Shengkai Innovations Inc · OTC:VALV
Shengkai Innovations — Investor Presentation (March 2011)
25 slides from Shengkai Innovations's investor presentation, Mar 8, 2011
Slide 1: World's Leader and Trailblazer in Industrial Ceramic Valves
World’s Leader and Trailblazer in Industrial Ceramic Valves NY SHENGKAI INNOVATIONS, INC. \ (NASDAQ GM: VALV) Corporate Presentation March 2011
Slide 2: Safe Harbor Statement
=< = bate Safe Harbor Statement This presentation contains forward-looking statements, including financial projections. In some cases, you can identity forward looking statements by terms such as “may,” “will” “should,” “could,” would,” “expects,” ‘plans,” “anticipates,” “believes,” “estimates,” “pr
Slide 3: Shengkai Innovations, Inc.
Shengkai Innovations, Inc. NASDAQ GM Symbol: VALV Stock Price: $5.60 as of February 24, 2011 Basic S/O: 26,706,611 Diluted S/OW: 37,353,421 Diluted Market Cap.: _ ~$209.2 Million as of February 24, 2011 (1) Based on the treasury stock method of accounting. Closing price alo 02/24/11,
Slide 4: VALV Overview
y h rhe VALV Overview abi * Largest ceramic valve producer in China with 16 years of operating history = One of the few producers in the world capable of producing large-sized ceramic valves with a caliber of 6 inches or more = Diversified customer base of over 400 domestic Chinese customers in indu
Slide 5: Management team
mone + Innovator and pioneer of ceramic valves Deaunierie * Advanced expertise and know-how of structural ceramic technology é 6 + Formerly worked at Tianjin Dagang Power Plant CEO & CTO + 16 years experience in the industry + CFO of VALV since March 2010 id ba + Former CFO of Equicap Inc. (OTCBB: E
Slide 6: Largest industrial ceramic valve producer in China
Largest industrial ceramic valve producer in China?) = Produce more than 760 types of ceramic valves under 9 categories = Strong management with experience in the ceramic valve industry and US capital markets: Innovator and pioneer of proprietary ceramic valve technology Superior Significant barrier
Slide 7: Industry Overview
Industry Overview
Slide 8: What is a valve
= A device that controls the movement of liquid, gas, or loose material in bulk = Valves control flow, rate, volume, pressure or direction of liquids, gases, slurries or dry materials through a pipeline, chute or similar passageway = Indispensable to virtually all manufacturing processes, energy pro
Slide 9: Ceramic Valve vs. Metal Valve
a Metal Valve vs. d i) Ceramic Valve vs. Metal Valve Ceramic Valve Characteristics: [No resistance to severe conditions such as abrasion, corrosion and heat Resistant to Abrasion Resistant to Corrosion Resistant to High Temperature Energy Conservation: Frequent replacement resulting in tremendous co
Slide 10: Metal versus ceramic component wear comparison
Metal ball after one ‘Standard metal seat ring after Stainless steel! wedge gate disc month, two months, after one week Ceramic SK ceramic ball aftertwo SK ceramic seat ring after SK wear-resistant ceramic years five years wedge gate disc after five years 10
Slide 11: Large and Growing Market
y Ie Large and Growing Market am « Worldwide sales for industrial valves to reach $77.55 billion by 2011 = 23.3% growth expected through 2016 with sales reaching $95 65 billion = China is becoming a leading market for industrial valves * Chinese demand for industrial valves driven by PRC Government
Slide 12: Historically Limited Application of Ceramic Valve
sir, Historically Limited Application of deg, Ceramic Valve Ceramic valves currently account for less than 1% of the overall valve market in Chl Why? = Valve users are not familiar with ceramic technology = Industrial applications have been limited = Most ceramic valve manufacturers (excluding VALV)
Slide 13: Business Overview
pr Business Overview
Slide 14: Leader in the Ceramic Valve Industry
Leader in the Ceramic Valve Industry‘ = Sustainable competitive advantage in Breakthrough technology Technology, PReewI ie pEm © Able to manufacture ceramic valves with A Products and calibers >150mm and up to 1,000mm Services = Offer tailor-made solutions to existing valve problems encountered by c
Slide 15: Diverse End Markets & Customer Base
Diverse End Markets & Customer Base Over 400 customers (primarily located EY 2010 Revenue Mix in China) 5.5% Multiple products supplied to customers in the power generation industry (e.g. China Guodian Group and Datang Power Group) 2 Exclusive ceramic valve supplier for SINOPEG "etrochemical Power G
Slide 16: Nationwide distribution network
* Nationwide distribution network * 42 regional sales centers (indicated in red) = 58 long term sales agent and distributors (indicated in blue) = Full reach into the entire domestic Chinese market * Gearing up for exports = Export revenue in FY2010 increased by 91.8% YOY = Exports accounted for ~1.
Slide 17: Proprietary Technologies & Strong R&D Capabilities
Proprietary Technologies & Strong R&D Capabilities = Proprietary technologies enable us to produce most types of industrial valves = Gradually substitute metal valves which are currently prevalent in market = Innovative changes through proprietary technology + Enhance strength, toughness, improve re
Slide 18: Selected Case Studies
l alk rhe Selected Case Studies ab Li y BY Case 1: HUNTLEY Power Plant, Town of Case 2: China National Offshore Oil Tonawanda, USA Corporation in the Bohai Sea Challenge: Challenge: = Fly ash conveying system previously = Throttle valves from various countries used metal valves had to be replaced ev
Slide 19: Production Capacity Expansion
y i/Es' Production Capacity Expansion Old Facility * Designed capacity of 7,500 units (based on 1 shift operation) * Output in FY2009 & FY2010 has exceeded 10,000 units per year * Capacity increases to 24,000 units (based on 1 shift operation) * Construction of the new plant was completed in June 20
Slide 20: Growth strategy
® 3 2 3 < > Continuous Reinforce Increase eee expansion of competitive edge petrochemical / aera ‘manufacturing overmetal valves [| chemical industry dasal bet facility revenue share ee Completed new Enhance product) (“Increase promotional) (Develop relationships ‘manufacturing plant quality and act
Slide 21: Consolidated Financials
pr Consolidated Financials
Slide 22: Revenue and net income, 2010 and 2011
2040 and 2044 Revenue ($ in milions) fs a = = a $40 $324 03 5 | | Ss ‘008 partes companion of $109 MM ad os rom change nF ol struments of 223 nar-toses compensation $22 Mand gan om hang Fe nstuments of 20.3 2
Slide 23: Summary Balance Sheets
ue Li J Ee Summary Balance Sheets ooh - SCS \ (US$ Millions) FYE 6/30 FY 2009 © FY 2010 FY2011 a ‘Cash and Cash Equivalents 39.0 21.0 42.4 Trade Receivables 44 65 "7 Inventories 03 26 37 Other Current Assets 47 26 28 Total Current Assets 457 327 60.3 Property, Plant and Equipment, Net 49 64 10.7 Con
Slide 24: Investment Highlights
Investment Highlights ge = Largest industrial ceramic valve producer in China‘) = Produce more than 760 types of ceramic valves under 9 categories = Strong management with experience in the ceramic valve industry and US capital markets: Innovator and pioneer of proprietary ceramic valve technology S
Slide 25: Thank You
Thank You
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