Shengkai Innovations Inc · OTC:VALV
Shengkai Innovations — Investor Presentation (May 2009)
28 slides from Shengkai Innovations's investor presentation, May 19, 2009
Slide 1: World's Leader and Trailblazer in Industrial Ceramic Valves
World’s Leader and Trailblazer in Industrial Ceramic Valves ‘I SHENGKAI INNOVATIONS, INC. (SKILOB) Investor Presentation May 2009
Slide 2: Safe Harbor Statement
j ‘ lay Safe Harbor Statement This presentation contains forward-ooking statements, including financial projections. In some cases, you can iden! forward looking statements by terms such as “may,” “will” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “project
Slide 3: Corporate Overview
Corporate History Market Leader Strong Product Portfolio Broad Customer Base Certifications ‘Headquartered - Tianjin, P.R.C.; 143 employees as of January 2009; went public in June 2008; private placement at $2.54 per unit (1 share & 4.2 warrant) Leading manufacturer of ceramic valves globally, large
Slide 4: Ticker Symbol SKII.OB
Ticker Symbol SKIILOB Price (5/14/09) Market Cap $66 MM Common Shares Outstanding Preferred Shares Outstanding Net income (ttm) EPS (ttm)* $0.39 P/E (ttm)*? $2.20 22.1 MM 7.9 MM $11.6 MM 228 the reconciliation table atthe end of thie presentation ‘unt of 29,998,868 charee fom $13.0 millon earnings t
Slide 5: Valve Overview
Valve Overview e that controls the movement of liquid, gas, or loose material in bulk. * Can 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 and eve
Slide 6: PRC Valve Sales
co PRC Valve Sales() (SUS Bn) 14 Large Fragmented Market in China CAGR: 30% 222) 943 7.25 | 2006 2007 20086 20096 China is a net valve exporter +2007 valve sales are approximately US$7.25 billion, up 35% year on year?) = 2007 total industrial reached US$13.56 bi year on year”) itput value In, UP 28%
Slide 7: Growth Drivers
& Growth Drivers Valve Market Segmentation { The PRC Valve Market per Segment and CAGR ‘2008 I 2009 (US $ Bn) 28.8% 28.4% = 29.5% ° = 33.7% = at 33.6% 2.41 2 LEU 35.1% = oe 1.07 1 . 0.75) “ll Petrochemicals oil Water Supply Metalluray Other Generation iirc | Power Generation Petrochemicals Water Tre
Slide 8: Valve Materials: Metal vs. Ceramic
: we Valve Materials: ‘Gs Metal vs. Ceramic Ceramic Superior Characteristics = of Ceramic A Abrasion Resistance Metal ball after one month of ‘Shengkai ceramic ball after two service ‘years in service Corrosion iJ Resistance Resistance to High ‘Standard metal seat ring after ‘Shengkai ceramic seat r
Slide 9: Ceramic Valve Application
Ceramic Valve Application Historically Limited by Size + Ceramic valves have occupied less than 1% of the overall valve market in China Why + Valve users not familiar with ceramic technology + Industrial applications have been limited as ceramic valve manufacturers (excluding SK) are limited to prod
Slide 10: Shengkai's Proprietary Technology - Structural Ceramics
Shengkai’s Proprietary Technology — Structural Ceramics Adding zirconia to alumina ceramics to increase toughness and resistance to corrosion Successfully using Martensite transformation toughening technology to increase toughness and reduce deformability. Applying nano-technology to improve toughne
Slide 11: Shengkai's Proprietary Technology - Key Results
Shengkai’s Proprietary Technology| Structural Ceramics ) KEY RESULTS Shengkai has developed a solid solution and agent that lowers firing temperature and enhances the homogeneous dispersion of ceramic pulp Shengkai has developed joint technologies under differing "
Slide 12: Leverage relationship with Tianjin University of Science & Technology
Leverage its existing relationship with Tianjin University of Science & Technology. The company plans to increase its cooperation with other universities to fund\support scientific research to leverage the company's existing R&D. Sl i co Innovations, Inc. \
Slide 13: Market Leading Technology, Products and Service
150mm Market Leading Service Shengkai is a Trailblazer in the Ceramic Valve Industry Telit] = Absolute technical advantage to manufacture Technology, ceramic valves with calibers in excess of ; = Offers tailor-made solutions to customers’ mrcductaland problems with existing valves Ceramic Valves and
Slide 14: Customer Segmentation
like “ae! 80.3% vuLa Customer Segmentation Expected Breakdown End of FY 2009 15.0% ours <a 65.0% Petrochemical | Power generation jj Metallurgy, Aluminum and Other + Proven track record in penetrating Power Generation industry + Successfully expanded into other industries: Petrochemical Aluminum Met
Slide 15: Case Studies: Maoming Petrochemical, Huaneng Dezhou Power Plant
Case 1: Maoming Petrochemical Case 2: Huaneng Dezhou Power Plai The Challenge: + The HCL pipes in the steam workshop were prone to leakage due to serious corrosion + Metal diaphragm valves used were replaced every 3 months but the leakage persisted The Solution: = Installed 12 sets of ceramic ball v
Slide 16: Nationwide distribution
Nationwide distribution Direct sales and customized solutions to large customers. ~30 sales agents Unique products and service lead to pricing power opportunities ig up for exports Exports currently only 1% of total sales Approved exporter to Europe, North America, Russia, UAE, and the Asia Pacific
Slide 17: Qualifications and Production Capacity Expansion
BY Qualifications Ligh Current Production and Mats Capacity Expansion Existing Facility Output in FY 2009 ~10,000 sets of valves; exceeds production capacity of 7,500 sets DNV and ISO 9001 API certification required for sales to petrochemical ws industry CE certification to qualify for exports to Eu
Slide 18: Growth Strategy
ke Growth Strategy > Improve Cee eae eal manufacturing position n geograp! capacity against metal petrochemical footprint valves industry internationally Constructing new Enhance product Increase promotional ) (“Develop relationships manufacturing facility with funds obtained in 2008, quality and pr
Slide 19: Management Team
Mr. Chen Wang, CEO & CTO — mr. Wang, the founder of Shengkai, has been serving as Chief Executive Officer and Chief Technology Officer since the Company's inception. Prior to founding Shengkai, he worked at Tianjin Dagang Power Plant (September 1987 - July 1992). Mr. Wang has an MBA from Renmin Univ
Slide 20: Rapid Growth and High Profitability
Rapid Growth and High ‘goa Profitability Revenue (5 MM) Gross Profit ($ MM) CAGR=53.8% a8. 13.8% CAGR=51.7% 15.3% me ns K mS a a i 166 aT Frame FY2n05 Net income {5 MM} Net Income Margin me 495% = CAGR=55.5% . ‘oa = num 1% a ey “ C | [| i Fy2006 FY2007 FY2008 FY200 30ms 3¢ars Frame FYZ07 FZ © 30Ns c
Slide 21: Summary Balance Sheet
Te * x ‘ sia Summary Balance Sheet (USS Millions) March 31, 2009 June 30, 2008 Cash and Cash Equi 33.4 21.3 Trade Receivables 48 3.6 Inventories 13 07 Total Current Assets a4 26.2 Property, Plant and Equipment 25 25 Intangible Assets 8.0 . Deposits on Purchase of Computer System 44 44 Total Assets 5
Slide 22: Summary Income Statement
Summary Income Statement 3.Qtrs FY2009 3 Qtrs FY2008 FY 2008 FY 2007] Total Net Sales 213 24.0 32.4 23.4 Revenue Growth 13.8% nla 40.3% 68.6% Cost of Sales (10.7) (9.6) (13.2) (9.2) Gross Profit 16.6 14.4 19.1 13.9 Gross Margin 60.8% 60.0% 59.2% 60.0% Selling Expenses (27) (23) (3.0) (2.6) General a
Slide 23: Peer Comparison
‘Shengkai? SKIILOB 1.3 2.6 35.3% ChinaValves — CVVT.OB $2.35 $136 16 CNNC SUFA Technology? Hubei Hongcheng? Flowserve FLS $67.70 $3,770 5. 27 79 9.0% 000777.sz $2.62 $521 nia nia 1.78% e00s66.ss $1.21 $129 nla nia The Gorman- Ruppcompany ¢RC $21.18 $350 Average 473 22 78 7.5% {excluding Skil) 4. Mar
Slide 24: Investment Summary
Large and Growing Market for Industrial Valves etpercmrecnncleng Ceramic Valves Poised mandi product Portfolio to Capture Market Share , from Metal Valves Proven Track Record of Increasing Solid Growth and High Manufacturing Profitability Capacity to Meet . Boerne Growth Driven by Industry and Geogr
Slide 25: Company Contact
Company Contact: Mr. Jeffrey T. Roney Shengkai Innovations, Inc. P.O. Box 303 Scottsville, VA. 24590 Email: jeffrey.roney@shengkai.com Auditor: Albert Wong & Co Legal Counsel: Sichenzia Ross Friedman Ference LLP 25
Slide 26: FY 2009 Make Good and Capital Structure
FY 2009 Make Good Per Share $13 MM $0.33, $11MM $0.28 Net Income Cash from Operations Capital Structure Exercise Price ‘Amount Common Stock Outstanding 22,112,500 Preferred Stock Outstanding 7,887,368 Warrants (June 2008 Financing)" $3.52 7,098,632 213,068 Warrants (July 2008 Financing)"* $3.52 2,36
Slide 27: EBITDA and EPS Reconciliation
Nine months Nine months FY 2007 FY 2009 FY 2008 EBITDA 9,877,412 8,307,048 15,124,306 10,425,993, Depreciation and 699,485, 647,935, 873,728 583,416 amortization Operating Income 9,877,412 8,307,048 14,250,578 9,842,577 Nine months H1 FY 2008 FY 2007 FY 2009 Diluted Diluted Diluted EPS EPS EPS Net i
Slide 28: Thank You
Thank You
Shengkai Innovations — Investor Presentation (May 2009) on 6ix