HOLLYSYS AUTOMATION

HOLI
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Hollysys Automation Technologies : HOLI Presentation FY2020Q3

05/19/2020 | 04:03am

Automation for Better Life

Hollysys Automation Technologies Ltd.

Investors Presentation

FY2020Q3

Safe Harbor

This presentation may contain forward-looking statements within the meaning of the private securities litigation reform act of 1995. Forward looking statements are statements that are not historical facts. Such forward-looking statements, based upon the current beliefs and expectations of Hollysys' management, are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: business conditions in China; continued compliance with government regulations; legislation or regulatory environments, requirements or changes adversely affecting the businesses in which Hollysys is engaged; cessation or changes in government incentive programs: potential trade barriers affecting international expansion; fluctuations in customer demand; management of transitions to new markets; intensity of competition from or introduction of new and superior products by other providers of automation and control system technology; timing, approval and market acceptance of new product introductions; as well as other relevant risks detailed in Hollysys' filings with the securities and exchange commission. The information set forth herein should be read in light of such risks. Hollysys does not assume any obligation to update the information contained in this presentation or filings.

* All $ amounts in this presentation are in USD unless otherwise noted.

Page 2

Corporation Overview

Market Data

NASDAQ: HOLI

Approximately 60MM shares outstanding

History

Founded in 1993

The leading provider of automation & control technologies in China

Headquartered in Beijing

Operation

Nationwide presence in 60 cities

Worldwide subsidiaries and offices in Singapore, Dubai, Malaysia,

India, etc.

Offerings

Proprietary technologies and products tailored to Industrial, Rail,

Subway and Nuclear Industries

Headcounts

3,300 employees worldwide

1,900+ in R&D & Engineering

Page 3

Note: Headcounts data as of June 30, 2019

Agenda

  1. Business Overview
  2. Industrial Automation
  3. Rail Transportation
  4. Overseas
  5. Management & Market Leadership Position
  6. Financials

Page 4

Business Overview

Revenue Contribution For First Nine

Months of FY2020

14.4%

44.9%

40.6%

Industrial Automation

Rail Transportation

M&E Solution

Page 5

Industrial Automation:

  • Intelligent plant automation solution;
  • DCS, PLC, MC, SCADA, MES and etc.

Rail Transportation:

  • High-speedrail signaling system: ATP, TCC, and etc.
  • Subway SCADA and CBTC

Mechanical & Electrical Solution and others:

  • Design, electrification and engineering service
  • Other businesses

Industrial Automation Growth Drivers

Production

Efficiency

Safety

Accelerated Automation and

Environment

Concern

Control Technologies Demand

Protection

Energy

Conservation

Page 6

Industrial Automation - Process Control

Plant Automation Solution

  • Offering:

Proprietary technologies in solution, design, manufacture, Integration and installation.

  • Products:

DCS, Batch, MES (Manufacturing Execution System), AMS (Asset Management System), SIS (Safety Instrumentation System), etc.

  • Track record:

More than 25,000 projects completed.

  • Clients:

15,000+ customers, including SOEs, Multinationals, and SMEs.

  • Competitors:

ABB, Siemens, Emerson, Honeywell, Supcon

Page 7

Distributed Control System

Page 8

Industrial Total Solution

Page 9

Industrial Automation - Discrete Control

PLC, MC and SCADA

City Transportation and

Coal Mining

Machine Control

Sewage Treatment

  • Supply intergrate solution of city transportation and sewage treatment, including SCADA, LE PLC, LK PLC etc.
  • Major player
  • Plenty of successful completed projects
  • Provide control application in coal mining industry, as well as intrinsic safety device
  • JV with Shenhua Group
  • MC1000 motion coordinator and LK/LE PLC control servo or stepper motors, up to 32 Axes.
  • Build-inIndustry Ethernet : EtherCAT, RTEX, Ethernet/IP
  • Safety: IEC61508 SIL2 Certification
  • Security: Achillies Level 1 Certification

Page 10

Industrial Automation - Nuclear Power Control

France

76.3%

World 11.5%

China 3.0%

Nuclear

Total

Nuclear

Electricity

Electricity

Utilization

(TWh)

(TWh)

(%)

France

419

549

76.3%

World

2,441

21,226

11.5 %

China

161.2

5,373

3.0 %

90

China Nuclear Market

80

In # reactors

70

60

56

50

50

44

40

35

38

30

30

24

20

20

16

10

0

(As of July, 2018. Source: World Nuclear Association, IAEA)

Page 11

Nuclear Power - Business Overview

Offerings

  • Proven proprietary nuclear power plant control systems and reactor protection system.
  • Engineering design, procurement, integration, installation, support, and specialized services for the safe, reliable, and economical operation of the nuclear power plant

Market Position

  • The only proven domestic company to supply control systems to nuclear power automation market in China
  • J/V with the China's largest nuclear station operator: China General Nuclear Power Group
    (CGNPG)

Projects

  • Qin Shan I/II/III, Da Yawan, Ling Ao, Tian Wan, Hong Yanhe, Ning De, Yang Jiang, Fang Cheng Gang, etc.

Competitors

  • SIEMENS/AREVA/INVENSYS

Page 12

Industrial Automation - Competitive Advantages

Items

HOLI

Multis

Local

Advantages of Hollysys

Brand Name

Industry leading brand name recognition

through more than 20 years' operation.

Pricing

Continuous investment in R&D to deliver

advanced technology.

Extensive service network in more than 60

Serviceindustrial cities across China, focusing on service and long-term client relationship.

Customization

Cost structure advantage enables Hollysys

Quality

deliver pricing competitive solution and

products.

Page 13

High-speed Rail Market of China

China High Speed Railway Market Growth

45,000

38,000

30,000

19,000

8,358

2010

2015

2020E

2025E

2030E

KM

(As of July, 2016. Source: National Development and Reform Commission)

Page 14

High-speed Rail - Signaling System

Page 15

High-speed Rail - Business Overview

High-speed Rail Signaling System

  • HSR signaling products:ATP , TCC, LEU and etc.
  • In China:
  • Market Position:
  • 1 of theonly 3approved providers in 300-350km/h segment;
  • 1 of the only 3 approved providers in200-250km/h segment,

Competitors:China Railway Signal & Communication Corp (CRSC),

Academy of Railway Science, Zhuzhou CRRC

  • Overseas:
    • Market Position:First international contract win from Hong Kong MTR for HongKong-ShenzhenHigh-speed rail line
    • Competitors:Bombardier, Siemens, Ansaldo, Hitachi.

Page 16

China Subway Market

URBAN RAIL TRANSIT OPERATING MILEAGE

(2015-2023E)

In # kilometers

9,276

4,766

2,891

2 0 1 5

2 0 1 8

2 0 2 3 E

Source: CAMET, Frost & Sullivan

Page 17

Subway Automation - Business Overview

Signaling

System

SCADA

  • Clients:
    China and international subway construction authorities
  • Market position:

One of the key proprietary subway signaling system provider

  • Competitors:
    Siemens, Alstom, Thales
  • Clients:
    Beijing, Shenzhen, Guangzhou, Hong Kong MTR
  • Market position:
    The leading SCADA (Supervisory Control and Data Acquisition) system supplier
  • Competitor:
    Nanjing Automation Research Institute (NARI)

Page 18

Internationalization Presence

Beijing Headquarter

Xi'an Facility

India Office

Hangzhou Facility

Singapore Office

Indonesia Office

Bond

Concord

Page 19

Hollysys Management Team

Name

Title

Working

Previous Experience

Years

General Manager of Hollysys Group

Mr. SHAO Baiqing

CEO

Master of Computer Science from the 6th Research

&

26 years

Institute of China Electronics Corporation and MBA

Chairman

from Peking University

Previously as Chief Financial Officer and Vice

President of Xinhua Lian Investment Co., Ltd.

Previous experience at various managerial positions

Mr. WANG Steven

CFO

24 years

at Globe Specialty Metals Inc. and Zoomlion Heavy

Industry Science & Technology Co.,Ltd.

• MBA degree in Finance from the Wharton School, the University of Pennsylvania.

Page 20

Market Leadership Position

15,000+ customers 25,000 projects customer base

Industry leading automation and

control brand name

JV with China General Nuclear Power Holding Corp

JV with Shen Hua Group

  • Successful integration of rail team
  • Acquisition of Concord and Bond

Market

Leadership

Early entry to high-speed rail

  • Early entry to nuclear
  • Re-focusingin industrial automation
  • Increasing R&D investment

Page 21

Wide range of core technologies

Various industry expert solutions

  • 1900+R&D & Engineers

State of the Art Production Line

In-house Production

  • State of the art production line
  • Almost fully automated production process
  • Multiple rounds of precise testing
  • Flexible and efficient in house production for different demand

Page 22

FINANCIAL SUMMARY

IN US$ MILLION

724.9

634.0

544.3

570.3

531.4

540.8

529.1

477.2 487.6

431.7

103.3

121.5

108.9

126.2

70.1

N O N - G AAP N E T I N C O M E

T O T AL R E V E N U E

N E W C O N T R AC T

FY2015

FY2016

FY2017

FY2018

FY2019

Page 23

National Spread Service Network, Professional & High Quality Service

After-sale

Revenue

In US$ million

110.0

20.0%

18.1%

100.0

18.0%

90.0

16.0%

80.0

13.7%

14.0%

70.0

12.2%

10.8%

12.0%

60.0

9.5%

10.0%

50.0

103.0

8.0%

40.0

74.3

6.0%

30.0

66.6

50.4

46.4

4.0%

20.0

2.0%

10.0

0.0

0.0%

FY2015

FY2016

FY2017

FY2018

FY2019

After-sale Revenue

% as of Total Revenue

Note: After-sale revenue is calculated as product sales revenue plus service rendered revenue.

Page 24

Gross Margin & EBIT Margin Performance

Gross Margin of Each Business Sector

Total Solution

35% - 40%

Industrial

Automation

Nuclear 60% - 75%

High-speed Rail

Non GAAP Net & Gross Margin

Non GAAP Gross Margin

Non GAAP Net Margin

37.1%

FY2019

22.1%

38.2%

FY2018

20.1%

Rail

Signaling

40% - 50%

32.7%

FY2017

16.2%

Transportation

Subway SCADA 15% - 20%

37.9%

FY2016

22.3%

M&E Solution and

Design,

41.2%

FY2015

electrification, 10%- 15%

19.4%

others

installation

Page 25

Heavy R&D Investment to Continuously Deliver Leading Technologies

R&D Expenditure

In US$ million

35.8

36.6

36.6

37.0

30.1

6.7%

6.7%

7.0%

6.8%

6.5%

FY2015 FY2016 FY2017 FY2018 FY2019

% of revenue

New Products Development

Subway Signaling

Motion Control

Energy Conservation

Industrial Internet of

Environment Protection

Things (IIOT)

Page 26

Sufficient Cash On-hand & Solid Operating Cash Flow Performance

CAPEX

Operating Cash Flow

In US$ million

122.2

100.5

84.0

69.8

46.7

4.6

7.9

3.7

10.6

2.3

FY2015

FY2016

FY2017

FY2018

FY2019

Debt

Cash

FY2019

23.2

in US$ million

358.4

FY2018

23.9

286.7

FY2017

29.1

237.7

FY2016

30.4

257.1

FY2015

31.1

237.2

Note: CAPEX compiled from items in cash flow statement including purchase of and proceeds from disposal of PP&E, and prepaid land leases. Cash refers to cash and cash equivalents + current and non current restricted cash.

Page 27

Backlog Performance

700

568.5

594.2

600

569.0

574.1

527.2

524.0

76.6

112.4

84.7

500

135.4

129.7

198.6

400

326.5

278.0

300

272.0

299

235.6

200

216.5

100

184.6

191.0

211.4

158.7

134.1

112.1

0

FY2015Q4

FY2016Q4

FY2017Q4

FY2018Q4

FY2019Q4

FY2020Q3

2015/06/30

2016/06/30

2017/06/30

2018/06/30

2019/06/30

2020/03/31

IA

RT

M&E

Total

Page 28

Automation for Better Work , Life and Environment

Striving to be a world leading automation and control system provider

Macro Enviroment

Strategy

Demographic Change, shortage

Automation solutions to offset

labor cost increase

of labor

Dedicated customized solutions for

Environmental protection

customizedenergy conservation and efficiency

Customized control

improvment

Alternative

Leading position in China's high-

Urbanization Process of China

Water process

speed rail and subway automation

Customer's buying behavior

control market

Customer- centric approach,

change

enlarge service team and enhance

service capabilities

Page 29

Automation for Better Life

Contact Information:

Investor Relations (8610) 5898-1386investors@hollysys.com

Disclaimer

HollySys Automation Technologies Ltd. published this content on 19 May 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 May 2020 07:02:03 UTC

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