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| 8-K - FORM 8-K - China XD Plastics Co Ltd | cxdc_8k.htm |
September
This presentation contains statements that constitute "forward looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995, which statements
reflect the beliefs and expectations of China XD Plastics Company Limited (“China XD”)
about the future, such as China XD’s anticipated growth strategies, future business
development, ability to attract and retain new clients, ability to develop new products, and
ability to expand to other related industries or markets in other geographical locations.
These forward-looking statements are based on a number of assumptions about China
XD’s operations, and are subject to risks, uncertainties and other important factors, many
of which are beyond China XD’s control, and, accordingly, actual results may differ
materially from the results discussed in these forward-looking statements. China XD has
no obligation and does not undertake to revise forward-looking statements to reflect
future events or circumstances.
the meaning of the Private Securities Litigation Reform Act of 1995, which statements
reflect the beliefs and expectations of China XD Plastics Company Limited (“China XD”)
about the future, such as China XD’s anticipated growth strategies, future business
development, ability to attract and retain new clients, ability to develop new products, and
ability to expand to other related industries or markets in other geographical locations.
These forward-looking statements are based on a number of assumptions about China
XD’s operations, and are subject to risks, uncertainties and other important factors, many
of which are beyond China XD’s control, and, accordingly, actual results may differ
materially from the results discussed in these forward-looking statements. China XD has
no obligation and does not undertake to revise forward-looking statements to reflect
future events or circumstances.
1
Safe Harbor Statement
2
Company Overview
High value to cost ratio suitable for individual customer needs
Leading position in a large and fast-growing market
Strong customer-oriented R&D capabilities
Unique business model and strong competitive advantages
5.
Proven track record of revenue growth and profitability
Defined long term growth strategy
6.
2.
4.
3.
7.
3
Key Investment Highlights
1.
Seasoned management team with local market knowledge
TTM EPS
$ 0.94
Fully Diluted Shares Outstanding
47.8 million
TTM Net Income
$ 45.0 million
TTM Revenue
$ 302 million
$ 215 million
Share Price (Sep 23, 2011)
$ 4.51
Exchange / Ticker
Nasdaq / CXDC
Market Capitalization
TTM Revenue, Net Income and EPS as of June 30, 2011
TTM Net Income and EPS excludes non-cash and non-recurring expenses related to
stock, option compensation and deferred income taxes
stock, option compensation and deferred income taxes
4
Capital Market Summary
5
Company Overview
China XD Plastics
Company Limited,
through its
operating
subsidiaries,
focuses on the
development,
manufacture, and
distribution of
modified plastics
primarily for use in
automotive
applications.
Company Limited,
through its
operating
subsidiaries,
focuses on the
development,
manufacture, and
distribution of
modified plastics
primarily for use in
automotive
applications.
• Headquartered in Harbin, China.
• Approximately 27 years of operating history.
• Currently have 596 employees.
• Operate two production facilities equipped with 38 top class production lines
and have annual production capacity of 165 thousand metric tons.
and have annual production capacity of 165 thousand metric tons.
• Total usable floor area is 670 thousand square feet. Independent R&D center
and employee training center can hold large-scale training programs to
accommodate more than 100 people.
and employee training center can hold large-scale training programs to
accommodate more than 100 people.
• Have more than 300 product varieties and more then 200 direct customers.
• Major end-users include 8 of the top ten automakers in China and many of the
best global automobile brands in the world.
best global automobile brands in the world.
• Products are widely applied to exterior parts, interior parts and functional
components of AUDI, BMW, Toyota, Buick, Mazda, Golf, Jetta, Hafei new
energy vehicles and over 70 kinds of major automobile brands.
components of AUDI, BMW, Toyota, Buick, Mazda, Golf, Jetta, Hafei new
energy vehicles and over 70 kinds of major automobile brands.
• Other end users of our modified plastics include ocean-going vessels, high-
speed trains, airplanes, etc.
speed trains, airplanes, etc.
July 1985
Harbin Xinda Nylon Factory,
the Company’s predecessor,
was founded and became
the first enterprise engaging
in the research and
development and
manufacturing of
automotive-use modified
plastics in China.
the Company’s predecessor,
was founded and became
the first enterprise engaging
in the research and
development and
manufacturing of
automotive-use modified
plastics in China.
September 2004
The production base with 25
thousand tons annual
production capacity was put
into use, which made the
company the largest
manufacturer of automotive-
use modified plastics in the
Northeast of China.
thousand tons annual
production capacity was put
into use, which made the
company the largest
manufacturer of automotive-
use modified plastics in the
Northeast of China.
August 2007
The production base with
the infrastructure to host
production capacity of
100,000 metric tons was
completed and the Company
became the then-largest
manufacturer of automotive-
use modified plastics in
China.
the infrastructure to host
production capacity of
100,000 metric tons was
completed and the Company
became the then-largest
manufacturer of automotive-
use modified plastics in
China.
November 2009
The Company was listed on
the Nasdaq Stock Exchange
global market in the US with
the ticker symbol CXDC.
CXDC became the first new
plastics material company
listed from Greater China.
the Nasdaq Stock Exchange
global market in the US with
the ticker symbol CXDC.
CXDC became the first new
plastics material company
listed from Greater China.
The Company’s History
6
Auto Modified Plastics Market Share
Domestic manufacturers: 35% (mainly includes
China XD, peer company 1 and peer company 2)
China XD, peer company 1 and peer company 2)
Foreign manufacturers: 65%
Over 70 auto models use our products, up from 11 in 2006.
Among the Company’s more than 200 direct customers, no
customer constitutes over 10% of revenue.
customer constitutes over 10% of revenue.
8 of China’s top 10 automaker OEMs are our end customers.
Increasing Customer Base with High Quality
Growing Distribution Network
Leading Market Position and Broad Growth Space
Steadily Increasing Customer Base and Geographic Distribution
7
A Leading Market Position
8
Our Efficient Business Model
The Company’s supply chain and manufacturing processes are integrated, well-tested, and operate in a
seamless fashion. This enables and results in significant efficiencies and speed to market.
seamless fashion. This enables and results in significant efficiencies and speed to market.
Modified ABS
Environment
Friendly plastics
Friendly plastics
Modified Nylon
Engineering Plastics
Modified PP
Alloy Plastics
Product line
Gross Margin
20-22%
21-24%
25-29%
28-30%
25-28%
25-31%
Product Application
Modified plastics are new materials made by physical and chemical processes to plastic resin through the use of specialized equipment
and technologies. The end products constitute novel new materials which provide a host of benefits over traditional materials.
and technologies. The end products constitute novel new materials which provide a host of benefits over traditional materials.
Modified plastics have many advantage. They are heat resistance, strong, corrosion resistant, lighter weight, easier to process, and they can be recycled to use
and parts of products can biodegrade naturally , making them an environmentally friendly material. They are widely used in the field of automobiles,
and parts of products can biodegrade naturally , making them an environmentally friendly material. They are widely used in the field of automobiles,
ocean-going vessels, high speed trains and airplanes. Automobile applications include interior parts (dashboard, glove box and door panels, etc.), exterior
parts (front and rear bumpers, lamp housings, license plates, etc.) and functional parts (air conditioner casings, intake manifolds, engine covers, etc).
The company’s products fall under 6 categories, up from 1 category five years ago, with an increasing focus on higher margin products.
Product Categories
9
Our Industry Leading Products
What Are Modified Plastics?
Project Cooperation
• R&D center has long-term and broad cooperation with
the top macromolecule material departments of 8
domestic research institutions, including Changchun
Applied Chemistry Institute of the Chinese Academy of
Science, Harbin Institute of Technology and Jilin
University.
the top macromolecule material departments of 8
domestic research institutions, including Changchun
Applied Chemistry Institute of the Chinese Academy of
Science, Harbin Institute of Technology and Jilin
University.
• Our R&D center’s scientific research achievements
remain at the cutting edge of the modified plastics
industry.
remain at the cutting edge of the modified plastics
industry.
• We work to continuously increase the percentage of high
value-added products in the auto industry and gradually
expand to the high-end of other product fields, including
vessel propulsion, high-speed trains, aerospace, etc. to
finally realize diverse products development pattern.
value-added products in the auto industry and gradually
expand to the high-end of other product fields, including
vessel propulsion, high-speed trains, aerospace, etc. to
finally realize diverse products development pattern.
Leading R&D Platform
• Leading professional R&D center in Chinese modified plastics industry and core for
company’s sustainable development.
company’s sustainable development.
• Over 100 sets of internationally advanced R&D and inspection devices for modified plastics,
allowing for the development and testing of all modified plastics’ property and index.
allowing for the development and testing of all modified plastics’ property and index.
• 10 R&D departments with doctors as the first role and masters as supplementary role, 20
project groups with 90 R&D professionals. Key members in R&D all have over 10 years of
industry experience.
project groups with 90 R&D professionals. Key members in R&D all have over 10 years of
industry experience.
• Advisory panel of experts consisting of 8 consultants, including leading Chinese experts,
academicians and chief scientists in the macromolecule industry.
academicians and chief scientists in the macromolecule industry.
10
Advanced R&D and Production Capabilities
Production Capacity
• All key manufacturing equipment utilizes German twin-
screw extruding systems and US automatic weighing
systems.
screw extruding systems and US automatic weighing
systems.
• Developed centralized control system independently.
• The only domestic enterprise in industry to utilize
automatic control in all processes from feeding, mixing,
extruding, cooling, graining, homogenization, parching,
to packaging.
automatic control in all processes from feeding, mixing,
extruding, cooling, graining, homogenization, parching,
to packaging.
R&D Achievements
Automotive products required to obtain
certification from auto OEMs according to
international automobile industry practice.
certification from auto OEMs according to
international automobile industry practice.
• We currently have 193 product certifications,
the largest among the industry through R&D
accumulation and technology reserve for
27 years.
the largest among the industry through R&D
accumulation and technology reserve for
27 years.
• We currently have19 patents for high-end
products applied with State Office of
Intellectual Property of China.
products applied with State Office of
Intellectual Property of China.
11
A Leader in Product Certifications & Patents
12
kg
Global
China
Modified Plastic per Vehicle Trend
Growth of Automobile Production Volume
8
High Barriers to Entry
• Potential suppliers must satisfy OEMs’ standards
on production capacity, R&D capacity, and
experience as a supplier.
on production capacity, R&D capacity, and
experience as a supplier.
• Potential suppliers must pass ISO/TS 16949 quality
assurance system and safety and environmental
certification systems such as RoHs, PAHs, etc for
products.
assurance system and safety and environmental
certification systems such as RoHs, PAHs, etc for
products.
• We have professional production plant, technical
production equipment, independent lab and R&D
equipment, independent QA system and
inspection devices.
production equipment, independent lab and R&D
equipment, independent QA system and
inspection devices.
Rigorous Product Certification Process
• Each product must pass strict authentication
standards, a minimum of 1-1.5 years process.
standards, a minimum of 1-1.5 years process.
• Before supplying, vendors also need to pass the
products stabilization test, which includes on-road
automobile testing between 5 and 50 cars.
products stabilization test, which includes on-road
automobile testing between 5 and 50 cars.
• 5 on-road automobile tests for stabilization are
needed when the car model changes.
needed when the car model changes.
According to international automotive industry practices, companies
have to pass strict qualification affirmation by the automotive OEMs
before becoming a certified supplier.
have to pass strict qualification affirmation by the automotive OEMs
before becoming a certified supplier.
13
High Barriers to Industry Entry
Strict Qualification Authentication
With 27 years’ dedication to R&D and technological reserve, the company has significant advantages over its domestic and foreign
competitors in terms of formulation cost, operation model, product certification quantity, customization degree and brand recognition.
competitors in terms of formulation cost, operation model, product certification quantity, customization degree and brand recognition.
• We design our product formula flexibly according to
customer’s individual requirements.
customer’s individual requirements.
• On average, the formulation cost of the products is 10-
30% lower than our competitors.
30% lower than our competitors.
• Deep local market service experience and extensive
relationship network.
relationship network.
• Provide echnical service throughout the product
lifecycle, to enhance customer fidelity.
lifecycle, to enhance customer fidelity.
• Largest inventory of products certifications.
• Largest variety of products offered to the customers.
• Industry leading R&D platform and products with high
value proposition.
value proposition.
• Distributors help to reduce the collection risk of accounts
receivable.
receivable.
14
Our Competitive Advantages
Customized
Formulation
Formulation
Cost
Brand Recognition
Operation Model
Product Certification
Quantity
Quantity
International
Competitors
Local Competitors
Advantages over Domestic Competitors
Advantages over International Competitors
Increase Production Capacity
Seek Strategic Acquisition
Enhance R&D Capability and
Continue the Shift to High
Margin Products
Continue the Shift to High
Margin Products
Expand Customer Base and
Geographic Distribution
Geographic Distribution
A Diversified Long-term Growth Strategy
Expand market share and customer base in
existing sales markets and explore export
opportunity to supplement domestic market and
customer base
existing sales markets and explore export
opportunity to supplement domestic market and
customer base
Accelerate the execution of the
Company’s growth strategy through
selective acquisitions
Company’s growth strategy through
selective acquisitions
Increase investing in R&D and develop high
value added products to further improve
company’s gross margin over time
value added products to further improve
company’s gross margin over time
Reinvest to grow production capacity
at a targeted annual rate of 30%
at a targeted annual rate of 30%
15
Clear Growth Strategy
Mr. Jie Han
Chairman and CEO
Chairman and CEO
• Founded China XD and former affiliate, Harbin Xinda Nylon Factory; over 27 years of
experience in the modified plastics industry; Executive Director of China Plastic
Processing Industry Association
experience in the modified plastics industry; Executive Director of China Plastic
Processing Industry Association
• Member of Industry and Commercial Union Executive Committee of Heilongjiang
Province; Chinese outstanding Director of Commercial Chamber; People’s Congress
Representative of Harbin City
Province; Chinese outstanding Director of Commercial Chamber; People’s Congress
Representative of Harbin City
Mr. Taylor Zhang
CFO
CFO
• Over 9 years of experience in finance and operational expertise in a broad range of
industries
industries
• Former CFO of a Nasdaq listed company
• MBA from University of Florida
Mr. Qingwei Ma
COO
COO
• Served as COO since 2008 and joined China XD in 2004
• Over 14 years of experience in the modified plastics industry
• Prior to China XD, senior management in Harbin Xinda Nylon Factory
• Awarded the Heilongjiang First Professional Manager Qualification Certificate in 2004
Mr. Junjie Ma
CTO
CTO
16
Experienced Management Team
• Established the R&D institute and led the team to obtain over 100 certifications from
automakers
automakers
• Over 14 years of experience in the modified plastics industry
• Broad relationship with macromolecule science R&D institutes and universities in
China
China
The management team has over 50 years combined industry experience in the field of modified
plastics and is committed to achieving the company’s operational and strategic targets
plastics and is committed to achieving the company’s operational and strategic targets
Lawrence W. Leighton
Independent Director
and Chairman of Audit
Committee
and Chairman of Audit
Committee
• Mr. Leighton has had an extensive 40 year international investment banking career. His
previous positions includes Co-Head of the Corporate Finance Department at Clark,
Dodge & Co. , Limited Partner of Bear Stearns, Managing Director of JPMorgan Chase
Bank and CEO of the U.S. investment bank of Credit Agricole, the major French Bank.
previous positions includes Co-Head of the Corporate Finance Department at Clark,
Dodge & Co. , Limited Partner of Bear Stearns, Managing Director of JPMorgan Chase
Bank and CEO of the U.S. investment bank of Credit Agricole, the major French Bank.
• Mr. Leighton received his BSE degree in engineering from Princeton University and an
MBA degree from Harvard Business School.
MBA degree from Harvard Business School.
Yong Jin
Independent Director
• Mr. Jin is a professor at Tsinghua University and an executive member of Chemical
Industry and Engineering Society of China and Chinese society of particuology.
Industry and Engineering Society of China and Chinese society of particuology.
• Lectureship Award recipient in fluidization by American Institute of Chemical Engineers
(AIChE).
(AIChE).
Robert Brisotti
Independent Director
and Chairman of
Compensation
Committee
and Chairman of
Compensation
Committee
• Mr. Brisotti has 14 years of experience in the plastics industry as business manager
and chemist and 20 years of experience in the securities industry as an investment
banker and securities analyst.
and chemist and 20 years of experience in the securities industry as an investment
banker and securities analyst.
• Currently Senior Vice President at Buckman, Buckman & Reid, Inc.
• Mr. Brisotti has a BS in Chemistry from Lehigh University, an MS in Chemistry from
University of Rhode Island, and an MBA in Finance from Columbia University.
University of Rhode Island, and an MBA in Finance from Columbia University.
Linyuan Zhai
Independent Director
and Chairman of
Nomination
Committee
and Chairman of
Nomination
Committee
• Mr. Zhai worked for China FAW Group Corporation for 37 years with abundant
experience in terms of technology, production, and business management.
experience in terms of technology, production, and business management.
• Mr. Zhai is a Senior Expert in the auto industry. He served as general manager of
automobile manufacturing, successfully led Four Ring Company, a subsidiary of FAW
group, to go public in China.
automobile manufacturing, successfully led Four Ring Company, a subsidiary of FAW
group, to go public in China.
17
Strong Independent Directors
18
Overview of Financials
US$
Million
Million
FY07-FY10
CAGR=94%
CAGR=94%
19
Successful Revenue and Profit Growth
(1) Non GAAP Recurring Net Income is adjusted by excluding dividend to series C preferred stockholders, non-cash stock
compensation, deferred income taxes and changes in fair value of warrants and embedded derivatives.
compensation, deferred income taxes and changes in fair value of warrants and embedded derivatives.
Robust Revenue Growth
o FY07-FY10 CAGR - 94%
o 2Q11 YoY Growth - 42%
Strong Profit Capabilities
o Consistent gross and net margins
o Non GAAP recurring net income (1)
FY07-FY10 CAGR - 107%
FY07-FY10 CAGR - 107%
o Non GAAP recurring net income (1)
2Q11 YoY growth - 36%
2Q11 YoY growth - 36%
High Growth Visibility
o Installed annual capacity of 165,000
MT in 2011
MT in 2011
o 80% of our capacity has been
contracted in 2011
contracted in 2011
Positive Outlook
o 2011 revenue guidance increased
to US$ 320-350M with non GAAP
net income guidance increased to
US$53-56M
to US$ 320-350M with non GAAP
net income guidance increased to
US$53-56M
Revenue Growth
(FY07-11E)
Quarterly Revenue Growth
(FY08-2Q11)
(FY08-2Q11)
Profit Growth
(FY07-11E)
Quarterly Profit Growth
(FY08-2Q11)
(FY08-2Q11)
US$
Million
Million
US$
Million
Million
High value to cost ratio suitable for individual customer needs
Leading position in a large and fast-growing market
Strong customer-oriented R&D capabilities
Unique business model and strong competitive advantages
5.
Proven track record of revenue growth and profitability
Defined long term growth strategy
6.
2.
4.
3.
7.
22
Key Investment Highlights
1.
Seasoned management team with local market knowledge
China XD Plastics Company Ltd.
Mr. Taylor Zhang, CFO
Phone: +1-212-747-1118 (New York)
Mr. Tienan Han, IR Director
Phone: +86-451-84346600 (China)
Email: cxdc@chinaxd.net
Website: www.chinaxd.net
SEC Attorney
DLA Piper UK LLP Beijing Representative
office
office
20th Floor, south Tower, Beijing Kerry Center
1 Guanghua Road, Chaoyang District
Beijing 100020,China
Phone: +86-10-6561-1788
Fax: +86-10-6561-5158
Web:www.dlapiper.com
Investor Relations Firm:
FTI Consulting
Cara O’Brien (Hong Kong)
Phone: +852-3768-4537
Email: cara.obrien@fticonsulting.com
Mingxia Li (Beijing)
Phone: +86-10-8591-1060
Email: mingxia.li@fticonsulting.com
Auditors
KPMG
8th Floor, Prince’s Building
10 Chater Road
Central, Hong Kong
Tel: +852-2522-6022,
Fax: +852-2845-2588
Web: www.kpmg.com.hk
23
Contact Information