Valuation Analysis of Mindray Medical’s Acquisition of Huitai Medical

Abstract

This study examines the 2024 acquisition of Huitai Medical by Mindray Medical for CNY 6.65 billion, with particular focus on assessing the reasonableness of the acquisition premium. The analysis begins with an overview of the two companies: Mindray Medical, a leading medical device manufacturer with 2023 revenues exceeding CNY 40 billion, and Huitai Medical, a competitive electrophysiology sector player generating CNY 1.65 billion in revenue in 2023. Historical financial data for Huitai Medical covering 2023-2024 are examined to establish baseline performance metrics. The valuation methodology employs a Discounted Cash Flow (DCF) framework, projecting Huitai’s revenue growth, net income, and Free Cash Flow to the Firm (FCFF) through 2030 and into the terminal period. Utilizing a Weighted Average Cost of Capital (WACC) of 8.21% as the discount rate and incorporating a perpetual growth assumption for the terminal value, the analysis yields an enterprise value of CNY 28.918 billion. After adjusting for net debt, the equity value is estimated at CNY 29.938 billion, corresponding to an intrinsic value of approximately CNY 309.55 per share. Sensitivity analysis establishes a valuation range of CNY 262-361 per share under varying assumptions. The study concludes that the 25% acquisition premium is justified, primarily attributable to substantial anticipated synergies and Mindray’s strong financial capacity to absorb the transaction costs. However, several risk factors warrant attention, including potential underperformance in domestic market substitution strategies. Ultimately, the acquisition’s success will depend critically on effective post-merger integration and the sustained operational development of the combined entity.