(The following statement was released by the rating agency)
Sept 09- Fitch Ratings has affirmed China Medical Technologies, Inc.'s (CMTI) Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B+' with Stable Outlook.
The ratings are supported by CMTI's steady revenue growth and stable profit margin, solid liquidity profile, and conservative financial management. The ratings are, however, constrained by the company's small scale - operating EBITDAR close to USD80m for the financial year ended 31 March 2011 - and financial leverage of total adjusted debt / operating EBITDAR over 5.0x for the same period.
"CMTI has successfully penetrated the Chinese market for molecular diagnostic systems, which shows strong growth potential," said Cosmo Zhang, Director at Fitch's Corporates team. "The company's stable EBITDA margin also reflects its solid market position and operational stability." For Q1FY11, CMTI recorded revenue of CNY237.1m, up 27.4% yoy.
Fitch also notes the company's ability to meet financial obligations is underpinned by its current cash position, no dividend payout plan in the near future, and strong cash flow generation capability.
The Stable Outlook reflects steady demand for healthcare in China and strong revenue growth prospects for CMTI's newly SFDA-approved molecular diagnostic products.
Positive rating action may result from operating EBITDAR rising over USD100m, while maintaining total adjusted debt/operating EBITDAR below 2.5x, net adjusted debt/ operating EBITDAR below 1.5x or operating EBITDAR/gross interest above 4.0x on a sustainable basis.
Negative rating action may result if there are material declines in the Enhanced Chemiluminescence Immunoassay business, if it fails to expand the Fluorescent in-situ Hybridization/Surface Plasmon Resonance business and/or if the company makes any significant acquisition that does not immediately contribute to positive cash flow. Fitch may also consider negative rating action if total adjusted debt/operating EBITDAR rises above 5.25x, net adjusted debt/operating EBITDAR above 4.0x or operating EBITDAR/gross interest falls below 2.25x on a sustainable basis.
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