equipment bidding data
• Progress and implementation rhythm of equipment trade-in policies
• Realization of Mindray's emerging business and overseas revenue
• United Imaging's service revenue share and gross margin improvement
• Launch progress of United Imaging's ultrasound product line