Annual Results 2006

Shenzhou International Group Holdings Limited

March 2007Stock code: 2313 HK

1

AgendaAgenda

Financial Highlights

Business Review

Strategies and Plans

Open Forum

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Financial Highlights

3

Financial HighlightsFinancial Highlights

N/A2 cents15 centsFinal dividend (RMB)

10.7351,487389,031Profit attributable to equity holders

N/A38 cents31centsBasic EPS (RMB cents)

3.6406,466420,907Operating Profit

20.02,482,9842,979,530Sales

Change (%)20052006(RMB '000)Year ended 31 December

4

Sales and Profit Attributable to Equity Sales and Profit Attributable to Equity Holders of the CompanyHolders of the Company

2005 2006

351.5

Profit Attributable to Equity Holders of the Company

+10.7%

Strong growth in sales was attributable to:– Continuous and sharp increase in the sales of sports wear– Increase in demand from Japanese customers

– Successful expansion into the European and Chinese markets

Year ended 31 December

2005 2006

2,483.0

Revenue

+20.0%

Year ended 31 December

RMB Mn RMB Mn

2,979.5389.0

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Profit Margin AnalysisProfit Margin Analysis

2005 2006

14.1%

Net Profit Margin

Profit margin was slightly lowered:– Recruited more staff to handle expected orders in 2007, which is

undergo induction and apprenticeship

– Capital expenditures for fixed assets led to higher depreciation

charges

Year ended 31 December

2005 2006

23.1%

Gross Profit Margin

Year ended 31 December

% %

21.4%13.1%

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Turnover Breakdown by ProductsTurnover Breakdown by Products

20.0%496,546100%2,482,984100.0%2,979,530Total

(52.8)%(118,636)9.0%224,4913.5%105,855Other knitting products

101.2%233,1299.3%230,47815.6%463,607Sports wear

18.8%382,05381.7%2,028,01580.9%2,410,068Casual wear

By products

%RMB'000%RMB'000%RMB'000

Change20052006

Year ended 31 December

Orders increased by the customers such as Uniqlo, Decathlon and Russell

Sales of sports wear contributed to the Group’s turnover surged from 9.3% in 2005 to 15.6% in 2006

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Turnover Breakdown by RegionsTurnover Breakdown by Regions

(2.8%)(5,103)7.4%184,2616.0%179,158Domestic Market

20.0%496,546100%2,482,984100%2,979,530Total

146.1%62,4051.8%42,7163.5%105,121Other countries

33.0%26,2093.2%79,4183.6%105,627United States

113.0%179,9966.4%159,34111.4%339,337Europe

11.6%233,03981.2%2,017,24875.5%2,250,287Japan

%RMB'000%RMB'000%RMB'000

Change20052006

Year ended 31 December

Better use of the Europe textile quotas and continual increase in the purchases by Decathlon led to the sales increase to Europe market

Increase in domestic sales were contributed to the supply of products for customers such as NIKE, UNIQLO and ITOCHU

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Healthy Financial PositionHealthy Financial Position

Year ended 31 December

27

21

62

2005

32Creditor turnover days

24Debtor turnover days

62Inventory turnover days

2006

As at 31 December

559.8274.0Cash and Cash Equivalent(RMB Mn)

2,541

1,714

32.8%

2005

15.4%Gearing ratio(debt to equity) (%)

2,794Total assets (RMB Mn)

2,074Net assets (RMB Mn)

2006

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Use of ProceedsUse of Proceeds

Acquisition of new dyeing and finishing equipment for the Group’s China production facilities

Acquisition of new weaving and knitting equipment for the Group’s China production facilities

Acquisition of new cutting and sewing equipment for the Group’s China production facilities

Repayment of long-term bank borrowings

General working capital

Acquisition of new plant and equipment for the production of functional fabrics mainly used in sports wear

PlannedActual

135 199

46 183

41 70

51 51

305 305

48 48

Unit: HK million

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Business Review

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For the year ended 31 December

2006200520042003

95,446

63,792

43,610

35,247

77,699

30,966

38,003

30,782

68,18063,720Cutting and sewing(in thousand pieces of apparel)

37,91933,768Printing and embroidery(in thousand pieces of fabric)

33,58033,870Dyeing and finishing(in tons)

25,69026,360Weaving and knitting(in tons)

Expansion of Production CapacityExpansion of Production Capacity

Acquired fully-automated and high-temperature dyeing system can increase dyeing capacity by 60 tons after testing

Purchased 50 new medium batch dyeing machines to enhance the dyeing capacity to 300 styles daily

Improve knitting, printing and embroidery and manufacturing processes

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Special Purpose Production BuildingsSpecial Purpose Production Buildings

Commenced operation in September 2006 and has garment production capacity of over 1.4 million pieces per month

Expect to put into operation in August 2007, with a monthly production capacity of over 2 million pieces per month

Already commenced operation in 2004 and has garment production capacity of over 2.6 million pieces per month

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Product DiversificationProduct Diversificationand Quality Enhancementand Quality Enhancement

Diversify to sports wear and lingerie wear

Received strong orders from NIKE, ADIDAS and PUMA. Sports wear to the Group’s total sales surged from 9.3% in 2005 to 15.6% in 2006

Laboratory has been awarded accreditation certificates for both fabrics and garments

Established Shenzhou NIKE Design and Development Centre to served as a recognition by NIKE for the high product quality

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Strategic Production Base in CambodiaStrategic Production Base in Cambodia

Production base became matured after a full year development

Production capacity about 850,000 pieces per month

Production base was certified by Nike, Adidas, Puma and Uniqlo

In line with the strategic adjustment of Uniqlo and better serve customers from North America

Ensure stable and timely supply of products

15

Benefited from EU textile quotas, apparel exports to EU rose from 6.4% of the Group’s total sales in 2005 to 11.4% in 2006

Increased contract amount from existing clients (e.g. Turnover from Nike in the Chinese market up 524% to RMB73 million in 2006)

Strong Clientele in Japan and the WorldStrong Clientele in Japan and the World

Apparel sourcing agents

Knitwear and sports wear international brand owners

Sojitz Holdings CorporationItochu CorporationTatsumi Trading Co., LtdChori Co., Ltd

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Strategies and Plans

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Impact on Quota and Cotton Price TrendImpact on Quota and Cotton Price Trend

Quota implementation favourable to the Group as apparel purchasers will only select apparel large scale producers

Favourable cotton harvest in Xinjiang, China led to the stable yarn price in China

Price of chemical fiber may be lowered as a results of substantial drop in international oil prices in the fourth quarter of 2006

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Product DiversificationProduct Diversification

2008 Beijing Olympics and promising future of the Chinese market

Develop the lingerie business to explore

new growth potentialIncrease the sales

of sports wear

Enhance the capabilities of new fabrics development and

garment design

Actively expand to lower stream business to reinforce

the leading position

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Production Capacity ExpansionProduction Capacity Expansion

Continue to expand the production capacity of the Cambodian factory to an established manufacturing base with stable profitability

Ensure smooth commencement of operation of ADIDAS factory and the apparel design centre

Optimise the standardized operation of NIKE and ADIDAS factories with high efficiency

Enhance the technical skills of different process

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Market DiversificationMarket Diversification

Strengthen the leading position in Japanese market and aggressively develop the European, the US and the Chinese markets

To realize market diversification and minimize operating risks

Europe

Asia

US

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MissionMission

To Be

The Most Competitive

Knitwear Manufacturer

In the World

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Open Forum