SGTI Investor Presentation (Final) Feb 09

8/3/2019 SGTI Investor Presentation (Final) Feb 09

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Roth 21 st Annual OC Growth StockConferenceYiru Melody Shi - CFO

February 17, 2009


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Safe Harbor Statement

Safe Harbor Statement Under the Private Securities Litigation Reform Act of

1995: Any statements set forth in this presentation that are not historical factsare forward-looking statements that involve risks and uncertainties that couldcause actual results to differ materially from those in the forward-lookingstatements, which may include, but are not limited to, such factors asunanticipated changes in product demand, increased competition, changes in

the scope or timing of the Companys projects, slowdown in the demand forglucose series products and starch products, uncompetitive levels of researchand development, failure to obtain regulatory approvals, and otherinformation detailed from time to time in the Companys filings and futurefilings with the United States Securities and Exchange Commission. The

forward-looking statements contained in this presentation are made only asof this date, the recent results may not be indicative of future results, and theCompany is under no obligation to revise or update these forward-lookingstatements.


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Company Overview Market leader of pharmaceutical grade glucose with about 40% market share in China

1 of only 3 companies licensed to produce dextrose monohydrate transfusion in China

Leading glucose and cornstarch products manufacturer supplying the pharmaceuticaland food and beverage industries

Well positioned to benefit from further expansion of Chinese pharmaceutical industry The State Council recently approved a plan to spend a total of 850 billion RMB to provide

universal primary medical services The plan seeks to expand healthcare services by targeting the countrys approximately 900

million farmers, many of whom do not have basic medical insurance coverage Rural health care reform is expected to enhance growth of our core pharmaceutical glucose

products

Major operating subsidiary in Weifang, Shandong Province Second largest corn producing province in China with an expected 18.49 million metric tons of

corn production in 2008, as corn is our main raw materials


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What is Pharmaceutical Grade Glucose?

A sugar with higher standards for purity and qualitythan glucose used in the food industry

The most common pharmaceutical glucose are DextroseMonohydrate and Dextrose Anhydrous

Dextrose Monohydrate is widely used as a standardmedical procedure for restorative and nutritionalpurposes

Dextrose solution is recommended for subcutaneousinjection as a restorative medium after major operations

or as a nutritive measure in debilitating diseases such asfever, cold and diarrhea etc.


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Favorable Industry Outlook In China, pharmaceutical grade glucose is widely used as part of surgical

procedures and as a standard health treatment. It is supported by the Chinese

Government-subsidized Medical Insurance Plan Improving rural area healthcare is a priority of the Chinese government the

Chinese government-subsidized rural healthcare system is creating greater demandfor pharmaceutical glucose products

Rising disposable net income per capita is generating greater demand for basic

healthcare services Corn prices in China are expected to stay at stable level in calendar year 2009. The

government will proactively use its large corn reserves to curb sharp ups and downsin the corn market

China has approximately 50 types of transfusion products with an estimated annualper capita consumption of around 5 bottles. Most of the consumption is for DextroseMonohydrate

The number of medical transfusion providers in China increased fromapproximately 100 in 2002 to 389 in 2007. The domestic sales grew from 2 billion bottles in 2002 to 7 billion bottles in 2007


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Robust Growth of Chinas Pharmaceutical Industry

936

673 661

586

502447 428

394

227

543

0

100

200

300

400

500

600

700

800

900

1,000

U S A

C a n a d a

F r a n c e

J a p a n

G e r m a n y

U K

A u s t r a l i a

K o r e a

S i n g a p o r e

C h i n a

I n d i a

(US$)

Expenditure on Pharmaceutical Productsper Capita in 2006

2007E-2011E CAGR of Expenditure onPharmaceutical Products per Capita

13.7%

12.1%

9.4% 8.9%7.9% 7.8%

6.2% 6.0% 5.8%4.8%

18.0%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

C h i n a

I n d i a

J a p a n

C a n a d a

S i n g a p o r e

K o r e a

U S A

U K

G e r m a n y

F r a n c e

A u s t r a l i a

(%)

Chinas expenditure on pharmaceutical productsper capita is still lagging behind other

countries

and is expected to grow fastest among othermajor countries in the next five years

Source: 2006 data from the PRC National Bureau of Statistics; 2007E to 2011E projected data from Frost & SullivanThis data has not been independently verified and is subject to change


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Strong Product Lines & Sales Growth

Glucose

Dextrose Monohydrate Dextrose Anhydrous Dextrose Monohydrate Oral Industrial Glucose

Corn Starches

Pharmaceutical Food & Beverage

Others Germ Fibers

Protein Powders Dextrin

Revenue Breakdown

Glucose

53%

Cornstarch

22%

Other

25%Glucose

40%

Cornstarch

34%

Other

26%

6 Mths FY08 6 Mths FY09


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Shengtai Core Competence

Market Leader and Preferred Supplier

Largest domestic producer of pharmaceutical grade glucose in Chinawith about 40% of market share Modern Production Facilities

Vertically integrated business model In-house cornstarch production facility Capacity and productivity improvement in existing glucose facility New glucose facility to significantly increase production capacity

High Product Quality GMP certified from China SFDA

Strong and Loyal Customer Base 430+ customers combined domestically and internationally for glucose

products Extensive Distribution Network Coverage in all provinces not including Tibet Exporting to 70 countries and growing


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Production Process

CornstarchConvert

EmulsionAdd in Glucoamylase

Filter

Discolor

Ion exchange

Inspissations

Crystallizationand separation

Clean and DryGlucose


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Quality Control Fully certified for GMP, ISO9002 and HACCP

international quality standards Most products globally certified HALAL,

KOSHER and IP GMO Chinese EPA compliant Output conforming to pharmaceutical glucose

product specifications is maintained at 100% Stringent condition controlled warehouse

All year temperature under 86 degree F andhumidity under 80%

Three-Tier quality control system Workshop team

Production team Management accountability


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Distribution Channels and Target Market

DomesticMarket

Guangzhou

Chengdu

Nanchang

Shandong

Representative OfficeChinese Operation Headquarter

Strong distribution Three marketing offices Coverage in all provinces not

including Tibet Exporting to 70 countries

including developed countriessuch as Japan, Singapore, Korea,

Australia & emerging marketssuch as Russia and India

Target Customers Pharmaceutical companies Medical supply companies Food and beverage

companies


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Growing Customer Base Growing base of over 1,000 total

customers in China and abroad

High-quality pharmaceutical gradeproducts certified for product reliability

Strong referrals from large reputablecustomers including Shanghe and Kelunwhich are the largest transfusionsuppliers in China

Excellent customer service and support;

On-time deliveries

Good AR collection with DSO forFY2008 at 30 days


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Key Corporate Milestones

Completed

newcornstarchfacility

2Q FY07

Listed onOTCBB

Completedfinancing

US $17.5M

4Q FY07

Beganconstructionof the new

glucoseplant

1Q FY08

Began trialproductionfrom newglucose

plant

July 08

Completed newglucose facility

GMP certificatereceived

1Q FY09

Invested for growth and reshaped businessthrough major capital investments Accomplishments in two years

2Q FY09

Started

operation innew glucosefacility


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Vertically Integrated Cornstarch Production Production facility completed in October 2006

Located in Shandong province, the second largest cornproducing province in China

Stable supply of high-quality raw materials for glucose Strategically located next to its own glucose production

plants which lowers transportation cost Maximum annual production capacity of 240,000 tons,

able to expand production up to 300,000 tons per year Achieves economies-of-scale Additional revenue opportunities by selling excess

cornstarch Power & Gas plant on site

Lower cost and stable supply of electricity and gas to allfactories including both cornstarch and glucose facilities


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Glucose Production Facilities Extant glucose production facility:

Annual production capacity 60,000 tons Capable of increasing capacity by 30,000 tons, if

necessary

New glucose production facility: Construction completed at the end of July 2008

with annual production capacity of 120,000 tonsof pharmaceutical glucose and other glucoseproducts

Launched trial production in July 2008 GMP certification received at the end of

September 2008 Started operation in Oct. 2008 and expect full-

scale production by calendar year end 2009


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Growth Strategy

To Expand Its Leading Market Position As a PremiereSupplier of Pharmaceutical Grade Glucose and Other

Refined, Starch Based Products

Increase volume of sales to existing customers Continue emphasis on higher-margin pharmaceutical grade products Leveraging strong brand name and proactively pursuing new business

opportunities through referrals Aggressively target new high-growth overseas markets:

Applying for safety certifications from regulatory agencies

Build awareness by attending trade shows and increasing its onlinepresence

Unlock production capacity bottleneck to lower overall costs throughincreases in operating efficiencies


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Summary Income Statement (12 Months Ended June 30)

($ millions) 2006 2007 2008YoY

increase2008/2007

Net Sales $36.03 $51.71 $90.87 76%

Gross Profits $8.46 $12.18 $20.26 66%

Gross Margin 23.5% 23.6% 22.3%

Operating Income $4.63 $7.50 $12.87 72%

Net Income $4.21 $7.15 $10.41 45%

6 Mtns

FY09

$32.92

$5.19

15.8%

$0.30

$0.16


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Balance Sheet Highlights

For the years ended June 30,

($ in Thousands)2006 2007 2008

Cash & Cash Equivalents $4,384 $12,549 $10,169

Current Assets 12,150 31,266 24,283

Total Assets 31,271 73,760 101,314

Current Liabilities 23,612 38,468 51,904

Total Liabilities 24,614 42,130 54,558

Total Stockholders Equity 6,657 31,631 46,755

2Q

FY09

$13,201

27,570

105,719

50,557

57,742

47,976


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Key Management and Board MemberMr. Qingtai Liu President and Chief Executive Officer

Chief Executive Officer and President of Weifang Shengtai since 1999 Recognized by the Weifang City Government office as a Leading Technology Innovator and a

Distinguished Pharmaceutical Production Director Deputy to the Peoples Conference of both Weifang City and Changle County Formerly head of Science and Technology of Changle Power Factory Bachelor of Electrical Engineering Degree from Shandong Technical University

Ms. Yiru Melody Shi

Chief Financial Officer Former audit manager for Kabani & Co., Inc. Channel Program Manager at Sun Microsystems Financial analyst at Hewlett Packard China MBA, University of California, Irvine, Certified Public Accountant (US)

Mr. Chris W. WangIndependent Director, Chairman of Audit Committee

Chief Financial Officer, Fushi Copperweld (NASDAQ: FSIN) Executive VP of Redwood Capital, Inc., MBA in Finance and Corporate Accounting, University of Rochester


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Equity Snapshot

Symbol: SGTIPrice (01/30/09): $1.00Market Cap: $19.12MShares Outstanding (As of 12/31/08): 19.12M

Revenue (TTM): $79.46MNet Income (TTM): $5.64MDiluted EPS (TTM): $0.28P/E 0.28x

Fiscal year end: June 30


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Investment Summary Leading Positions

40% domestic market share of pharmaceutical grade glucose One of only three companies licensed by the Chinese government to produce dextrose

monohydrate glucose in China Strong existing customer base

Strategic Strengths Strong growth opportunities in favorable markets Focus on pharmaceutical grade glucose to take advantage of growth opportunity in Chinas

healthcare market

Clear long-term growth strategy Vertically integrated business model Strategic location and modern plants

Solid Track Record Consistently maintain high product quality Solid revenue and net income growth

Improving Financial Outlook Improving balance sheet Low maintenance Cap-X Solid cash generation


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Contact Information

Shengtai Pharmaceutical, Inc.Yiru Melody Shi, CFO

Tel: +1 (949) [email protected]

Grayling GlobalEddie Cheung

Tel: +1 (646) [email protected]


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Thank You!

February 2009

SGTI Investor Presentation (Final) Feb 09

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