Shengkai Innovations Inc · OTC:VALV
Shengkai Innovations — Investor Presentation (May 2011)
25 slides from Shengkai Innovations's investor presentation, May 20, 2011
Slide 1: World's Leader and Trailblazer in Industrial Ceramic Valves
World’s Leader and Trailblazer in Industrial Ceramic Valves N SHENGKAI INNOVATIONS, INC. \ (NASDAQ GM: VALV) Corporate Presentation May 2011
Slide 2: Safe Harbor Statement
hes Safe Harbor Statement wh This presentation contains forward ooking statements, including financial projections. In some cases, you can identity forward looking statements by terms such as “may,” “wil,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “proje
Slide 3: Equity Snapshot
y si ath ' Equity Snapshot a Shengkai Innovations, Inc. NASDAQ GM Symbol: VALV Stock Price: $3.16 as of May 12, 2011 Basic S/O: 28,306,611 Diluted S/O): 38,280,917 Diluted Market Cap.: ~$121.0 Million as of May 12, 2011 Auditor: BDO China Li Xin Da Hua CPAs Co. (1) Based on the treasury stock method
Slide 4: VALV Overview
fe, Me hy: E VALV Overview oa i: a) * 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 custome
Slide 5: Management team
Scans + Innovator and pioneer of ceramic valves Erayeaaks + Advanced expertise and know-how of structural ceramic technology p 6 + Formerly worked at Tianjin Dagang Power Plant CEO & CTO * 16 years experience in the industry + CFO of VALV since March 2010 iat + Former CFO of Equicap Inc. (OTCBB: EQP
Slide 6: Investment Highlights
Investment Highlights 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 Significan
Slide 7: Industry Overview
ho 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
i) Ceramic Valve vs. Metal Valve Metal Valve Ceramic Valve Resistant to Abrasion + No resistance to severe condons : Characteristics: ResstonttoCoresion Sich as abrasion, coroson and heat co Resear caren ae Frequent replacement resuting in Wig lau ene Energy Conservation: temendous conaumpton of tel
Slide 10: Ceramic versus metal component wear comparison
. Ceramic Metal Metal ball afterone ‘Standard metal seat ring after Stainless steel wedge gate disc month, two months, after one week Ceramic SK ceramic balll aftertwo SK ceramic seat ring after SK wear-resistant ceramic years five years wedge gate disc after five years 10
Slide 11: Worldwide sales for industrial valves to reach $77.56 billion by 2011
« Worldwide sales for industrial valves to reach $77.56 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 stimulus package of ~$570 billion
Slide 12: Ceramic valves account for less than 1% of valve market in China
Ceramic valves currently account for less than 1% of the overall valve market in Chi Why? = Valve users are not familiar with ceramic technology = Industrial applications have been limited = Most ceramic valve manufacturers (excluding VALV) can only produce ceramic ball & adjustable valves with cali
Slide 13: Business Overview
Business Overview
Slide 14: Breakthrough technology
Breakthrough technology Technology, Services = Sustainable competitive advantage in PReeTIt ier pEm © Able to manufacture ceramic valves with Products and calibers >150mm and up to 1,000mm = Offer tailor-made solutions to existing valve problems encountered by customers Breakdown of Sales by Product
Slide 15: Diverse End Markets & Customer Base
Diverse End Markets & Customer Base Over 400 customers (primarily located EY 2010 Revenue Mix in China) 6.5% 28.9% 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 SINOPEC "etrochemical P
Slide 16: Strong Sales & Distribution Network
Aig 18 Strong Sales & Distribution Network ‘N. “i * 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
Slide 17: Proprietary Technologies & Strong R&D Capabilities
aR sky “fk | re 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, to
Slide 18: Selected Case Studies
We) Me liale Selected Case Studies ‘a Se a 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: Old and New Facility
Old Facility * Actual fully operated output of 14,000 units * Output in FY2009 & FY2010 has exceeded 10,000 units per year New Facility Capacity increases to 24,000 units (based on 1 shift operation) Construction of the new plant was completed in June 2010 — operational by 09/30/10 Fully funded at a
Slide 20: Growth Strategy
Growth Strategy Continuous Reinforce Increase expansion of competitive edge petrochemical / Hates manufacturing fovermetal valves [| chemical industry seals facility revenue share Completed new Enhance product ~) Increase promotional ) (Develop relationships manufacturing plant quality and activitie
Slide 21: Consolidated Financials
ho Consolidated Financials
Slide 22: Adjusted EBITDA and Adjusted Net Income
‘Adjusted EBITDA (S in mijions) ‘Adjusted Net income ($ in mylions) | CBS 35 $31534 | Grommon.y 30 ‘ 35 $10 % $0 go maa mee eo $0 gr ae meee ee ee as ee aed core ssh compre xpne of $18044 ads fom change Ff insramers 8
Slide 23: Summary balance sheet
Rly (USS Millions) FYE 6/30 FY 2009 FY2010 — FY2011 3} Cash and Cash Equivalents 39.0 21.0 50.5 Trade Receivables 44 65 13.0 Inventories 09 28 34 Other Current Assets 17 26 33 Total Current Assets 45.7 327 70.2) Property, Plant and Equipment, Net 49 61 449 Construction in progress 03 25.2 : Intangib
Slide 24: Investment Highlights
Investment Highlights ga 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: = 8 3 ve $ $a sz =) z & Innovator and pioneer of proprietary ceramic
Slide 25: Thank You
ho Thank You
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