china gerui investor presentation13
TRANSCRIPT
September 2013
2
Safe Harbor
This presentation includes or incorporates by reference statements that constitute "forward-looking statements"
within the meaning and protections of Section 27A of the Securities Act of 1933, as amended and Section 21E of
the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements include
statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions,
estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other
factors, which may be beyond our control, and which may cause the actual results, performance, capital,
ownership or achievements of the Company to be materially different from future results, performance or
achievements expressed or implied by such forward-looking statements. All statements other than statements of
historical fact are statements that could be forward-looking statements. You can identify these forward-looking
statements through our use of words such as "may," "will," "anticipate," "assume," "should," "indicate,"
"would," "believe," "contemplate," "expect," "estimate," "continue," "plan," "point to," "project," "could,"
"intend," "target" and other similar words and expressions of the future. All written or oral forward-looking
statements attributable to us are expressly qualified in their entirety by this cautionary notice, including, without
limitation, those risks and uncertainties described in our annual report on Form 20-F for the year ended
December 31, 2012 and otherwise in our SEC reports and filings. Such reports are available upon request from
the Company, or from the Securities and Exchange Commission, including through the SEC's Internet website at
http://www.sec.gov. We have no obligation and do not undertake to update, revise or correct any of the forward-
looking statements after the date hereof, or after the respective dates on which any such statements otherwise
are made.
3
Capital Markets Summary
LTM = last twelve months (1) Analyst FY2013E EPS guidance of $0.31 per share (2) Growth rate provided by Analyst estimate of 32.3%
Price (9/3/13): $1.58
Revenues (LTM): $208.70 million
Net Income(LTM): $1.11 million
EPS (LTM): $0.02
Market Capitalization: $94.10 million
Price/Book Value: 0.28x
Book Value Per Share: $5.61
Net Cash Per Share: $0.42
2013E P/E (1): 5.1x
2013E PEG Ratio (2): 0.16
4
The Leading High-Precision Steel Processing Company in China
● Headquartered in Zhengzhou, Henan Province, China
● Approximately 1,100 employees as of December 2012
● Annual capacity of 500K tons including 50% chromium plating capacity and 30K tons laminating
capabilities
● Serves over 200 customers in China in consumer spending and construction industries
● Began export of products to customers in Turkey and India in 2012 with additional customers expected in the U.S.
and other emerging markets
Company Overview
China Gerui is a leading niche and high-value added metal processing company that
utilizes advanced technology to produce specialty, cold-rolled steel products
Raw Materials
Hot Rolled Steel
Cold Rolled Steel
Processing
(Narrow + Wide Strip)
Manufacturers End
Applications
5
1 Focus on customized, high value-added, high-margin steel production
2 Leading position in robust niche market in China
3 Unique business model with defendable barriers to entry
4 Proven track record of strong financial performance and profitability
5 Defined long-term growth strategy
7
Seasoned management with local market knowledge
Investment Highlights
Diversification of revenue stream via new technologies and exports
6
6
In-House Value Chain
Hot
Rolled
Coil
Initial
Cutting
Acid
Pickling
Cold
Rolling
Annealing
Temper
Rolling/
Stretching
Cold Rolled
Steel Strips
(Narrow + Wide)
Chromium
Plated and
Laminated
Steel
Production Process
Le
vel
of
Co
mp
lexit
y
Finished Product
Input
Factor Value Creators
7
Defining Our Market
● China Gerui specializes in ultra-thin, high-precision products with
thicknesses mostly from 0.05mm to 0.5, widths up to 1200mm, tolerance +/-
0.003mm
● For CRS products, the thickness can range between 0.05mm up to 7.5mm
● Typical thickness of CHOP raw material HRC: 3mm
● Five series and over twenty types of high-precision strip steel products
0.05mm 0.5mm 7.5 mm
CHOP Commodity-type producers
8
Revenue by Industry Application
China Gerui produces high-precision steel products tailored
to meet exact customer specifications
Food and Industrial Packaging
49%
Construction and Household Decoration
19%
Electrical Appliances
25%
Telecom Wire & Cable
8%
2011
Food and Industrial Packaging
51%
Construction and Household Decoration
23%
Electrical Appliances
17%
Telecom Wire & Cable
9%
2012
9
Economics of CHOP’s Business Model
Made- to- order production
High Inventory Turnover
Low A/R
No Long-Term Debt
Customer
Survey/Order Secure Raw
Material
Receive 30%
down payment
Processing
70% Balance
Collected Upon
Delivery
Cost-plus method of pricing
● Not a commodity business: focused on customized high-margin steel production
● Products meet stringent performance and specification requirements
● Supplier of choice when our existing customers develop new products
10
Outpacing the Competition
● Limited domestic supply because PRC manufacturers lack the equipment and expertise to
produce high-end specialty cold rolled steel
● Steel industry is highly capital intensive: Capital requirements prevent newcomers or
smaller players without sufficient funds from entering the market
CHOP International
Companies
Domestic
Companies
Strategic Focus
First Mover Advantage
Brand Recognition
Nationwide Distribution
Local Market Knowledge
High Product Quality
Financial Resources
11
Financial Performance
USD million
Total Revenue
Adjusted Net Profit/Loss Adjusted EBITDA
USD million USD million
USD million
Gross Profit
FYE 2013 Guidance
Revenue
$165 MM
to
$170 MM
$253.9
$341.8
$265.5
$145.5
$88.7
0
50
100
150
200
250
300
350
400
2010 2011 2012 6months2012
6months2013
$76.0
$101.6
$56.9
$41.3
$8.7
29.9%
29.7%
21.4%
28.4%
9.8%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
0.0
20.0
40.0
60.0
80.0
100.0
120.0
2010 2011 2012 6months2012
6months2013
Grosss profit Gross margin
$47.1
$63.2
$29.8 $24.3
$(0.7)
18.5% 18.5%
11.2%
16.7%
0.0%2.0%4.0%6.0%8.0%10.0%12.0%14.0%16.0%18.0%20.0%
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
Net income Net margin
$70.6
$98.2
$57.6 $41.6
$9.1
0
20
40
60
80
100
120
Note: Net Profii/Loss and EBITDA is adjusted for one-time warrant expenses of $5.7mm in 2011 and,
stock-based compensation expense of $3.7mm in 2012, stock-based compensation expense of $0.33mm
in 1Q 2013
2010 2011 2012 6months
2012
6months
2013 2010 2011 2012 6months
2012
6months
2013
12
Healthy Balance Sheet
Condensed Balance Sheet
(USD 000’s)
Jun-30-2013
(Unaudited)
December-31-2012
(Unaudited)
Cash $203,573 $228,861
Certificates of Deposit 27,971 16,372
Restricted cash 169,845 145,413
Accounts receivable 7,528 2,276
Inventories 24,599 22,763
Current assets 555,972 495,040
Total assets 759,390 673,370
Notes Payable 315,878 259,546
Term Loans 61,590 57,463
Current liabilities 425,001 343,302
Total liabilities 425,001 343,302
Total stockholders’ equity 334,389 330,067
Working capital 130,971 151,738
Inventory turnover per year 4.8 9.2
Days sales in inventory 76.0 39.8
13
Disciplined Growth Strategy
Expand technical expertise and control cost
Expand Market Share
Improve Efficiency
Broaden Product Portfolio
Pursue Acquisitions & Strategic Partnership
Double Capacity
Double capacity to 500K tons with 50%
chromium plating capabilities and added
30K tons laminating capacity
Broaden product portfolio and mix by expanding into
plated and laminated steel production
Develop disciplined
acquisition strategy and
pursue strategic
partnership with industry
leaders
Expand sales channels and
product offerings to replace
imported steel products
14
Production Capacity
Doubled in 2012
250K 100% Utilization
400K
500K
250K 250K
Wide Strip
Narrow Strip
Chromium Plating
Capacity 50K
0
50
100
150
200
250
300
350
400
450
500
2010 2011 2012
250 250 250
150
250
To
ns (
000)
0
50
100
150
200
250
2010 2011 2012
50 50
250
200
To
ns (
000)
• Added 30K
tons of
laminated
production
capacity in
2013
15
● Mingwang Lu, Chairman of the Board and Chief Executive Officer
– Over 20 years of steel industry experience
– CEO of the Company since 2000
– Held various management positions at Zhengzhou No.2 Steel Plant from 1995 to 2000
– Elected as a member of the 9th, 10th and 11th National People’s Congress in Henan Province
– Awarded Excellent Director/Manager in Henan Province, National Excellent Township
Entrepreneur and Expert in Steel Industry of Henan Province
● Edward Meng, Chief Financial Officer
– Joined China Gerui in April 2009, residing in Zhengzhou, China
– Former CFO/Director of the Board of a number of U.S.-listed companies
– Former CFO of MNCs in China (Shell/Koch/Terex)
– Georgetown University MBA, U.S. CPA, experienced in PRC & U.S. GAAP
Seasoned Management Team
16
1 Focus on customized, high value-added, high-margin steel production
2 Leading position in robust niche market in China
3 Unique business model with defendable barriers to entry
4 Proven track record of strong financial performance and profitability
5 Defined long-term growth strategy
7
Seasoned management with local market knowledge
Investment Highlights
Diversification of revenue stream via new technologies and exports
6
17
Contact Information
This Presentation of China Gerui Advanced Materials Group Limited was developed by the Company and Grayling and is intended solely for informational
purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy the Company’s stock. This presentation is based upon information
available to the public, as well as other information from sources which management believes to be reliable, but is not represented by China Gerui Advanced
Materials Group Limited or Grayling as being fully accurate nor does it purport to be complete. Opinions expressed herein are those of management as of the date
of publication and are subject to change without notice.
Company Contact: Grayling:
Email: [email protected] Vivian Chen, Managing Director
Website: www.geruigroup.com Phone: 1-646-284-9427
Email: [email protected]
September 2013