SORL Auto Parts, Inc. NASDAQ: SORL Global Chinese Financial Forum SHANGHAI CONFERENCE 2007
Safe Harbor Statement This presentation contains "forward-looking statements" within the meaning of the “safe-harbor” provisions of the Private Securities Litigation Reform Act of Such statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to differ materially from the results expressed or implied by such statements, including changes from anticipated levels of sales, future national or regional economic and competitive conditions, changes in relationships with customers, access to capital, difficulties in developing and marketing new products, marketing existing products, customer acceptance of existing and new products, and other factors. Accordingly, although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. The Company has no obligation to update the forward-looking information contained in this presentation.
Overview: Production Leading manufacturer of Commercial Vehicle Air Brake Valves in China – Based in Wenzhou City, Zhejiang Province the “Hub of auto parts” in China – The largest manufacturing base for air brake valves in China – 40 categories of air brake valves in over 800 specifications – ISO/TS16949 Quality Management System, OHSAS18001 System, and ISO14001 Environmental Management System
Overview: Sales and Marketing Leading Distributor of Commercial Air Brake Valve in China – 39 domestic OEM customers, including all major truck makers in China – 28 distributors and over 800 sub-distributors, covering 7 regions nationwide – Distributing products to 72 foreign countries or regions internationally – Gaining the first international OEM customer, TATA motor in India
Overview: From OTCBB to NASDAQ GM Reverse Merger – – In May 2004, Enchanted Village, Inc. acquired Fairford who owned 90% of the air brake valve business of Ruili Group – – Shares of Preferred Stock were converted into common stock – – In July 2004, Enchanted changed the name to SORL NASDAQ Capital Market – – In April 2006, transferred from OTCBB to NASDAQ Capital Market NASDAQ Global Market – – November 2006, upgraded to NASDAQ Global Market – – Secondary Public Offering with proceeds of $36 million USD
Significant Domestic Market ’06 sales commercial vehicle increase: – commercial vehicle 15.2% – truck 16.2% – heavy truck 34.3% less sensitive prices: CV vs. PV 50% price advantage: Domestic Brands over Imported Brands 90% of market share was taken by Local brands Long-term Development: Highway Expansion, Construction of 2 & 3 tier Cities, Big Logistics Substantial export market growth for trucks made in China
Significant Domestic Market Heavy truck consist of heavy-duty truck, chassis for heavy truck and trailer 12.2% CAGR of commercial vehicle during % CAGR of truck during % CAGR of heavy truck during
Significant Domestic Market For the five months ended May 31, 2007 – – The Chinese commercial vehicle sector experienced a solid 24% growth – – The unit output of heavy trucks posted a robust 62% growth – – SORL grew overall sales by 31.6% and the sales to OEM increased by nearly 68%, in comparison with the same period of 2006
SORL: 2007 Q1 Revenue and Profit Growth YOY Sales Growth: increased 25.7% to 24.4M :: Aftermarket $7.1M :: Export OEM $8.9M :: Aftermarket $7.1M :: Export $8.4M YOY Profit Growth: increased 31% to 2.1M
37% CAGR of sales during % CAGR of net income during SORL: from 2003 to 2006 Net Income ($millions) Revenue ($millions)
Key Strengths of SORL Success factors to win in the intensified competition Established Nationwide Sales Network Close Relationship with Big OEM Manufacturers Performance- Cost Competitiveness Warranty and Reliability Timely Delivery Efficient Customer Services Other Small Manufacturers No Low Poor SORL Auto Parts Yes High Good
New Export Opportunities New Office: In early 2007, SORL opened its forth oversea office in Pune, India with 4 sales representatives and 2 engineers New Contracts: In 2006, accepted by TATA Motors to supply to TATA’s commercial vehicles and aftermarket replacement division On March 12th, 2007, SORL entered into a new sales agreement with TATA Motors
Capacity Growth Reorganized production lines from traditional straight-line layout to U- shape track, enabling it to quickly adjust its production plan, and shortening the logistic distance among diverse procedures Up to May, 2007, installed 10 additional die casting machines, added 47 computerized numerical control machines to 198 machines previously in use, purchased 4 new tooling machines for clutch servo and streamlined the production facility to increase the total capacity by nearly 25%. Booked More equipments which were expected to be available in succession
Growth Strategy M&A Project Pipeline: – – Step 1: acquisition of international distribution network, repair factories, and assembling facility – – Step 2: domestic acquisition for product-line extension – – Step 3: seeking strategic alliance opportunities Organic Growth – – Establishment of new sales centers in countries with auto industry – – Further expand production facilities to meet additional demand – – Cost Control: reduce material and energy consumption strict waste measurement – – Maintenance of high standard quality control
SORL Auto Parts, Inc. NASDAQ: SORL Richard Cai Senior Manager, Capital Market Phone:+86 (577) Fax:+86 (577) Web: