Roth China Comes to Vegas Conference November 2008 SORL A UTO P ARTS, I NC. NASDAQ: SORL.

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Presentation transcript:

Roth China Comes to Vegas Conference November 2008 SORL A UTO P ARTS, I NC. NASDAQ: SORL

S AFE H ARBOR S TATEMENT 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.

B USINESS D ESCRIPTION Market Position  Established in 1987; over 20 years of history  The largest air brake system supplier for commercial vehicles in China  Rapid growth Facilities  Total floor area of over 700,000 square feet  Located in Ruian (China’s biggest region for automotive parts production)  Enjoy the benefits of logistics, outsourcing and professional labor force  World Class Manufacture Facilities Main Business  Air brake system used in commercial vehicles larger than 3 tons  Penetrating Bus and Agricultural Vehicle Market Since 2007 Sales Network  OEM: Sales to top 50 domestic OEM customers  Aftermarket: 28 authorized distributors and over 800 sub-distributors  Exports: 3 distributors in UAE, Australia, USA; exports to over 81 countries and regions worldwide

C APITAL M ARKETS S UMMARY Ticker SymbolNASDAQGM: SORL Recent Price (as of 10/31/08)$2.72 Shares Outstanding18.3 Million Market Cap$49.7 Million Legal CounselMorris, Manning & Martin, LLP AuditorRotenberg & Co., LLP Revenue (ttm, as of 09/30/08)$138.3 million Net Income (ttm, as of 09/30/08)$13.0 million Book Value (mrq)$88.6 million

I NVESTMENT H IGHLIGHTS High Growth Market Commercial vehicle market has grown at a CAGR of 14% since 2002 Chinese is the second vehicle market at present, will be No 1 in 2010 Market Driver (GDP of China; Fundamental Structure; Logistic; Development of highway , government policy etc.) Our niche market Leading Market Position in China  51 OEMs customers in China  Nationwide network of 28 distributors and 800 sub-distributors  Unmatched in China Proven Record of Organic Growth  Sales: $47 million in 2004 to $116 million in 2007; 35% CAGR  Net income: $4.8 million in 2004 to $10.7 million in 2007; 31% CAGR  TTM revenue (as of September 30, 2008): 138 million  TTM net income (as of September 30, 2008): 13.0 million World-Class Manufacturing Ability  ISO/TS16949 Quality Management System  OHSAS18001 System  ISO14001 Environmental Management System;  Lean manufacturing implemented

I NVESTMENT H IGHLIGHTS  Moving from components to systems (enhances margins)  Electronics initiative is expected to further distance SORL from competitors Competitive Value (Domestic)  Low-cost supply network  Local cost structure  Cheap labor force  China-based R&D efforts, closer to the end market  Sales network  Experienced Management Team Competitive Value (Abroad) Management Team Product Development and R&D Advantage  Brand recognition  Scale and scope efficiency  Sophisticated management  Competitive quality  Strong R&D capabilities

P RODUCTS Air Brakes  Use compressed air to provide the force used for service and park brakes  Found in all large commercial vehicles 40 categories sold by SORL  Over 1000 specifications  Key components include Spring Brake Chamber, Clutch Servo, Air Dryer, Relay Valves, and Hand Brake Valves Focus on air brake systems vs components  Eg, air preparation units vs. air dryers  Higher margins  Required technical ability serves as barrier to entry

A DVANCED R&D C APABILITIES SORL currently owns 12 patents SORL currently owns 12 patents  6 pending patent application in China  3 additional in US 68 technical staff, including 43 engineers or senior engineers 68 technical staff, including 43 engineers or senior engineers Partnerships for new automobile technology research: Partnerships for new automobile technology research:  Leading Universities  Research groups of OEM customers  Helping to further product development and management Budget expanded to develop new products that will generate future global growth and increase profit margins: Budget expanded to develop new products that will generate future global growth and increase profit margins:  SORL is closing the gap with foreign suppliers by constantly improving products  SORL launched electronic part development program two years ago

M ARKETS AND C USTOMERS (million USD) CAGR China OEM % China After Market % Export % Total % Sales channels include Chinese OEMs, the aftermarket in China, and exports to the aftermarket in 81 countries around the world.

M ARKETS : C HINESE OEM S 51 OEM customers in China, including all major truck manufacturers SORL is the leading supplier to the dominant truck manufacturers in China The big 5 continue to dominate the market, accounting for 91% of Chinese total heavy duty truck output in Q Major customers are all increasing their business with SORL Auto MakersFAWDongfeng China Nat’l Heavy Duty Truck Group ShaanqiBeiqi Foton Market Share in China 24.8%21.6%20.1%12.6%12.2% % Valves Supplied by SORL 40%19%6%22%31% (million USD)Y2005Y2006Y2007 CAGR FAW Jiefang % FAW Qingdao % Dongfeng Axle % Beiqi Foton Zhucheng % Boiqi Foton Aumen % Anhui Hualing % FAW Shandong %

M ARKETS : C HINESE A FTERMARKET Nationwide: 28 distributors and over 800 sub- distributors, covering 7 regions nationwide Aftermarket/OEM Synergy: OEM business feeds aftermarket business as owners generally prefer to replace original parts with the same brand Competition: No other company in China, including foreign competitors, has an aftermarket distribution network comparable to SORL’s Barrier to Entry: Serves as a barrier to entry and an asset which can be leveraged to support additional parts that may be developed or acquired Leading Distribution Network Throughout China

M ARKETS : E XPORT A FTERMARKET (million USD) CAGR U.S % Europe % Asia % India % Cost advantage vs. foreign brands presents significant export opportunity Exports to 81 countries in 2007; will continue to add dealerships overseas Strategic goal of acquiring distributors in the US:  Accelerate growth  Replicate distribution advantage already established in China

M ANUFACTURING Certifications: ISO/TS16949 Quality Management System, OHSAS18001 System, and ISO14001 Environmental Management System Lean manufacturing: Reorganized production lines from traditional straight-line layout to U-shape track, shortening total cycle time and enabling quick adjustments to production. Other lean practices continue to be implemented. Increased Efficiency: Output per person has increased 30% last years Quality Audit: Never failed a quality audit by a supplier, which is crucial in developing OEM business

C OMPETITION : D OMESTIC  Auto parts is a highly fragmented market with many smaller players  Chinese OEM requirements relative to quality, delivery, inventory, and technical support are not easy to meet  SORL’s aftermarket distribution network is difficult to duplicate  In terms of manufacturing, quality, distribution, product development, and technical support, it will be difficult for others to catch up with SORL Nationwide Sales Network Close Relationship with Big OEMs Performance- Cost Ratio Warranty and Reliability Timely Delivery Efficient Customer Services Other Small Suppliers No Low Poor SORL Auto Parts Yes High Good SORL has a leadership position that will be difficult to challenge

C OMPETITION : F OREIGN Foreign companies have limited themselves to the high end of the market in China  Do not have an aftermarket distribution network like SORL  Have not been able to develop the technical support levels that SORL has As a result, foreign companies are losing market share in China as SORL’s quality improves  Foreign share of air brakes estimated to be 10%, down from 25% 2 years ago Overseas, SORL’s cost advantage and constantly improving quality will drive future export growth

STRATEGIC VISION Global Leader We aim to be a leading global supplier of air brake valves and related products Capacity Expansion Expand production capacity to meet the growing demand in China market and support the future international expansion plan New Products Develop scalable product technologies and capacities, focusing on electronics and controls; establish position as a integrated system provider in China New Sectors Accelerate growth into public transportation segment Overseas Acquisition Enhance export potential by acquiring US distributors or parts makers

M ANAGEMENT T EAM Xiaoping Zhang, Chairman and CEO Co-founder of Ruili Group President of the Ruian Auto Parts Association in Wenzhou, Zhejiang Province Vice President of China Federation of Industry and Commerce Auto & Motorbike Parts Chamber of Commerce Xiaofeng Zhang, COO Co-founder of Ruili Group – General Manager Spearheads SORL’s sales and marketing effort Zongyun Zhou, CFO Certified Public Accountant in China Chief Financial Officer of Shanghai Huhao Auto Parts Manufacturing Company Limited, a joint venture between the Ruili Group and Shanghai Auto Group,

FINANCIAL HIGHLIGHTS  Steady Revenue Growth ($, millions)  Improved Profitability

S UMMARY I NCOME S TATEMENT ($MM) Revenue Gross Profit Operating Profit Net Income Revenue Growth Net Income Growth Gross Margin Operating Margin Net Margin 12/31/ % 3.0% 22.3% 8.6% 7.7% 12/31/ % 55.5% 22.7% 11.6% 9.1% 12/31/ % 39.6% 23.3% 10.4% 9.3% Q % % 9.0% 7.1% Q % 10.9% 25.5% 8.8% 7.1%

S UMMARY B ALANCE S HEET (In '000 $USD ) Sep. 30, 2008Dec. 31, 2007Dec. 31, 2006 Cash and cash equivalents 5,951 4,34011,138 Accounts receivable 36,211 30,58626,751 Inventory 20,832 8,2204,529 Total Current Assets 76,149 58,16954,370 Property, plant and equipment, net 24,220 21,79516,312 Total Assets 115,153 93,97470,880 Accounts payable 5,094 5,3054,621 Total Current Liabilities 16,789 13,4537,175 Total Liabilities 16,789 13,4537,175 Total Shareholders' Equity 88,550 72,49757,369 Total Liabilities and Shareholders’ Equity 115,153 93,97470,880

SORL AUTO PARTS, INC. NASDAQ: SORL Ben Chen Senior Manager, Investor Relation Phone:+86 (577) Fax:+86 (577) Web: