Hollysys Automation Technologies : HOLI Presentation FY2020Q3

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) [e-mail]