Annual Results

March 2013

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Disclaimer

This document may contain statements that constitute “forward-looking statements”, including, but not limited to, statements relating to the implementation of strategic initiatives, and other statements relating to our future business development and economic performance. While these forward-looking statements represent our judgments and future expectations concerning the development of our business, a number of risks, uncertainties and other statutory requirements may render actual developments and results to differ materially from our expectations. These factors include, but are not limited to, (1) general market, macro-economic, governmental and regulatory trends, (2) movements in local and international securities markets, currency exchange rates and interest rates, (3) competitive pressures, (4) technology developments, (5) changes in the financial position or creditworthiness of our customers, obligors and counterparts, and changes in the developments in the markets in which they operate, (6) legislative developments, (7) management changes and changes to our business group structure and (8) other key factors that may adversely affect our business and financial model. We are not under any obligation to (and expressly disclaims any such obligations to) update or alter its forward-looking statements whether as a result of new information, future events, or otherwise. This material may not be reproduced, distributed or transmitted to any other person or incorporated in any way into another document or other material without the prior written consent of us. This document is not: (a) an offer of securities for sale in Hong Kong or elsewhere; or (b) an invitation to enter into an agreement to acquire, dispose of, subscribe for or underwrite securities; or related to the issue of any securities. This document (and the information contained herein) is not for publication or distribution to any person(s) except as permitted by us.

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Investment Highlights

Business Review

Financial Analysis

Tiangong’s Outlook

Agenda

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5 Q&A

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Investment Highlights

Competitive Advantages

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Tiangong International’s Competitive Advantages

Vertically integrated business model

High quality products and large production scale

Unique raw material cost advantage

Stable customer base in China and overseas with vast distribution network

Preferential export tax rebate

Strong credit support from banks

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Unique Vertically Integrated Business Model

Raw Materials

Production process for High Speed Steel (HSS) and Die Steel are similar. This results in enhanced efficiency and plant utilization.

Tiangong’s Major Products

HSS Cutting Tools

Die Steel

HSS

Vertical Integration

Titanium Alloy

New Core Product

End-product Applications

Chromium

Tungsten

Titanium

Scrap Steel

Vanadium

Molybdenum

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Business Overview

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2012 Development Highlights (1)

Pushed forward the construction of large scaled projects

Proactively extended products applications

Successfully signed a strategic cooperation agreement with China FAW subsidiary and acquired a 60% stake in a FAW subsidiary.

HSS and die steel products were recognized by well-known companies such as Qingdao Haier, XCMG, LG, and Samsung Group, and as a designated product for Qingdao Haier.

Rod and coil production facilities for HSS and DS commenced production in May with an annual production capacity of 80,000 tons and a total investment of RMB 600 million

Upgraded old factories: expanded new taps production line with an investment of approx. 100 million, and increased area of the factory by 20,000 sq.m..

Invested 200 million to kick off “The 1st hammer, Jiangsu province” 4,500 ton quick forging project, which is expected to commence production in late August.

Increase production capacity in 2013

by 25,000 tons Production capacity of new taps

production line reached 12 million pieces

Ranked 1st in China, quality outperforms

peers

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2012 Development Highlights (2)

Further enhance product portfolio

to increase market share.

Increase variety of

Tiangong’s products.

Increase variety of Tiangong’s

tools and die steel products with

completed specifications

Cutting Tools

Successfully developed and produced φ20mm—φ50mm polished taper shank drill, polished stainless steel twist drill and polished precision automotive taps product.

Developed and produced polished left-handed drill specifically for the world renowned Bosch company.

Successfully produced stepped drill.

Die Steel

Successfully produced die steel specifications furnace steel bar , enhanced A8 die steel product, 1.2767, Ultra high-strength H13 steel.

Produced φ822mm large width die steel flat bar product with renowned Qingdao Haier, becoming one of the manufacturers in China engaged in producing the widest flat bar steel of high-end die steel .

Produced φ350mm large-size cold work die steel D2 steel bar.

HSS

Developed and produced M1, M4, M7 and TGE1 which can replace M42

Introduced variety of new products

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2012 Development Highlights (3)

Quality focused and creating a global brand

“Win-win” development of economy and ecosystem

* Data from an international authority SMR steel, metal products market research center

Quality of tool products is recognized by National Tools Testing Center for its excellence, and has reached or exceeded the industry level.

Tool and die steel products are tested recognized by the world’s renowned German ThyssenKrupp Group and tested by the most authoritative testing organizations in Korea and Taiwan, meeting the world's top quality standards of Japan’s Hitachi.

HSS and die steel remains top three ranking in the world, and ranks first in China*

43 pending patents, including 3 invention patents. Pending patents is 7 more compared to the previous year.

Upgrade of the last set of coal-fired furnaces has been finished. All furnaces use natural gas heating, and all coal-fired boilers use natural gas boiler, which meets the emission standard of the national environmental standard.

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Financial Analysis

Financial Highlights

For the year ended 31 December

2011 (RMB ‘000)

2012 (RMB ‘000)

Change

Revenue 3,111,763 3,118,251 +0.2%

Gross profit 706,763 729,389 +3.2%

Profit attributable to equity shareholders of the Company

365,327 444,892 +21.8%

Gross profit margin 22.7% 23.4% +0.7 p.p.

Net profit margin 11.7% 14.3% +2.6 p.p.

Average number of shares (‘000) 1,678,000 1,931,000 --

Basic earnings per share (RMB) 0.218 0.244 +11.9%

Dividend per share (RMB)

Full – year 0.0480 0.0461 -4.0%

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Revenue Analysis

Revenue by Key Product Categories

RMB million

Sales Mix

Other 12%

Die Steel 32%

HSS 37%

HSS Cutting Tools 19%

Die Steel 33%

HSS 35%

HSS Cutting Tools 18%

Other 12%

Titanium Alloy 1%

2011

2012

Diversified Global Footprint

Domestic Sales Export Sales

HSS HSS Cutting Tools Die Steel

Asia (ex China) 19%

Geographic Mix

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Highlights

The China market accounts for approx. 57% of Tiangong’s sales

86 domestic sales centers and appointed sales agents in all regions to ensure quality after-sales service

Proactively expand export markets

‘000 tons RMB ‘000

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Core Products – High Speed Steel (HSS)

Sales Volume ASP and Gross Profit Margin

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45 46

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Sales Volume ASP and Gross Profit Margin

Million pieces / sets

Core Products – HSS Cutting Tools

RMB

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Sales Volume ASP and Gross Profit Margin

Core Product – Die Steel

‘000 tons RMB ‘000

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Sales Volume

Titanium Alloy

A new metal alloy material that is lighter and tougher than other special steel varieties. Increasing demand is expected.

Key traits: toughness and higher corrosion resistance.

Mainly applied in the aviation, marine, aerospace and medical and chemical industries.

A major material used for the construction of aircraft and submarines.

Major raw material is titanium sponge (China possesses the largest reserve in the world).

Production Major Application

Phrase I 2011 – 2012

Ingot Mainly used in titanium rod

production

Metal rod Mainly used in titanium sheet

production

Phrase 2 2013 – 2015

Pipes Mainly used in aerospace and

marine operation industries

Sheet Mainly used in medical and

bioscience industry

*Production capacity is expected to reach 10,000 tons in five years

New Product – Titanium Alloy

tons

Raw materials

67%

Production 11%

Others 4%

Labour 7%

Utilities 11%

Rare metals (Tungsten, molybdenum, chromium, vanadium etc.)

51%

Scrap steel 16%

COGS accounted for76.6% of total revenue.

China boasts the world’s largest reserves of rare metals (Tungsten, Molybdenum, Vanadium) and imposes high export tariffs on rare metals.

Hence, Tiangong possesses significant cost advantage and strong bargaining power compared to its overseas competitors.

Adopted “Cost-plus” pricing model to maintain stable margins.

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Cost Structure

*Net gearing ratio = (bank borrowings – cash and cash equivalents – time deposits) / net assets

As at 31 December 2011 (RMB ‘000)

As at 31 December 2012 (RMB ‘000)

Change

Net assets 2,139,317 2,787,283 +30.1%

Net assets per share (RMB) 1.27 1.44 -11.2%

Cash and cash equivalents (including time deposit)

577,089 596,499 +3.4%

Bank borrowings 1,943,203 2,088,045 +7.5%

Net gearing ratio* 64% 54% -10 pts

Net cash from operating activities

652,157 373,257 -42.8%

Inventory turnover days 182 199 +17

Trade receivable turnover days 111 139 +28

Trade payable turnover days 106 140 +34

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Key Financial Figures

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Cash Flow Analysis

Cash Generated from Operating Activities vs. CAPEX

Cash

RMB million RMB million

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Tiangong’s Outlook

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2013 Development Plan

Additional two sets of vacuum self-consuming furnaces with smelting capacities of 10,000 tons.

To put prehardened equipment in operation enhancing quality of plastic die steels.

To develop and produce high-end M42 high speed steel flat wire and M2 high speed steel with a higher S content, tapping into bi-metal blade market.

To develop and produce powder metallurgy new material, and strive to develop and produce more than 15 high-end new products , including 5 titanium products, 6 HSS and die steel products and 3 cutting tool products in 2013.

Facilities upgrade and products innovation

Automated and semi-automated tools production facilities To replace imports with domestic supplies To maintain HSS and die steel leadership in international markets To become the most equipped production facilities company in China

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2013 Development Plan

Continue to set up sales offices in overseas

To expand domestic sales network of tools

To establish Tiangong’s special steel sales network in economically developed areas such as Pearl River Delta, Yangtze River Delta, Bohai Bay, coastal areas, as well as Chongqing and Chengdu.

Marketing strategy enhancement

To enhance international sales network Strive to establish 200 domestic sales centers in 2013 To sustain dominant positions in China’s high-end tools and die steel markets

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Growth Momentum – Titanium Alloy

Tiangong’s titanium factory

Titanium alloy is the key “new material” for national development purposes in China’s “Twelfth-Five Year Plan”.

Currently, only four countries produce titanium alloy in the world: Russia, Japan, US and China.

Due to the high entry barrier, Tiangong International is one of the limited number of companies in China engaged in titanium production.

In 2012, annual production capacity increased 3 times year-on-year, and was the fastest growth amongst all titanium alloy companies. Annual production capacity is expected to double in 2013.

Future growth engine

图片

Vacuum self-consuming furnace Titanium pipes

Supported by national policy Global shortage of rare metals High entry barriers

Titanium production capacity to

reach 10,000 tons

Composite Hole Cutter series

复合孔加工刀具系列

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Growth Momentum – Complex Cutter and Non-standard Cutting Tools

Reaming tool series 铰削刀具系列

Cooperation with Changchun FAW subsidiary producing four main products

Threading tool series 螺纹刀具系列

Drilling cutter series 钻削刀具系列

2013 - 2015 Projects CAPEX (RMB)

Research and development for titanium business

Facilities for the production of titanium pipes

500 m – 700m Facilities for the production of titanium sheets

Technical enhancement to existing business

Automation of HSS production lines

220m – 400m Automation of HSS cutting tools production lines

Automation of die steel production lines

Total 720m – 1,100m

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CAPEX Plan

Rod and coil production facilities

15 ton medium frequency induction furnace

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Future Capacity Growth Target

Core products 2012 Actual 2013 Target 2014 Target 2015 Target

Annual Production

Capacity (‘000 tons)

Annual Production

Capacity (‘000 tons)

Annual Production

Capacity (‘000 tons)

Annual Production

Capacity (‘000 tons)

HSS 50 55 60 65

Die Steel 100 120 140 150

Titanium Alloy 2 2-3 4-6 8-10

Annual Production

Capacity (100 million piece)

Annual

Production Capacity

(100 million piece)

Annual Production

Capacity (100 million piece)

Annual Production

Capacity (100 million piece)

HSS Cutting Tools 4.5 5 5.5 6

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Thank you!

Q&A

PRChina Limited

Tel: 852-2522 1838 Email: tiangong@prchina.com.hk

Investor and Media Enquiries

Tiangong International Company Limited

Tel: 852-3102 2386 Email: tiangong@biznetvigator.com