China Zenix Auto International LimitedChina Zenix Auto International Limited (NYSE: ZX)(NYSE: ZX)
2
DisclaimerDisclaimer
This presentation contains forward-looking statements, including statements about China Zenix Auto International Limited (the “Company”)’s business outlook, strategy and market opportunity, and statements that may suggest trends for its business. These statements are individually and collectively forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are made only as of the date of this presentation and are based on estimates and information available to the Company at the time of this presentation. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict and may be beyond the Company’s control. Therefore, you are cautioned that actual results may differ materially from those set forth in any forward-looking statements herein. You are urged to review the risk factors included in the Company’s filings with the U.S. Securities and Exchange Commission, including its Registration Statement on Form F-1 related to the Company’s initial public offering. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements made during this presentation will in fact be realized. Any forward-looking statements and projections made by others in this presentation are not adopted by the Company and the Company is not responsible for the forward-looking statements and projections of others. Except as otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.
Overview of China ZenixOverview of China Zenix
2,139
3,200
4,094
3,7383,802
2,8202,551
0
1,000
2,000
3,000
4,000
5,000
4
(RMB MM)
China Zenix at a GlanceChina Zenix at a Glance
Largest commercial vehicle wheel manufacturer in China, with19.3% (1) market share in 2013
Diversified product line with premium “Zhengxing” brand
Balanced exposure to China OEM, China aftermarket and international market
More than 84 OEM customers
Most extensive network in China aftermarket with and 4,700 distributors
– 24 tier-one distributors across nearly all provinces (except Hong Kong and Macau)
3Q 2014 results:
– Revenue: RMB 694.9 MM
– Net loss: RMB 12.3 MM
– Loss per ADS: RMB 0.24
Chairman exercised options; ownership at 69.5%
Balanced Customer BaseBalanced Customer BaseRevenue Revenue
3Q2014 Revenue
Notes:1. China Automotive Industry Yearbook for
2013
International
China OEM
China Aftermarket
52.4%
32.6%15.0%
5
Financial HighlightsFinancial Highlights
NYSE ADS Symbol: ZX
ADS Price (Feb. 2, 2015) $1.22
52-Week Hi/Low: $3.15-$1.01
Cash and bank balances per ADS (9/30/2014): $3.46
Shareholders’ Equity per ADS (9/30/2014): $8.22
Cash flow from operating activities (9M2014) $47.9 mil
Cash/Total liabilities (9/30/2014): 68.0%
Long-term Debt (9/30/2014): nil
6
Manufacturing Facilities and Production CapacityManufacturing Facilities and Production Capacity
Hefei
Chengdu
Langfang
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
Off-road steel
wheels
Aluminum wheels
Tubeless steel
wheels
Tubed steel
wheels
(‘000 Units)Benxi
Zhangzhou (Headquarters)
Production Capacity (1)
Note:1. As of December 31, 2013
9,420
5,520
34
Hua’an (Aluminum wheel plant)
500
Industry OverviewIndustry Overview
3.7
4.84.6
4.44.0
0.8
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2009 2010 2011 2012 2013 3Q2014
8
Solid Performance in Challenging EnvironmentSolid Performance in Challenging Environment
China Commercial Vehicle Production Volume
China Commercial Vehicle Production Volume
(MM units) (RMB MM)
China Zenix Revenue China Zenix Revenue
1. Source: CAAM, 2009-2011 Frost & Sullivan Report
2,139
3,200
4,0943,738 3,802
930695
0
1,000
2,000
3,000
4,000
5,000
2009 2010 2011 2012 2013 3Q2013 3Q2014
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2008 2009 2010 2011 2012 2013
Total Bus Sales (,000 units) Total Truck Sales (,000 units)
9
Source: China Statistical Yearbook, National Bureau of Statistics of China
Sustainability of Commercial Vehicle MarketSustainability of Commercial Vehicle Market
Truck & Bus SalesTruck & Bus Sales
(Bn ton km)
Total Freight and Highway Freight Transport Turnover in China
Total Freight and Highway Freight Transport Turnover in China
5,386
6,945
8,026
8,884
10,142
11,030
12,213
14,184
15,932
17,38016,801
710784 869 975
1,135
3,287
3,719
4,339
5,137
5,953 5,574
0
600
1,200
1,800
2,400
3,000
3,600
4,200
4,800
5,400
6,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
(Bn ton km)
Source: CAAM
(‘000 Units)
Highway Freight Turnover Total Freight Turnover
10
Chinese Commercial Vehicle Market Dynamics and TrendsChinese Commercial Vehicle Market Dynamics and Trends
Further urbanization in China continues to drive higher demand for commercial vehicles to haul goods and carry people longer distances with more frequent trips
More stringent anti-overloading measures present market opportunities for OEMs to design lighter-weight trucks in medium- and heavy-duty range
New Government bus safety standards accelerates retirement of school buses
Highway safety legislation raises the bar for safety-related auto components
1
2
3
4
More stringent emission standards and forced retirement of older vehicles will improve environment and strengthen demand for new commercial vehicles
5
11
Investment HighlightsInvestment Highlights
Strong Domestic R&D Capability
Strong Domestic R&D Capability
Diversified Commercial
Vehicle Wheel Products
Diversified Commercial
Vehicle Wheel Products
Strategically-located Manufacturing
Facilities
Strategically-located Manufacturing
Facilities
Most Extensive Distribution Network in
China Aftermarket
Most Extensive Distribution Network in
China Aftermarket
Professional Management with Industry Knowledge
Professional Management with Industry Knowledge
11
22
33
44
55
66
Leading Commercial Vehicle Wheel
Manufacturer in China with Premium
Brand
Leading Commercial Vehicle Wheel
Manufacturer in China with Premium
Brand
12
Zenix is the Leading Commercial Vehicle Wheel Manufacturer in ChinaZenix is the Leading Commercial Vehicle Wheel Manufacturer in China1
• Largest Wheel manufacturer by sales with 19.3% market share
• Broadest product line – 644 wheel models
• Tubed, tubeless and off-road wheels
• Over 84 OEM customers
• More than 4,700 aftermarket sales distributors
• Exports steel wheels to more than 30 countries
• Developed China’s first domestic aluminum wheels
13
with Premium “Zhengxing” Brand…with Premium “Zhengxing” Brand…1
Premium Brand with High Customer Recognition
Note:
1. Source: Frost & Sullivan 2011 Report
Brand Awareness:
Zhengxing is the best known commercial vehicle wheel brand by end-users. In a survey, 92% of responded end-users ranked the brand “very familiar”, and additional 4% ranked “familiar” (1)
Brand Reputation:
Zhengxing is regarded as the best commercial vehicle wheel brand in China by 70% of responded end-users (1)
14
… and Diversified End Markets and Customer Base … and Diversified End Markets and Customer Base 1
Solid and Balanced Growth Across Diversified Customer Base
Diversified End MarketsDiversified End Markets
% of Revenue
Key OEM CustomersKey OEM Customers
China OEM Customers
International Customers
46.8% 41.3%48.5% 48.9% 50.7% 52.4%
37.8% 42.0%37.7% 34.9%
34.6%32.6%
15.4% 16.7% 13.8% 16.2%7.8% 15.0%
2009 2010 2011 2012 2013 3Q2014China AM China OEM Export
15
Awards & Recognitions from CustomersAwards & Recognitions from Customers1
Premium Quality Won High Customer Recognition
“2012 Excellent Supplier Award”
“2014 Quality Award”
“2012 Win-win Partner Award”
“2012 Excellent Supplier Award”
“2013 Quality Excellence Award”
“2013 Class B Supplier Award”
“Ten-year Excellent Supplier Award”
16
Wide Range of Product Offerings to Meet Customers Demand and Well Serve AftermarketWide Range of Product Offerings to Meet Customers Demand and Well Serve Aftermarket2
Tu
be
d S
tee
l W
he
els
Tu
be
d S
tee
l W
he
els
Tu
be
les
s
Ste
el
Wh
ee
ls
Tu
be
les
s
Ste
el
Wh
ee
ls
Off
-ro
ad
S
tee
l W
he
els
Off
-ro
ad
S
tee
l W
he
els
ForkliftsForklifts
LoadersLoaders
Product Types – 644 + modelsProduct Types – 644 + models ApplicationsApplications
Medium-duty &
Heavy-duty Trucks
Medium-duty &
Heavy-duty Trucks
BusesBuses
Light-duty
Trucks
Light-duty
Trucks
Mini Trucks
Mini Trucks
351Series
263 Series
28 Series
Buses
Alu
min
um
W
he
els
Alu
min
um
W
he
els 2
series
17
Advanced Production Technologies to Ensure QualityAdvanced Production Technologies to Ensure Quality2
Wheel Steel with our Special Specifications Wheel Steel with our Special Specifications Advanced Spinning and Pressing Technology Advanced Spinning and Pressing Technology
Rim-shaped Steel Production Technology Rim-shaped Steel Production Technology Comprehensive Quality Management System Comprehensive Quality Management System
18
Wheel Rims Wheel Discs
Preparation of Raw Materials (1) Preparation of Raw Materials and Stamping
Rounding and Welding
Refining
Shaping (1)
Inspection and Testing
Punching Holes
Spinning and Pressing
Punching Additional Holes
Refining
Inspection and Testing
Welding
Testing
Coating
Packaging
Wheel Assembly
Complex Production Process and High Barrier-to-Entry Complex Production Process and High Barrier-to-Entry
Commercial Vehicle Wheel Manufacturing ProcessCommercial Vehicle Wheel Manufacturing Process
Sophisticated Wheel Production Process requires substantial R&D investment and
technical expertise and creates a high barrier-to-entry
2
Note:
1.Process is different for tubed and tubeless wheels
19
Most Extensive Distribution Network in China Aftermarket Most Extensive Distribution Network in China Aftermarket 3
Obtain Information Promptly to Satisfy Market DemandObtain Information Promptly to Satisfy Market Demand
Quickly Penetrate New Markets and Expand SalesQuickly Penetrate New Markets and Expand SalesEasy Access to CustomersEasy Access to Customers
Market Products at Low Sales CostMarket Products at Low Sales Cost
Competitive AdvantagesCompetitive Advantages
Tier-1
Distributors 24 (1)
Exclusive Tier-2Distributors 3,102 (1)
Non-exclusive
Tier-2
Distributors
1,651 (1)
End-usersMaintenance Shops
Note:
1.As of December 31, 2013
20
Strategically-located, Scaled and Vertically Integrated ProductionStrategically-located, Scaled and Vertically Integrated Production
4
• Reduce transportation costs• Quickly respond to customer
needs• Ease labor cost pressure
• Major steel plants
• OEMs
• Port
Benxi
Langfang
ChengduHefei
Zhangzhou
Strategically Located Manufacturing FacilitiesStrategically Located
Manufacturing Facilities
• Unique wheel rim steel and mold manufacturing capability
• Shape steel wheel rim in-house to reduce production cost
Vertical IntegrationVertical IntegrationLarge-scaled Production
and Partnership with Suppliers
Large-scaled Production and Partnership with
Suppliers
• 10 yr+ supplier partner who provides customized steel
• Low prices
Adjacent to:
Hua’an
• Aluminum wheel
21
Strong R&D Capability and a Large Intellectual Property PortfolioStrong R&D Capability and a Large Intellectual Property Portfolio5
4 Invention Patents4 Invention Patents
78 Utility Model Patents
78 Utility Model Patents
20 Design Patents20 Design Patents
Research AchievementsResearch Achievements
National Wheel Test CenterNational Wheel Test Center
High SafetyHigh Safety
Strong DurabilityStrong Durability
Low PulsationLow Pulsation
Light WeightLight Weight
High Quality ProductsHigh Quality Products
R&D focuses on material science and aerodynamic design to improve fuel efficiency, reduce product weight and prolong the lifespan of tires
(approximately 290 new models of steel wheels developed 2011 – 2013)
Strong Durability
Durability: 3x China industry standard
7% fuel saving on every 10% vehicle weight reduction (1)
Fuel Efficiency & Weight Control
1. Source: International Aluminum Institute
22
Strong Management and Board with Proven Track RecordsStrong Management and Board with Proven Track Records6
Financial OverviewFinancial Overview
3,738 3,802
2,820
0
1000
2000
3000
4000
5000
2012 2013 9M2013 9M2014
942
791
593
477
0
220
440
660
880
1,100
2012 2013 9MQ2013 9M2014
20.8%
25.2%
23.6%
18.7%
21.0%
24
Revenue and Gross Profit Revenue and Gross Profit
RevenueRevenue Gross ProfitGross Profit
(RMB MM) (RMB MM) (%)
2,551
461
276
217
103
0
100
200
300
400
500
600
2012 2013 9M2013 9M2014
362
233
178
93
0
80
160
240
320
400
2012 2013 9M2013 9M2014
25
Operating Profit (1)Operating Profit (1)
Notes:
1. Operating profit= Gross profit - Selling cost - R&D cost - Admin cost
Operating and Net Profit Operating and Net Profit
Net ProfitNet Profit
(RMB MM) (RMB MM)
Condensed Consolidate Profit and Loss – Q3Condensed Consolidate Profit and Loss – Q3
26
(’000, except EPS and EPADS, Unaudited) 2013 Q3 2014 Q3 2014 Q3 RMB' 000 RMB' 000 US$' 000 Revenue 930,136 694,937 112,952 Cost of Sales 733,136 593,240 96,423 Gross Profit 197,000 101,697 16,393 Other Operating Income 9,559 10,183 1,659 Net Exchange Loss 1,554 177 29 Selling and Distribution Costs 67,217 56,019 9,127 Research and Development 24,041 27,817 4,532 Administrative Expenses 36,060 37,001 6,028 Finance Costs 5,534 4,833 787 Profit (loss) Before Tax 72,153 (13,967) (2,275)Income Tax Expense (Credit) (11,236) 1,683 274 Profit (Loss) and Total Comprehensive Income (Loss) 60,917 (12,284) (2,100) EPS 0.29 (0.06) (0.01) EPADS 1.18 (0.24) (0.04) Shares 206,500 206,500 206,500 ADS 51,625 51,625 51,625
Condensed Consolidated Summary of Financial PositionCondensed Consolidated Summary of Financial Position
27
(unaudited)December 31
2013 Sept. 30 2014
Sept. 30 2014
RMB'000 RMB'000 US$' 000 ASSETS Inventories 394,758 400,554 65,104 Trade and other receivables and prepayments 971,809 716,260 116,418 Pledged bank deposits 76,600 65,100 10,581 Fixed bank deposits with maturity period over three months 160,000 260,000 42,259 Bank balances and cash 748,744 836,828 136,014 Total current assets 2,361,336 2,288,167 371,907
Property, plant and equipment 1,494,847 1,461,809 237,596 Prepaid lease payments 404,724 397,650 64,632 Total non-current assets 1,942,476 1,932,329 314,072 Total assets 4,303,812 4,220,496 685,980
EQUITY AND LIABILITIES Trade and other payables and accruals 1,132,173 960,692 156,147 Bank borrowings 558,000 558,000 90,695 Total current liabilities 1,701,150 1,525,972 248,025
Total non-current liabilities 89,827 88,741 14,424 Total liabilities 1,790,977 1,614,713 262,448
Total equity attributable to owners of the company 2,512,835 2,605,783 423,532 Total equity and liabilities 4,303,812 4,220,496 685,980
Strategies & Recent DevelopmentStrategies & Recent Development
29
Development StrategiesDevelopment Strategies
Strengthen Market LeadershipStrengthen Market Leadership
Broaden Product OfferingsBroaden Product Offerings
Develop International Market Develop International Market
Enhance ProductivityEnhance Productivity
Further Expand China Aftermarket Distribution Further Expand China Aftermarket Distribution
Enhance R&D CapabilityEnhance R&D Capability
30
12.5
14.9 15.4
0
5
10
15
20
2010 2012 2014
Expansion Plan Will Capture Market DemandExpansion Plan Will Capture Market Demand
Solid Production Capacity Growth Solid Production Capacity Growth
(MM Units)
Built 1st aluminum wheel plant in China
Strong Distribution Network OutlookStrong Distribution Network Outlook
Continue to grow our distribution network, currently with over 4,700 tier-2 distributors and the most extensive in China
Focus on R&D Focus on R&D
Latest R&D projects:
– Introduced first domestic-made aluminum wheel
– To design new advanced steel wheels with improved durability, lighter weight, and better heat dissipation that results in superior life-cycle cost savings
– Developed approximately 290 new models of steel wheels between 2011 – 2013
Development of Aluminum Wheels Development of Aluminum Wheels
Aluminum Wheels
– New facility started operations in Hua’an (part of Zhangzhou)
– Small batches produced
– Aluminum wheels continue to be field-tested by potential customers
– Applying for product certification under US DOT standard and EU standard
– Annual capacity of 500K units
31
Lighter weight, greater fuel efficiency and more competitive pricing to replace imported aluminum wheels and drive new demand from existing steel
wheel users
AppendixAppendix
33
33.2
37.1
30.8
17.2
9.7
0
10
20
30
40
2009 2010 2011 2012 2013
Return on Equity (2) Return on Equity (2)
(%)
Notes:
1. EBITDA= Operating Profit + D&A
2. Return on equity= Net income/ (average equity)
3. 2010 and 2011 EBITDA/margin are including one-time IPO listing costs of RMB17 million and 10 million, respectively
EBITDA and ROEEBITDA and ROE
353
598
746
610
417
109
15
0
200
400
600
800
2009 2010 2011 2012 2013 3Q20133Q2014
EBITDA (1)EBITDA (1)
(RMB MM) (%)
(3)(3)
6.2%
6.2%6.3% 6.7% 7.3%
7.0% 8.1%
1.3%
1.4%
2.1% 2.4%2.4%
2.1% 4.0%
3.3%
2.6%
3.2% 3.7%3.8%
3.4%
0
100
200
300
400
500
2009 2010 2011 2012 2013 3Q2013 3Q2014
Selling & Dist. Expenses R&D Expenses Administrative Expenses
34
(RMB MM)
Operating ExpensesOperating Expenses
Sales %Sales %
Cost StructureCost Structure
% Total Revenue
11.5%11.5%10.1%10.1%10.7%10.7%
Note:
1. 2010 and 2011 full-year administrative expense are adjusted for one-time listing costs of RMB17 million and 10 million, respectively
12.9%12.9% 13.7%13.7%
(1)(1)
13.3%13.3% 17.4%17.4%
12.5%
5.3%
35
DSO (1)DSO (1)
(Day)
Inventory
Turnover Days (1)
Inventory
Turnover Days (1)
Accounts Payables
Turnover Days (1)
Accounts Payables
Turnover Days (1)
Operating MetricsOperating Metrics
Note:
1. Calculated on the basis of the average inventory/accounts receivables/accounts payables balance
53 51
53
61 62
0
6
12
18
24
30
36
42
48
54
60
66
2009 2010 2011 2012 3Q2014
128
146
114 115
101
0
30
60
90
120
150
2009 2010 2011 2012 3Q2014
93 95
73 73
52
0
10
20
30
40
50
60
70
80
90
100
2009 2010 2011 2012 3Q2014
(Day) (Day)
China Zenix Auto International Limited
www.zenixauto.com/en
China Zenix Auto International Limited
www.zenixauto.com/en