Transcript Document

Jinpan International Ltd.
Investor Presentation
November 2013
Mark Du
Albert Sheng
Chief Financial Officer
Vice President of Investor
Relations
Safe Harbor Statement
Forward-Looking Statements
This presentation and oral statements made in conjunction with it may contain forward-looking statements made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s current expectations and observations
and involve known and unknown risks and uncertainties or other factors not under the Company’s control, which may cause actual results, performance or
achievements of the Company to be materially different from the results, performance or other expectations implied by these forward-looking statements.
These factors include, but are not limited to, the following:
 our ability to successfully implement our business strategy;
 the impact of existing and new competitors in the markets in which we compete, including competitors that may offer less expensive products and
services, more desirable or innovative products or technological substitutes, or have more extensive resources or better financing;
 the effects of rapid technological changes and vigorous competition in the markets in which we operate;
 the effects of changes in competition and the pricing environments in the countries in which we operate;
 uncertainties about the future growth in electricity consumption and infrastructure;
 other factors or trends affecting the industry generally and our financial condition in particular;
 the effects of the higher degree of regulation in the markets in which we operate;
 the effects of additional or higher taxes in the countries in which we operate;
 general economic and political conditions in the countries in which we operate or other countries which have an impact on our business activities;
 the monetary and interest rate policies of the countries in which we operate;
 exchange rates; and
 other factors listed from time-to-time in our filings with the Securities and Exchange Commission, including, without limitation, our Annual Report on
Form 20-F for the period ended December 31, 2012 and our subsequent reports on Form 6-K.
Except as required by law, we are not under any obligation, and expressly disclaim any obligation, to update or alter any forward-looking statements,
whether as a result of new information, future events or otherwise.
Use of Non-GAAP Financial Measures
This presentation contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission.
Refer to the Appendix for a discussion of these numbers and a reconciliation to their nearest equivalent financial measures calculated in accordance with
GAAP.
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Company Snapshot
Nasdaq: JST
Founded: 1993
IPO: 1998
A leading manufacturer of medium-voltage electrical control and power
distribution equipment. China’s largest manufacturer of cast resin
transformers, by capacity.

Recent price
$6.61

52-week Price Range
$4.38 to $7.86

Market capitalization
$108.5 million

Common shares outstanding (fully diluted)
16.6 million

Avg daily trading volume (3 mos)
37,989

Tangible book value per share
$11.62

Quarterly dividend
$0.03

Dividend yield (annualized)
1.9%

Insider ownership
26.4%
Note: Market data as of Nov 13, 2013 market close; weighted average diluted share count as of Sep 30, 2013; balance sheet data as
of Sep 30, 2013; tangible book value excludes goodwill & deferred tax assets; most recent quarterly dividend paid Sep 26, 2013;
ownership as of latest filing
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Investment Highlights
#1 producer of cast resin transformers in China, by capacity
Positioned for growth & margin expansion after investment period
Demand driven by China’s industrialization & urbanization
Supplier of choice to four blue chip OEMs; provides global reach
Disciplined growth strategy funded primarily via cash flow & debt
15-year history as public company; 8-year dividend history
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Products
Cast Resin
Transformers
VPI Transformers
& Reactors
Switchgear
Substations
79% of 2012 sales
9% of 2012 sales
6% of 2012 sales
6% of 2012 sales
Used to change voltage
of an electric current.
Use air to cool induction
coils to dissipate heat.
Components of
converters & inverters,
used to change voltage
& filter electricity.
Used to isolate electric
equipment in the grid
and de-energize
equipment to allow
maintenance.
Voltage: max 35 KV
Capacity: max 40 MVA
Voltage: max 1 KV
Capacity: max 500 KVA
Integrated assembly of
LV HV switchgear,
transformer, and
monitoring & control
systems in an enclosed
unit. Lowers the
voltage of electricity
drawn from the grid to
levels that can be fed
into general purpose
transformers.
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Products: Cast Resin Transformers

Dry-type transformers use air to cool
its induction coils to dissipate heat;
require less maintenance than oilcooled transformers

Jinpan’s products comply with
international codes & standards: GB,
IEC, ANSI/IEEE/NEMA, CSA, JEC

Certifications:
 UL (U.S.)
 KEMA (Holland & U.S.)
 CE (EU)
 GOST-R (Russia)

Approximately half of our transformers
are custom-designed
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Markets

88% of sales within China; OEM partnerships provide international reach

Products used in demanding industrial applications & critical infrastructure

 Utility projects – power plants, electrical distribution networks
 Renewable energy – wind energy, utility-scale solar energy
 Industrial applications – factories, refineries, shipyards, etc.
 Infrastructure – airports, rail transportation, other municipal projects
 Commercial & residential – office buildings, shopping centers, high-rises
Jinpan supplies cast resin transformers & reactors for wind energy applications
 Qualified supplier for two leading global wind turbine manufacturers
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Growth Drivers
China Electricity Consumption
China Fixed Asset Investment
Source: Compiled based on data sourced from China Electric Council
releases. Year 2012 data is sourced from “2012 Electricity Industry
Operations Brief” China Electricity Council on January 17, 2013.




Source:”Statistical Communiqué of the People's Republic of China on the
2012 National Economic and Social Development” released by the China
National Bureau of Statistics on February 22, 2012.
Key demand drivers: electricity consumption & infrastructure development
China’s electricity consumption est. to increase 4.2% annually through 2035 (IEA)
China’s electrical capacity is projected to increase 3.9% annually through 2035 (IEA)
China’s fixed asset investment has continued to increase at 20.1% y/y YTD July 2013 (China NBS)
 China’s government continuing infrastructure investment
 Specific focus on rail transportation investment
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Growth Drivers: Wind Energy
Source: “Global Wind Energy Statistics”, Global Wind Energy Council (Feb 2013)

Sales of transformers & reactors for wind turbines; primarily international installations

Qualified supplier to two leading wind turbine manufacturers (2006 and 2Q2013)

Annual capacity growth est. 14.4% in 2014, 12.6% in 2015, 10.2% in 2016 (GWEC)

Global wind capacity growth +6.2% to +8.9% through 2035 (policy-dependent, IEA)

Offshore wind power expected to contribute the majority of growth in long-term
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Growth Strategy
Increase manufacturing output & productivity
Enrich product offering
Expand international OEM business
Capture new market opportunities in China
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Expanded Capacity & Capabilities

Current capacity makes Jinpan China’s largest manufacturer of cast resin transformers

Disciplined expansion focused on establishing scale and improving productivity

$121 million total investment since 1999, funded by cash flow, $32M debt, $18M equity

Guilin facility began production in Mar 2013; gradually increase output over several years

Carlstadt, New Jersey facility supports limited assembly, product testing, after sales service
Haikou
Wuhan
Shanghai
Guilin
1993 production start
2008 production start
2009 production start
2013 production start
Cast resin transformers,
conventional switchgear, substations
Cast resin transformers
VPI transformers,
reactors, gas-insulated
switchgear
Standard cast resin
transformers
6 million KVA
5 million KVA capacity
20,000 units capacity
6 million KVA capacity*
*expandable to 12 million KVA
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R&D Investment

Research and development is a core component of our growth strategy
 More than 170 engineers & technicians (2012 Data)
 Historically have invested approximately 5% of sales in R&D
 Utilize CAD tools & proprietary software for modeling & design

New product development
 Diversify product offering to drive consistent growth
 Offer more comprehensive power distribution solutions to customers
 Explore new product categories & expand reach into new markets

Productivity improvements
 Enhance product design to reduce manufacturing costs
 Run SAP ERP system, integrating inventory controls, cost controls,
management information into a single platform
 Automated production, streamlined processes, & new transformer design
expected to reduce production cost for standard transformers by 5-10%
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International Growth via OEM Partners

Leverage the marketing reach of large OEMs to expand internationally

Qualified with four international OEMs

In 2Q13, qualified with a leading Europe-based wind turbine producer

Pursuing qualification with two additional international OEMs

Jinpan is 1 of 2 UL-certified cast resin transformer manufacturers worldwide

International sales have historically been for wind power, but now diversifying
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Capturing China’s Market Opportunities

Sells into a wide range of industries and infrastructure projects, both public and private

Leverage engineering & manufacturing capabilities to drive sales of customized
transformers for demanding industrial and renewable energy applications

Leverage increased scale and efficient manufacturing to increase sales of standard
distribution transformers & expand market share

Extensive sales network with 38 sales and services offices throughout China
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Financial Performance
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Summary Income Statement
$ in thousands, except per share amounts
2009
2010
2011
2012
158,880
144,061
218,869
210,538
162,579
y/y change
3.2%
-9.3%
51.9%
-3.8%
3.5%
Gross Profit
67,180
56,090
80,290
68,790
56,007
42.3%
38.9%
36.7%
32.7%
34.4%
31,145
15,416
25,998
14,887
14,466
19.6%
10.7%
11.9%
7.1%
8.9%
28,971
13,312
23,853
14,062
12,499
per diluted share
$1.79
$0.81
$1.45
$0.84
$0.75
Dividend per share
$0.12
$0.14
$0.14
$0.18
$0.09
Net Sales
margin
Operating Income
margin
Net Income
9M 2013

Maintained healthy profitability during several years of market volatility

Particularly challenging market environment in 2012 & 1Q13

2012 & 1Q13 results reflect low capacity utilization at the newly completed Guilin
facility & gaps in shipping of wind power products to OEM customer due to the
customer platform upgrade.

Shifting from investment phase into growth phase; well-positioned for success
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Recent Quarter Results
$ in thousands, except per share amounts
Sep-13
Sep-12
Net Sales
68,743
58,832
16.8%
Gross Profit
23,890
19,607
21.8%
34.8%
33.3%
150 b ps
7,703
4,788
60.9%
11.2%
8.1%
310 b ps
Net Income
6,976
3,904
78.7%
per share
$0.42
$0.23
margin
Operating Income
margin
Y/Y Change

2Q13 results demonstrate return to sales growth and margin recovery

Resumed volume shipments to our largest international OEM customer

Qualified with Europe-based wind turbine manufacturer; brings total OEMs to four

Pricing environment in Chinese market stabilized, benefitting margins

Backlog expected to recover in 4Q13
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2013 Guidance
$ in thousands, except per share amounts
2009
2010
2011
2012
158,880
144,061
218,869
210,538
162,579
219,000 to 222,000
y/y change
3.2%
-9.3%
51.9%
-3.8%
3.5%
4-5%
Gross Profit
67,180
56,090
80,290
68,790
56,007
42.3%
38.9%
36.7%
32.7%
34.4%
31,145
15,416
25,998
14,887
14,466
19.6%
10.7%
11.9%
7.1%
8.9%
28,971
13,312
23,853
14,062
12,499
16,000 to 16,500
per diluted share
$1.79
$0.81
$1.45
$0.84
$0.75
$0.96 to $0.99
Dividend per share
$0.12
$0.14
$0.14
$0.18
$0.09
Net Sales
margin
Operating Income
margin
Net Income
9M 2013
2013 Guidance
Note: guidance provided as of November 14, 2013

2013 guidance calls for revenue growth of 4-5% and earnings growth of 14-17%

2H business is typically seasonally strong

International sales expected to increase as shipments resume to largest customer

Anticipate slight operating margin improvement from 1H13 levels

Q4 operating cash flow typically seasonally strong
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Summary Balance Sheet

$ in thousands, except per share amounts
Simple capital structure
Sep-13
Dec-12
19,179
30,471
159,337
140,328
Inventory
44,410
29,565
Other current assets
18,052
10,133
Total current assets
240,978
210,497
Non current assets
104,532
98,786
Total assets
345,510
309,283
100,270
86,732
36,602
29,692
Total liabilities
136,872
116,424
Shareholders equity
208,638
192,859
Total liabilities and shareholders equity
345,510
309,283
ASSETS


Growth funded with internal cash
flow & debt
Completed one post-IPO follow on
$25 million equity raise in 2006;
proceeds for Wuhan facility,
expansion of Haikou facility, and
buyout of minority shareholders
Cash, cash equivalents, & short-term investments
Accounts receivable & notes receivable
LIABILITIES & SHAREHOLDERS EQUITY
Current liabilities
Non current liabilities

Focused on improving working
capital management and
generating cash flow
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Consistent Dividend History

Jinpan has paid a dividend since 2005

Currently paying quarterly dividend of $0.03 per share

As of market close on November 13, 2013, reflects a 1.8% yield

2012 included special dividend of $0.04 per share, in addition to regular dividend
November 2013
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Investment Highlights
#1 producer of cast resin transformers in China, by capacity
Positioned for growth & margin expansion after investment period
Demand driven by China’s industrialization & urbanization
Supplier of choice to four blue chip OEMs; provides global reach
Disciplined growth strategy funded primarily via cash flow & debt
15-year history as public company; 8-year dividend history
November 2013
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Jinpan International Ltd.
Nasdaq: JST
Company Contact:
Mark Du, Chief Financial Officer
(201) 460-8778
Investor Relations Contact:
Mark Tobin, Tobin Tao & Company
(949) 870-9778
[email protected]
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