Shengkai Innovations Inc · OTC:VALV
Shengkai Innovations — Investor Presentation (June 2009)
27 slides from Shengkai Innovations's investor presentation, Jun 12, 2009
Slide 1: World's Leader and Trailblazer in Industrial Ceramic Valves
World’s Leader and Trailblazer in Industrial Ceramic Valves SHENGKAI INNOVATIONS, INC. (SKIILOB) Investor Presentation June 2009
Slide 2: Forward-looking statements
This presentation contains forward-looking statements, including financial projections. In some cases, you can iden! forward-looking statements by terms such as “may,” “wil,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential,”
Slide 3: Company overview and revenue and net income growth
Revenue uel MM) (Sco Headquartered - Tianjin, P.R.C.; Founded 1994.) CAGR=53.8% 138% 5 History Profitable since 1996. Public in June 2008. = HS Market Leading manufacturer of ceramic valves Leader globally, largest in the PRC. Strong Teva ( Over 700 products in 32 series under 9 [ew | categories. Ne
Slide 4: Ticker symbol and trading snapshot
Ticker Symbol SKIILOB Price (5/29/09) $2.75 Common Shares Outstanding 22.1MM Preferred Shares Outstanding 7.9MM Net income (ttm) $11.6 MM P/E (ttm)12 7A EV/EBITDA (ttm)? 3.7 reconciliation abl id of tis presentation for FY 2009 and a share count of 29,999,868.
Slide 5: Valve Overview
Valve Overview + Adevice 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 processe
Slide 6: Large Fragmented Market in China
Large Fragmented Market in China PRC Valve Sales(*) China is a net valve exporter (SUS Bn) +2007 valve sales are approximately USS7.25 billion, up 35% "") 4 - 309 12.25 CAGR: 30% = 2007 total industrial value was 12 0 US$13.56 billion, up 28% 8 7.25 Fragmented industry with over 6,000 ee valve manuf
Slide 7: The PRC Valve Market per Segment and CAGR
The PRC Valve Market per Segment and CAGR © 2006 MI 2009E SSB) 96.4% Ga 29.5% . 241 Paes ae 33.7% 241 2 as _ 1.81 35.1% 1.13 1.07 141 : 0.64) 0.75) | = Power Petrochemicals oil Water Supply Metallurgy Other Generation Petrochemicals Water Treatment Power Generation Total power generating Industries’
Slide 8: Valve Materials: Metal vs. Ceramic
Was Valve Materials: od, Metal vs. Ceramic Metal Ceramic Superior Characteristics of Ceramic Abrasion Resistance Metal ball after one month of ‘Shengkai ceramic ball after two service years in service Corrosion J Resistance Resistance to High ‘Standard metal seat ring after ‘Shengkai ceramic seat ri
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 unfamiliar with ceramic technology. = Industrial applications have been limited as ceramic valve manufacturers (excluding SK) are limited to pro
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 toug
Slide 11: Shengkai's Proprietary Technology: Key Results
Shengkai's Proprietary Technolog »g, Structural Ceramics ai 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 temperatures, that solve prob
Slide 12: Shengkai is a Trailblazer in the Ceramic Valve Industry
Shengkai is a Trailblazer in ad, the Ceramic Valve Industry Breakthrough « Absolute technical advantage to manufacture Technology. ceramic valves with calibers in excess of 6” Market Leading i Offers tailor-made solutions to customers’ Products and problems with existing valves Service Ceramic Valve
Slide 13: Customer Segmentation
= ies & Customer Segmentation FY 2008 Expected Breakdown End of FY 2009 12.4% 7.3% TGS 20.0% ery i COE 80.3% GES Petrochemical — Power generation I Metallurgy, Aluminum and Other = Proven track record in penetrating Power * Petrochemical industry is a focus for 2009 Generation industry - Company exp
Slide 14: USA Case Studies
fs USA- Case Studies Case 1: GP Paper Plant Case 2: NRG Energy Power Plant The Environment: = Salt Cake Slurry Isolation — R8 ClO2 process bleach generator. Ambient temperature. PSI less than 100. The Problem: = Salt cake slurry with high chlorides content corrodes alloy valves and high salt solids
Slide 15: Nationwide distribution
Nationwide distribution Direct sales and customized solutions to large customers ~30 sales agents Unique products and service lead to pricing power opportunities Gearing up for exports Exports currently only 1% of total sales Approved exporter to Europe, North America, Russia, UAE, and the Asia Paci
Slide 16: Existing and New Facility
Existing Facility Output in FY 2009 10,000 sets of valves Qualifications DNV and ISO 9001 API certification required for sales to petrochemical industry CE certification to qualify for exports to Europe New Facility Increases capacity to 24,000 sets of valves Expected total investment: $27 MM Expect
Slide 17: Growth strategy
Increase manufacturing capacity Improve competitive position against metal valves Expand geographic footprint internationally > Constructing new manufacturing facility with funds obtained in 2008 Enhance product quality and production efficiency Lower production costs through increased automation De
Slide 18: Management team
Mr. Chen Wang, CEO & CTO — mr. Wang, the founder of Shengkai, has been serving as Chief Executive Officer and Chief Technology Officer since the Company’s inception. Prior to founding Shengkai, he worked at Tianjin Dagang Power Plant (September 1987 — July 1992). Mr. Wang has an MBA from Renmin Univ
Slide 19: Revenue, Gross Profit and Net Income
Revenue (§ MM) Gross Profit (§ MM) ee 8% 8 Bo, en 51.7% 6K Fyz006 FY2007 FY28 «304s © 3.Qhrs Fy2006 FYZOU7 FY208 «30ms 3 ONS. Fyzous FY2003 Fr2q FY2008 Net Income ($ MM} Net Income Margin ne 19.5% = CAGR=55.5% a% 104 th 3.2% a 305% 5 L | || | Fv2006 Fr2007 FY2008 FY200" 30ms 300s Fv200s FY207 FY2003
Slide 20: Summary balance sheet and operating efficiency
(US$ ions) 1009 June 30, 2008 Cash and Cash Equivalents 33.4 21.3 Trade Receivables 48 3.6 Inventories 1.3 07 Total Current Assets 414 26.2 Property, Plant and Equipment 25 25 Intangible Assets 8.0 67 Deposits on Purchase of Computer System 44 44 Total Assets 56.3 39.8 Accounts\Notes Payable 26 09 T
Slide 21: Summary Income Statement
li I Summary Income Statement By Sed Total Net Sales 273 24.0 32.4 23.1 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 19.4 13.9 Gross Margin 60.8% 60.0% 59.2% 60.0% Selling Expenses (27) (23) (3.0) (2.6) Genggal ane Administrative (1.8) (1.3) (1.
Slide 22: Peer Valuation
Peer Valuation Shengkaiz SKIILOB $82 37 China Valves CVVT.OB ‘$2.40 $150 CNNC SUFA 0777.82 $2.58 $619 98 nla nla 1.7% Technology? Hubei 5 Hongeheng? 6005668 $1.16. $124 401 nla nla 12% Flowserve FLS $73.57 $4,120 78 42 34.9 9.0% The Gorman- y FENCES $21.00 $350 140 22 94 63% Average 48.1 29 178 7.1%
Slide 23: Investment highlights
Large and Growing Market for Industrial Valves Superior Technology Ceramic Valves Poised and Product Portfolio to Capture Market Share y from Metal Valves I F Proven Track Record of ncreasing. / Solid Growth and High Manufacturing “ Capacity to Meet Profitability Demand Growth Driven by Industry and
Slide 24: Company Contact
Company Contact: Mr. Jeffrey T. Roney Shengkai Innovations, Inc. P.O. Box 303 Scottsville, VA. 24590 Email: jeffrey.roney@shengkai.com od, Contact Information Auditor: Albert Wong & Co Legal Counsel: Sichenzia Ross Friedman Ference LLP 24
Slide 25: Make Good and Capital Structure
Structure Make Good and Capital FY 2009 Make Good Per Share $13 MM $0.35 $11 MM $0.37 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 (J
Slide 26: EBITDA and EPS reconciliation
ine months Nine months FY 2008 FY 2007 FY 2009 FY 2008 EBITDA 12,668,370 11,481,984 15,124,306 10,425,993 Depreciation and 699,485 647,935 873,728 583,416 amortization Operating Income 11,998,885 10,834,048 14,250,578 9,842,577 Nine months H1 FY 2008 FY 2008 FY 2007 FY 2009 Diluted Diluted Diluted E
Slide 27: Thank You
Thank You
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