Mindray reported revenue of RMB33.3bn (-9.4% YoY) and attributable net profit of RMB8.1bn (-30.3% YoY) in 2025, 2%/ 12% below our estimates, respectively. The weak domestic business was the primary drag, which was attributable to domestic hospital budget constraints and policy pressures in IVD market. Attributable NPM dropped 7.3ppts YoY in 2025, reflecting domestic price cuts, FX losses, and higher overseas selling expenses. Looking ahead, we expect the domestic business to bottom out in 2026E, while overseas business remains the key growth driver. With resilient overseas growth, ongoing IVD share gains, and rapid scaling in emerging businesses, we believe Mindray remains well positioned for a long-term recovery. However, margin pressure may persist given the implementation of chemiluminescence VBP, FX volatility, and a higher effective tax rate.

Overseas business remains resilient, led by Europe. Overseas revenue grew 7.4% YoY to RMB17.7bn in 2025, accounting for 53% of total revenue. The overseas growth moderated amid inflation, geopolitical disruptions, and delayed procurement in developing markets. Even so, Europe delivered a strong 17% YoY increase, supported by Mindray’s growing localization and intelligent solutions, which effectively addressed local labor shortages. We expect overseas growth to reaccelerate in 2026E as Mindray deepens local operations and expands into higher-end accounts.

Expect domestic business to bottom out in 2026E. Domestic revenue declined 23.0% YoY to RMB15.6bn in 2025, pressured by reduced hospital procurement budget and ongoing policy headwinds including DRG/DIP and VBP. Despite these near-term headwinds, we remain positive on Mindray’s domestic IVD business, where Mindray continues to execute on its “Double Big” strategy focused on top-tier hospitals and large-volume customers. In 2025, revenue from these key customers grew nearly 20% YoY and represented 45% of domestic IVD reagent revenue. We project a return to positive growth in domestic business in 2026E, underpinned by ongoing IVD share gains and a growing revenue mix from emerging businesses.

Emerging businesses are becoming the next growth driver. Emerging business revenue rose 38.9% YoY to RMB5.4bn, accounting for 16% of total revenue, making it Mindray’s fastest-growing segment. This segment includes minimally invasive interventions (APT Medical), minimally invasive surgery and animal care. We think the long-term growth is driven by an aging population, adoption of minimally invasive procedures, and growth in pet healthcare. With enriching product pipelines, we believe these businesses can become a meaningful long-term growth driver.

Maintain BUY. Given the lower-than-expected earnings in 2025, we lower our 2026E revenue/earnings forecast by 6%/23%, respectively, and revise our target price to RMB204.54, based on a 9-year DCF (WACC: 9.1%, terminal growth: 3.0%, unchanged).