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China Intelligent Lightingand Electronics, Inc.
China Intelligent Lightingand Electronics, Inc.
Investor PresentationJuly 2010
Investor PresentationJuly 2010
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Forward-Looking Statements
This presentation may contain “forward-looking statements” within the meaning of the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors as well as assumptions that, if they do not fully materialize, or prove incorrect, could cause the actual results of China Intelligent Lighting and Electronics, Inc. (the “Company” or “CIL”) to differ materially from the results expressed or implied by such statements. 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.
The Company has filed a registration statement (including a prospectus) with the Securities and Exchange Commission (“the Commission”) for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the Company has filed with the Commission for more complete information about the Company and this offering. You may get these documents for free by visiting EDGAR on the Commission’s website at www.sec.gov.
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Corporate Profile
Centrally located in Huizhou, Guangdong, manufacturing, selling and marketing high-quality LED and other lighting products for home, commercial and outdoor useStrong brand recognition as Hyundai Group’s exclusive strategic partner in lighting in ChinaLong history of commercialization of LED and other light technologiesEstablished production and sales network in 2003-2005
53,820 square-foot factory, including large-scale production areaMore than 600 full-time employees, including approximately 500 in productionSenior design team develops and tracks new technologies, concepts and ideas
HouseholdHousehold
CommercialCommercial OfficeOffice
OutdoorOutdoor
IntelligentIntelligent
Civil Service
Civil Service
ConstructionConstruction
LEDLED
Company Product Lines
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Product LinesHyundai™ LEDs – Highly efficient, with a long life span of up to 10,000 hours, and low energy cost. Hyundai™ LEDs consume substantially less energy than incandescent lamps and are suitable for use in public areas due to low voltage.T4/T5 Framed Fluorescent Lamps and Compact Fluorescent light bulbs – T4/T5 framed fluorescent lamps are straight double-fluorescent lamps widely used at home and in public areas. Compact fluorescent are used widely in homes.
Product Lines Continued
Company continues to see growing demand from domestic Chinese consumption due to increasing urbanization and
energy cost savings
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Ceiling Lights – Lamp holder, light source, and a base concealed inside the ceiling
Metal Halide Lights – High-power lighting options with the benefits of a long lifespan
Super Electric Transformers – Provide anti-lightning surge protection adaptable to China’s power grid while providing a sufficient power output to maintain our lighting products and comply with local standards
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Advanced Technology and Production CapabilitiesLEDs benefits over traditional light sources: Lower energy consumption, longer life span and absence of hazardous materials; a wide range of colors, dynamics, miniaturization, and design flexibility Modern production lines: Automated processing equipment and procedures able to rapidly accommodate customer requests, designs and specificationsBroad production capability: Annual capacity of approximately 30 million units from 16 advanced automated production linesInnovative R&D team: 40 in-house engineers and 5 patents, including Halide lamps and energy-saving lamps; benefits from Hyundai’s R&D in basic science and automotive lighting
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Macro Trends Support China’s Lighting IndustryLED Segment Driving Lighting Market Growth
Strong OEMRelationshipsStrong OEMRelationships
Economic Drivers Strengthen Segment
Demand
Economic Drivers Strengthen Segment
Demand
Strong Brand RecognitionDiversified Customer Base and End MarketsWell-Developed Distribution NetworkInnovative and Experienced R&D Team Modern and Efficient Manufacturing
Technology Leaderwith Focused R&D
Technology Leaderwith Focused R&D
Growth Strategy to Build Leadership PositionExperienced Management TeamRobust Revenue and Earnings Growth Growth Out-Pacing Peers
Solid Business Case
Solid Business Case
Investment Highlights
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Macro Trends Support China’s Lighting Industry
(1) Source: China Association of Lighting Industry(1) Source: China Association of Lighting Industry
2009: Global lamp products market reached $29.6 billion; projected to reach $37.2 billion in 2014(1)
2009: China’s lamp products demand reached $5.6 billion (18.9% of world); projected to reach $7.8 billion in 2014 (21.0% of world)(1)
China’s advantages lighting product manufacturing advantages will drive growth:Low costs: Despite recent changes in labor laws, China continues to have a
relatively low cost of raw materials, land and labor, which is especially important given the labor-intensive nature of the lighting product manufacturing process
Proximity to supply chain: Manufacturing of consumer products in general continues to shift to China, giving China-based manufacturers a further cost and cycle time advantage
Proximity to end-markets: China has focused in recent years on building its research, development and engineering skill base in all aspects of higher end manufacturing
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Alternative Lighting Driving Market Growth
Consumers are becoming more aware of the positive impact of the use of alternative lighting source. Replacements for the 425 million 60-watt incandescent light bulbs sold each year in the United States (1) continues to create export demand for the Chinese lighting industry. Replacing incandescent bulbs with LEDs could save enough electricity in one year to power up to 17.4
million homes and save approximately 5.6 million metric tons of carbon emissions annually.
As of September 2009, the EU banned importation of most incandescent bulbs, and the U.S. is considering a similar ban scheduled to commence as early as 2012(2)
As a result of these factors and improving technology, CIL believes the LED lighting market will be one of the fastest-growing segments in the lighting industry over the next decade
(1) Source: U.S. Department of Energy as reported in 2008(2) Source: NVC Lighting (SEHK: 2222) IPO Prospectus(1) Source: U.S. Department of Energy as reported in 2008(2) Source: NVC Lighting (SEHK: 2222) IPO Prospectus
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Macro Trends Support China’s Lighting IndustryLED Segment Driving Lighting Market Growth
Strong OEM
Relationships
Strong OEM
RelationshipsEconomic Drivers
Strengthen Segment Demand
Economic Drivers Strengthen Segment
Demand
Strong Brand RecognitionDiversified Customer Base and End MarketsWell-Developed Distribution NetworkInnovative and Experienced R&D Team Modern and Efficient Manufacturing
Technology Leaderwith Focused R&D
Technology Leaderwith Focused R&D
Growth Strategy to Build Leadership PositionExperienced Management TeamRobust Revenue and Earnings Growth Growth Out-Pacing Peers
Solid Business Case
Solid Business Case
Investment Highlights
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Sales Growth Driven by Hyundai and CINLE Brands
Hyundai-branded products have strong brand recognition in China
Hyundai™ LED technology has a growing application base in the lighting industry, allowing CIL to distinguish its products from competitors
Marketing and promotional activities continue to build Hyundai and CINLE brand products
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Diversified Customer Base and End Markets
Current offering and new product development meets shift in demandFrom traditional to energy-efficient and solid-
state lighting technologies
2009 sales to 60 OEMs and 73 distributorsHousehold lighting products constitute
majority of annual sales
CIL offers OEMs an outsourcing solution for their lighting needsQuality product and services meet unique
requirementsOEM sales increasing as % of revenue
Largest customer: 4.6% of sales in 2009
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Revenue by GeographyRevenue by Geography
Well-Developed Distribution NetworkComprehensive sales network in China:6 regional sales centers40 branches and 60 specialty stores across 30+
provinces, cities and regions2,200 distribution outlets across 23 provinces and
cities
Focused International distribution: Specialty retailers, international and regional
chains, mass merchants, distributors in Asia and the U.S.
Hyundai relationship assists sales channel growth: Brand recognition facilitates channel extension in
ChinaInfrastructure leveraged to promote and develop
CINLE brand channel in ChinaGlobal channel provides support for CINLE brand
international expansion
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Innovative and Experienced R&D Team
40 in-house engineers
Majority of R&D staff hold a bachelors degree or higher, in addition to having more than five years of R&D experience
Collaborative relationship with a number of academic institutions, including the Chinese Academy of Sciences and the Hong Kong Semiconductor Lighting Laboratory
5 patents, including Halide lamps and energy-saving lamps
Investments in technology R&D: Approx 3% of sales per annum New products designed to appeal to specific
demographics
Hyundai Group provides support for LED technology advancements
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Modern and Efficient Manufacturing16 advanced automated production lines; production capacity of 30 million units/year
Technological manufacturing expertise enhances quality: Production capacity and profit margin
believed to be at forefront of China’s lighting industry
Safe and efficient operations: ISO2000 Quality System and ISO14000
Environmental Protection System certifications
Streamlined processes enable CIL to secure business from customers that require immediate product design and delivery
Stringent quality standards for every component and every process
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Macro Trends Support China’s Lighting IndustryLED Segment Driving Lighting Market Growth
Strong OEM
Relationships
Strong OEM
RelationshipsEconomic Drivers
Strengthen Segment Demand
Economic Drivers Strengthen Segment
Demand
Strong Brand RecognitionDiversified Customer Base and End MarketsWell-Developed Distribution NetworkInnovative and Experienced R&D Team Modern and Efficient Manufacturing
Technology Leaderwith Focused R&D
Technology Leaderwith Focused R&D
Growth Strategy to Build Leadership PositionExperienced Management TeamRobust Revenue and Earnings Growth Growth Out-Pacing Peers
Solid Business Case
Solid Business Case
Investment Highlights
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Growth Strategy to Build Leadership Position
Expand LED product offering to increase market shareContinue shift from traditional technologies to energy-efficient and solid-state lighting
technologiesExpand applications of and markets for LED products
Augment marketing and promotion to increase brand awarenessBuild “Hyundai Lights” brand and strengthen the marketability of products
Expand sales network and distribution channelsDevelop relationships in order to expand market availability of products
Build partnerships with new and existing clientsDevelop and manufacture new products tailored to client needs
Expand global presenceIncrease OEM product exports outside of Mainland China
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Experienced Management TeamName and Title Experience
Li Xuemei Chairman and CEO
Founder of Hyundai Lighting Electric in 2003. Extensive experience in the lighting industry in China prior to the founding of CIL. Ms. Li received an associate’s degree from Zhejiang Industry & Trade Polytechnic in 1987.
Kui (Kevin) Jiang, CPAChief Financial Officer and Corporate Secretary
Appointed CFO and Corporate Secretary in May 2010. Previously senior auditor and audit supervisor at Davidson & Company, LLP, a full service accountancy firm. Prior to that, Mr. Jiang held various senior accounting positions. He received a bachelor’s degree in auditing from Central-South University of Business and Economics in 1989 and a master’s degree in accounting from Golden Gate University in 1999.
Dong Bin COO
General manager of Hyundai Lighting Electric since June 2009. From February 2006 to May 2009, Mr. Dong served as secretary-general of Huizhou Lighting Association as a consultant for various lighting enterprises.
Wu ShiliangExecutive VP, Sales & Marketing and Director
Vice GM of Hyundai Lighting Electric since March 2008 and previously sales director of Hyundai Lighting Electric and from March 1999.
Robust Revenue and Earnings Growth
(USD thousands) 2009 2008 2007
Revenue $59,261 $42,944 $16,552
Gross Profit $13,573 $9,990 $4,105
Net Income $7,580 $5,768 $2,209
Earnings Per Share – diluted $1.07 $0.81 $0.31
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Robust Revenue and Earnings Growth (Con’t)
(USD millions, except per share data) 2010 Q2 [expected]
2009 Q2[unaudited]
2010 Q1 [unaudited]2009 Q1
[unaudited]Revenue
$17.5 – 19.3 $13.8 $14.9 $12.0
Gross Profit$4.0 – 4.4 $3.1 $3.4 $2.6
Net Income (1)
$2.2 – 2.4 $1.6 $0.9 $1.5
Earnings Per Share – diluted (1) $0.21 – 0.23 $0.23 $0.09 $0.21
The Company had $0.85MM total debt and $2.6MM of cash and equivalents as of March 31, 2010
(1) Adjusted to exclude $1.0MM of charges related to the share exchange and private placement transactions that closed January 15, 2010.
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Growth Out-Pacing Peers
Sustained growth due to strong demand, lower cost of production, and strong management even in 2009, when peers struggled
2010-7-6
Comparable Company Analysis > China Intelligent Lighting and Electronics, Inc. (AMEX:CIL)
($ in millions, except per share data)
Company Name Stock Price Market CapTEV/LTM Total
RevP/Diluted EPS Before Extra
TEV/NTM Total Rev NTM P/E Est.
Acuity Brands, Inc. (NYSE:AYI) $ 35.41 1,542.0 1.1x 18.9x 1.0x 15.2x
Cree Inc. (NasdaqGS:CREE) $ 60.96 6,552.4 7.4x 55.6x 4.8x 28.0x
Nexxus Lighting, Inc. (NasdaqCM:NEXS) $ 2.16 35.1 2.4x NM 1.2x NM
NVC Lighting Holding Limited (SEHK:2222) $ 0.33 978.0 3.3x 15.6x 2.1x 15.1x
Mean 3.5x 30.0x 2.3x 19.4x
Median 2.9x 18.9x 1.7x 15.2x
China Intelligent Lighting and Electronics, Inc. (AMEX:CIL) $ 2.85 38.2 2.4x 5.5x - -
Source: Capital IQ
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Macro Trends Support China’s Lighting IndustryLED Segment Driving Lighting Market Growth
Strong OEM
Relationships
Strong OEM
RelationshipsEconomic Drivers
Strengthen Segment Demand
Economic Drivers Strengthen Segment
Demand
Strong Brand RecognitionDiversified Customer Base and End MarketsWell-Developed Distribution NetworkInnovative and Experienced R&D Team Modern and Efficient Manufacturing
Technology Leaderwith Focused R&D
Technology Leaderwith Focused R&D
Growth Strategy to Build Leadership PositionExperienced Management TeamRobust Revenue and Earnings Growth Growth Out-Pacing Peers
Solid Business Case
Solid Business Case
Investment Highlights
Contact
Kevin Jiang, CFO,604-561-3895, [email protected]
Peter Zhu, IR407-968-1448, [email protected]
Taylor Rafferty, IR company212-889-4350
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