Harbin Electric Co. Ltd. Class H · HKEX:1133
Harbin Electric Co. Ltd. Class H — ROTH 3rd Annual China Discovery Tour (May 2008)
34 slides from Harbin Electric Co. Ltd. Class H's conference presentation, May 19, 2008
Slide 1: My Power, Your Future
My Power, Your Future NASDAQ: HRBN Investor Presentation ROTH 3" Annual China May 19, 2008 . Beinencnina Discovery Tour
Slide 2: Safe Harbor Statement
Safe Harbor Statement Statements included in this presentation may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This presentation may contain statements which address such key issues as the company’s growth strategy, future financi
Slide 3: Overview
Overview
Slide 4: Welcome to Harbin Electric
Welcome to Harbin Electric @ January 2007 NASDAQ, HRBN @ January 2005 Listed in the US @ Headquarters Harbin, China ™ Founded in 2000 , ’ @ Full-Time Employees! 490 © Urumal @ Turpan @ Price (05/15/08) $18.00 sear” noon @ Market Value $330mm @ Lanzhou . © Xia Nanjun ™ Shares Outstanding — 18.37mm |
Slide 5: Linear Motors (LM) & Integrated Systems
Linear Motors (LM) & Integrated Systems @ Linear Motors & their Integrated Systems (LMs provide direct-coupled motion with magnetic force and eliminate mechanical transmission devices) Q Flat Linear Motors Q Cylindrical Linear Motors @ Wide Applications for LM Systems — Examples: Q Mail sorting equi
Slide 6: Specialty Auto Interior Micro-Motors
Specialty Auto Interior Mic @ Products Developed — Nine auto micro-motors Q Car seat automation Q Back seat folding QO EPS (power steering) QO Automated window Q Automated trunk opening @ Under Development Q Micro-motors for door lock, gas pedal, ABS, gas pump, engine gas jet HARBIN ELECTRIC
Slide 7: Investment Highlights (I)
Investment Highlights (1) @ Rapid growth in Sales & NI with consistent high margins (~50% GM) Q 2007 vs 2006 —> Sales up 62%; Op. Income up 69%; NI up 41% (excluding accounting adjustment) Q 1Q08 vs 1Q07 —>Sales up 65%; Op. Income up 68%; NI up 57% ™@ Open-Ended Market Potential Q Wide range of appl
Slide 8: Investment Highlights (II)
Investment Highlights (II) ® World-Class Manufacturing Facilities Q Extensive certification processes (ISO for Quality mgmt; AQA for technical specification of automobile industry) Q Harbin (Mainly for linear motors, oil pumps, future train systems) Q Shanghai (Operational in 3Q08E and dedicated to
Slide 9: Historical Financial Highlights
Historical Financial Highlights Revenues ($mm) 80 Operating Income ($mm) 65.4 30 2004 2005 Net Income ($mm) 20 15 10.0 10 : - Le > 2004 2005 20 40 c 6 15 10.0 20 10 _ ° id «al 0 — 2006 2007 2004 2005 2006 2007 16.9 High Double-Digit YoY Growth in Revenues and Earnings 2006 2007
Slide 10: Consistent Quarterly Sales Growth
Consistent Quarterly Sales Growth Average Quarter-Over-Quarter Revenue Growth at 16% Since 2005 $mm 25.0 20.0 22.5 135 193 15.0 13.6 40 12.0 97 98 10.0 89 70 72 49 5.3 1 | 7 L L L 00 Li 2004 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 ° HARBIN ELECTRIC
Slide 11: Stable High Gross Margin
Stable High Gross Margin Stable Gross Margin and Consistently Above 46% 60% 52.2% 51.6% 50.3% 49.0% 48.0% 46.9% 48.1% “94% 48.9% 48.1% ” 48.2% 47.90% 50% . a oe no Bln 40% 30% 20% 49.7% 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08
Slide 12: Competitive Strengths
Competitive Strengths
Slide 13: Strong Research & Development Capabilities
Strong Research & Development Capabilities @ Recruited Talent Worldwide to Establish Strong In-House R&D QO ~60 researchers and engineers with diverse experience and specialization = Linear Motors/Specialty Micro-motors/Controllers & Automations = Manufacturing Technologies and Processes @ Collabora
Slide 14: A Selected List of Patents Developed
A Selected List of Patents Developed Patent Name Patent Number Linear Motor-Driven Flexible Planar Materials Circulation Line ZL 02 2 11613.3 Linear Motor-Driven Crawler Style Conveyor ZL 02 2 10379.1 Flat Linear Three-Phase Asynchronous Motor ZL 02 2 10740.1 Cylinder Permanent Magnetic Linear Synch
Slide 15: HRBN: #1 in Linear Motor (LM) Technology
HRBN: #1 in Linear Motor (LM) Technology @ First private enterprise in China to enter linear motor (LM) market Q Our focus is on technical innovation, creativity & value-added products; we strive to avoid competing in low-cost commodity segments & In most cases, we are the only supplier of LMs to ou
Slide 16: World-Class Manufacturing Capabilities
World-Class Manufacturing Capabilities @ State-of-the-Art Manufacturing Equipment Q Imported production lines, inspection & testing equipment plus quality control systems = Guided by International Experts Q We adopted internationally advanced manufacturing technologies and processes @ Safe and Moder
Slide 17: Advantages over Foreign Competitors
Advantages over Foreign Competitors @ Closer Customer Contact & Partnerships Q Geographic proximity, shared culture and same language Q Customization allows us to work closely with our clients, giving us time to understand their needs and become their partners m@ Lower Cost Q Lower labor cost and ra
Slide 18: Favorable Chinese Government Policies
Favorable Chinese Government Policies @ Fostering Key Industries Essential to China’s Industrialization Q Transition from “Made in China” to “Developed in China” Q In HRBN’s case, “Electric Motors” — Industrial Goods = Promoting Technology-Oriented & Value-Added Firms QO) Have received R&D grants in
Slide 19: Multi-Faceted Growth Strategy
Multi-Faceted Growth Strategy
Slide 20: Organic Growth — Maintain LM Leadership
Organic Growth — Maintain LM Leadership Continued R&D Investment in Linear Motors J J J Expand Introduce Enter Customer Base New Products New Markets J J J Linear Motor Sales Expected in Year 2010: US$150mm HARBIN ELECTRIC
Slide 21: Expanding Customer Base
Expanding Customer Base Top Four Customer Sales Distribution — “All Others” Rising All Others is 19% 29% AllOthers 22% 34% 10% 16% 2006 1Q2008 1. A Logistic Technology Company (2006)/A Car Seat Manufacturer (1Q08) 2. Daqing Oilfield (2006 and 1Q08) 3. A Business Trading Company/A Logistic Technology
Slide 22: New Products — Example: Oil Pump System for Oil Fields
New Products — Example: Oil Pump System for Oil Fields ™ Successfully developed a “Tower Type Oil Pump” driven by permanent magnetic linear motors in 2007 Q Patented the world’s first vertical oil pump driven by a linear motor Q Greater efficiency allows for >25% energy savings Q Certified by China
Slide 23: New Markets — Example: Urban Railway System for China
New Markets — Example: Urban Railway System for Chin @ Currently Developing China’s First Homemade Linear Motor Train System for Urban Mass Transportation & Goal -— To have HRBN’s LM technology be the “Standard” for all future urban railway system construction across China @ Entered into R&D Agreeme
Slide 24: Big Potential — Long-Term Construction Plan
Big Potential — Long-Term Construction Plan @ Next 15 years, “a golden period” in China to develop metro railway transportation Q Urban population > 800 million by 2015E Q Currently, public transportation only 10%-25% in major cities Q Urban mass transportation infrastructure doesn’t really exist Q)
Slide 25: Major New Business Line — Auto Micro-Motors
Major New Business Line — Auto Micro-Motors Rapidly Grow This Line of Business J J Domestic Strategy: Overseas Strategy: To Supply into China’s To Serve as Key Parts Supplier Fast-Growing Auto Market for Foreign Auto Makers J J Auto Micro-Motor Sales Expected in Year 2010: US$200mm HARBIN ELECTRIC
Slide 26: Auto Motors Business — Accomplishments So Far
Auto Motors Business — Accomplishments So Far @ Acquired Harbin Taifu Auto Electric Co. Ltd. Q Capacity of 2.4 million units in Harbin Q Average Selling Price per Unit = ~ $20/unit & Constructing New Manufacturing Facility in Shanghai Q 10 million units in new capacity; opening expected in Summer 20
Slide 27: Motors Business to Grow Fast
Motors Business to Grow Fast Revenues by Product Segment @ Linear Motors % @ Auto Specialty 42% m@ Other 1Q2008 2010 Forecast HARBIN ELECTRIC
Slide 28: Foreign Sales — Growth Just Starting
Foreign Sales — Growth Just Starting @ Overseas Markets Represent a Huge Opportunity for Us O Our positioning — Products meeting int'l standards but at lower prices O Barriers to entry — Our ability to undergo extensive testing and qualification of our products makes HRBN unique @ Grew international
Slide 29: Acquisition Growth — Enter Rotary Motor Market
Acquisition Growth — Enter Rotary Motor Market @ Propose to Acquire Shandong Weihai Hengda Electric Motor Co. Ltd. Q An industrial rotary motor manufacturer Q 2007 annual sales ~$46.5 mm, net profits ~$4.9 mm, net assets $29.6 mm Q 2008 annual sales and net profits to grow 30% Qa “Wenbao’ electric m
Slide 30: Rotary Motor Business — Strategic Significance
Rotary Motor Business -— Strategic Significance m= Extend Product Range - offer a full range of electric motors: industrial rotary motors, special motors (linear motors), and micro-motors (auto specialty micro-motors) @ Establish a stronger manufacturing platform — North (Harbin), South (Shanghai),
Slide 31: Year 2010 Total Revenue Target
Year 2010 Total Revenue Target Revenue Target Excluding Acquisitions @ Existing products = Automobile micro-motors $350mm @ Tower type oil pumps @ Subway train linear motors $150mm 2007 LM & Other Products = Auto Products 2010 Fiscal year ends December 31 HARBIN ELECTRIC
Slide 32: Strong Management Team
Strong Management Team With International Diversity @ Founder of Harbin Electric @ Over 12 years of industry experience @ Over 20 years of industry experience @ Previously CFO for Harbin WanDa @ One of 27 Commissioners of China Electrical Electro-Technical Society @ CPA under China's accountancy pro
Slide 33: Strong Management Team
Strong Management Team With International Diversity @ Advised US listed Chinese companies on managing capital market-related issues ™@ Management experience in Investor Relations and Finance for a Fortune 100 company @ Specialized in the development of auto interior specialty micro-motors @ Previous
Slide 34: Thank you for your interest
Thank you for your interest wat www.harbinelectric.com
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