Direct sales, 70% of revenue, take place through seven regional sales offices
Most customers, 60% to 70% of current sales, are long-time repeat customers
The Company’s over 400 clients are in the thermal power, oil and chemical, metallurgy, and water supply and drainage industries, located in the southeastern coastal region of China
Exports, about 10% of current sales, take place to the Europe and rest of Asia
Comprehensive product-line and manufacturing capabilities is appealing to customers
UAL-Wafer Hardsealing Butterfly Valve
Extensive and Established
Customer Relationships
Two-way Metal Sealing Butterfly Valves, used to control
municipal water and sewage flow, have an 86.0%
domestic market share
High Temperature Pressure Power Station Gate Valves,
have an 82% domestic market share
Market Leader
9
Technology and Products
The first domestic manufactured high pressure large diameter gate valves for coal chemical industry, which substitute for imported products from overseas
The sole manufacturer of whole series of blowtorch valves, water pressure testing valves, steam controlling valves for high parameter power station, and bypass valves for high pressure heater.
The only company in China in possession of the world class technology integrated integral foundry DN3600 Metal Sealing Butterfly Valves and Communication Pressure Regular Valves Two-way
No.1 Position in The China Valve Industry
The first manufacturer of main steam gate valves for 300MW power station in China and water supply gate valves for 600MW power station in China
The sole designer and manufacturer in China of valves which are used for ultra supercritical units of 1000MW power station.
The first manufacturer of high pressure large diameter oil pipeline valves in China.
The first domestic manufactured 2500Lb high pressure gate valves for hydrogenation in chemical lines, which substitute for imported products from overseas
10
700 models of valves with over 10,000 specifications
High pressure and high temperature power station valves
Gate valves
Check valves
Globe valves
Safety valves
Butterfly Valves
Ball valves
Vent valves
Other valves and accessories
Valves vary in diameter from 3mm to 1300mm
Pressure caps range from 150 to 4,500 pounds
Products can be used in temperatures ranging from -196°C to 610°C
Motor Ball Valve
Extension Rod Dual
Sealing Butterfly Valve
Half Ball Valve
Dual-Cylinder Pneumatic
Gate Valve
1500-200 Gate
Valve
Slow-Off
Check Valve
1000MW Solid Forge Gate Valve
Products
11
Source: China Valves Technology, Inc.
- Thermal power industry: 8 %
- Thermal power high parameter market: 35 %
- Provincial capital cities water supply market: 41 %
China Valve Market
Breakdown by Industries
Source: P.R.C. General Machinery Industry Association, Valve Sector
China Valve 9 Month 2008 Sales by Industry
Industry Breakdown & China Valve Sales Breakdown
PetroChemical
10.6%
Metallurgy
12.4%
Chemical
14.2%
Power Supply
26.3%
Water Supply &
Drainage
36.5%
12
Manufacturing costs are 30% to 40% lower than for foreign competition
Low labor costs
Long standing relationships with suppliers assure price and quality stability
Low domestic shipping costs
Lower repair and maintenance costs than for imported products
Lower marketing costs due to direct selling in China
State of the art research, development, and manufacturing
Abstration Check Valve
for Powerstation Steam
Turbine System
Competitive Advantages
“KF ” - No.1 brand in China valve industry (48 year history),
awarded the “Most Competitive Brand” by China’s Ministry of Commerce
“ZD ” - Recognized as a “Famous Brand” in China
Famous
Brands
13
Construction of a new 13,200 m2 facility will expand production
capacity and allow for new products to be manufactured for
new industries
Increase domestic market penetration through 7 sales office in China
Develop and manufacture higher margin products aimed at new business segments
Aggressive acquisition of new high-end products companies by targeting fluid-control valve manufacturer and new distribution channels
Use brand advantage to capture greater market share
Develop high quality products through research that replace imported products in domestic market and can compete in international markets
Rebalance product mix as necessary to emphasize sales of new high margin high quality products
Opportunistically increase international sales of high quality products by taking advantage of lower costs of production
Future Growth
14
Management Team
Mr. Fang Si Ping, President, CEO, Board Chairman and Secretary – Mr. Fang established Zheng Zhou City Zhengdie Valves Co. in 2001 and was its President and CEO. In early 2004, he acquired and became the President and CEO of the stated-owned enterprise, Henan Kaifeng High Pressure Valves Company Limited. He has over 20 years of experience in the valve industry. Chairman of the P.R.C. General Machinery Industry Association, Valve Sector.
Ms. Jing Chen, Chief Financial Officer – Ms. Chen was the Chief Financial Officer for NASDAQ listed Origin Agritech, Ltd. Previously, Senior Director of Finance at iKang Healthcare, Inc., Director of Finance at Nasdaq listed eLong, Inc. and Finance Manager of the North China Region for Eli Lilly Asia Inc. China Representative Office. She has a Doctor of Business Administration degree from Victoria University in Switzerland, and a Masters in Business Administration from City University in U.S.
Mr. Fang Bin Jie, Chief Operating Officer – From September 1995 through January 2005, Mr. Fang was head of operations and the human resources department of Zhengzhou City Zhengdie Valve Co., Ltd. From January 2005 to the present, Mr. Fang has been the General Manager of Zhengdie Valve Co., Ltd. He became the Company’s Chief Operating Officer in January, 2008.
15
Financials
16
Revenue
($ million)
20.0
25.5
37.0
26.0
6.3
21.4
46.2
2005
2006
2007
9M2007
9M2008
3Q2007
3Q2008
CAGR: 36.0%
YoY Growth: 77.6%
YoY Growth: 237.9%
17
Sales by Top Clients and Category
Top 10 Clients Ranked by Revenue - 9 Mnths 2008
Percentage of
Total Revenue
PetroChina No. 1 Construction Company, Guangxi Project Department
3.51%
Kunshan Tap Water Group Ltd.
3.00%
No. 2 Machine Plant (Luoyang) Petroleum Equipment Ltd.
2.64%
Shanghai Tap Water Inc.
2.59%
Nanjing Huashui Water Disposal Equipment Ltd.
2.52%
CVT (German)
2.50%
Sichuan Oriental Electric Power Group, Iran Project Department
2.04%
Shanghai Turbine Co.
1.96%
Shandong Chenming Papermaking Group
1.94%
Henan Goldenland Chemical Ltd.
1.22%
Total:
23.90%
Sales by Valve Category ($ million)
-
5
10
15
9M2008
12.3
14.2
3.6
2.5
1.9
9.2
2.0
0.6
9M2007
8.1
7.9
1.8
0.9
0.4
3.9
2.5
0.7
Gate Valve
Butterfly Valve
Check Valve
Ball valve
Vent Valve
Other valve and
assessories
Globe Stop
Valve
Safety Valve
18
Gross Profit and Gross Margin
($ millions)
8.2
11.0
15.0
10.4
18.5
2.7
8.6
41.0%
43.1%
40.5%
40.0%
40.0%
43.2%
39.9%
2005
2006
2007
9M2007
9M2008
3Q2007
3Q2008
CAGR: 35.3%
19
Net Income and Net Margin
($ millions)
5.2
1.4
8.1
7.1
4.7
3.7
4.6
21.6%
19.9%
18.5%
18.4%
19.2%
17.5%
22.5%
2005
2006
2007
9M2007
9M2008
3Q2007
3Q2008
20
Income Statement Highlights
2006
2007
9 Mnth 2007
9 Mnth 2008
Sales
$
25,530,183
$
37,036,282
$
26,017,238
$
46,208,006
Cost of Goods Sold
14,522,202
22,050,041
15,607,116
27,702,722
Gross Profit
11,007,981
14,986,241
10,410,122
18,505,284
Gross Margin
43.1%
40.5%
40.0%
40.0%
Total Operating Expenses
4,463,167
6,349,041
4,343,829
8,127,379
Income from Operations
6,544,814
8,637,200
6,066,293
10,377,905
Total Other Expenses (Income)
707,274
156,865
43,799
-519,333
Income Before Taxes
5,837,540
8,480,335
6,022,494
10,897,238
Income Tax Expense
1,158,161
1,337,743
843,412
2,825,542
Net Income
$
4,679,379
$
7,142,592
$
5,179,082
$
8,071,696
Net Profit Margin
18.3%
19.3%
19.9%
17.5%
Make Good Provisions
2008
2009
2010
After Tax Net Income
10,500,000
$
23,000,000
$
31,000,000
$
Fully Diluted EPS
0.369
$
0.497
$
21
Balance Sheet Highlights
(US $)
September 30,
2006
2007
2008
Cash and Cash Equivalents
$
5,591,211
$
2,773,262
$
27,859,871
Accounts Receivable
9,171,675
16,789,383
24,368,336
Inventories
14,739,845
10,539,087
10,076,877
Total Current Assets
33,746,688
35,758,807
70,900,587
Total Assets
57,499,030
64,766,790
106,645,169
Accounts Payable - Trade
8,843,663
6,452,519
6,776,268
Total Current Liabilities
30,587,832
26,496,555
31,228,645
Total Long Term Liabilities
-
1,096,800
-
Total Shareholders' Equity
26,911,198
37,173,435
75,416,524
Total Liabilities and Shareholders' Equity
57,499,030
64,766,790
106,645,169
Year Ended December 31,
22
Peer Valuation
*In August 2008, the Company completed a Private Placement financing for $30 million,
16,778,523 shares of its common stock at a price of $1.788 per share
Ticker
Price
Market
Cap
P/E
EPS
P/S
Net Profit
Margin
Operating
Margin
(ttm)
(ttm)
(ttm)
(ttm)
(ttm)
China Valves
CVVT
$ 5.00*
$2
11
.
2
M
**
27.80
0.18
5.00
17.54%
22.63%
CNNC SUFA Technology
SS:000777
1.16
$
$234.1M
49.20
0.02
2.17
6.90%
28.90%
Hubei Hongcheng General Machinery
SS:600566
0.64
$
$68.4M
55.38
0.01
2.06
1.85%
26.80%
November 3, 2008 Yahoo Finance
Domestic Competitors
Hubei Hongcheng General Machinery Co.,
Ltd
CNNC SUFA Technology
Its products include gate valves, globe valves, check valves, plug valves, butterfly valves, diaphragm valves, control valves, insulation valves, valves for high-temperature and high-pressure power stations, vacuum valves, and other kinds of valves
Its products include butterfly valves, ball valves, gate valves, flow regulating valves, exhaust valves and other kinds of valves
23
Premiere brand in the domestic valve industry
Strong revenue growth in a growing industry indirectly supported by the government
Well defined strategy for corporate growth
Comprehensive product line produces 700 models with 10,000 specifications
11 active patents for processes and products
Collaborative research and development partnerships with institutes
Experienced management team with knowledge and vision
Investment Summary
24
China Valves Technology, Inc.
Ray Chen, VP of Investor Relations
Tel: +1-650-281-8375
Tel: +86-138-2527-9478
E-mail: ir@cvalve.com
Website: http://www.cvalve.com
CCG Investor Relations
Crocker Coulson, President
1325 Avenue of the Americas, Suite 2800
New York, NY 10019
New York Office: 646 213-1915
Fax: 310 651-9658
E-Mail: crocker.coulson@ccgir.com
Website: http://www.ccgir.com
Legal Counsel
Pillsbury Winthrop Shaw Pittman LLP
Washington D.C.
Auditor
Moore Stephens Wurth Frazer
and Torbet, LLP
Walnut, California
Contacts
25
Thank You
