Automation for Better Life

Hollysys Automation Technologies Ltd.

Investors Presentation
FY2019 Q1
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 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.

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Corporation Overview
 NASDAQ: HOLI
Market Data
 Approximately 60MM shares outstanding

 Founded in 1993
History
 The leading provider of automation & control technologies in China

 Headquartered in Beijing
 Nationwide presence in 60 cities
Operation
 Worldwide subsidiaries and offices in Singapore, Dubai, Malaysia,
India, etc.

 Proprietary technologies and products tailored to Industrial, Rail,

Offerings Subway and Nuclear Industries

 3,300 employees worldwide

Headcounts
 650+ in R&D

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 Agenda

1 Business Overview

2 Industrial Automation

3 Rail Transportation

4 Overseas

5 Management & Market Leadership Position

6 Financials

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Business Overview
Revenue by sector for FY2019Q1
Industrial Automation
Rail Transportation
M&E Solution
Industrial Automation:
• Intelligent plant automation
solution;
• DCS, PLC, MC, SCADA, MES
and etc.

Rail Transportation:
22.1% • High-speed rail signaling
system: ATP, TCC, and etc.
41.6% • Subway SCADA and CBTC

Mechanical & Electrical

Solution and others:
36.3%
• Design, electrification and
engineering service
• Other businesses

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Industrial Automation Growth Drivers

Production
Efficiency

Safety Accelerated Automation and Environment

Concern Control Technologies Demand Protection

Energy
Conservation

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 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 30,000 projects completed.
 China market share:
Around 13 -15%
 Clients:
10,000+ customers, including SOEs, Multinationals, and
SMEs.
 Competitors:
ABB, Siemens, Emerson, Honeywell,Supcon

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Distributed Control System

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Industrial Automation – Nuclear Power Control

90 China Nuclear Market

France 76.3% In # reactors
80

World 11.5%
70
60 56
China 3.0% 50
50 44
38
40 35
30
30 24
20
Nuclear Total Nuclear 20 16
Electricity Electricity Utilization
(TWh) (TWh) (%) 10
France 419 549 76.3%
World 2,441 21,226 11.5 %
0
China 161.2 5,373 3.0 %

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

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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

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Industrial Automation - Discrete Control
City Transportation and
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
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PLC, MC and SCADA
Coal Mining Machine Control
 Provide control  MC1000 motion coordinator
application in coal mining and LK/LE PLC control servo or
industry, as well as stepper motors, up to 32 Axes.
intrinsic safety device  Build-in Industry Ethernet :
 JV with Shenhua Group EtherCAT, RTEX, Ethernet/IP
 Safety: IEC61508 SIL2
Certification
 Security: Achillies Level 1
Certification
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Industrial Software

Industrial Cloud

Management ERP/CRM/SCM/BPM/PLM

Execution MES/APS/WMS/EMS

Monitoring SCADA/APC/BATCH

DCS/SIS/PLC/MC
Control Software

Field Embedded
Device Software

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Industrial Internet of Things (IIOT)

BP BP BP
BP
BP BP BP BP
Application
BP BP
BP BP

MS MS MS
MicroService Pool MS MS MS MS

Model Reservoir CIM CIM CIM CIM CIM CIM CIM

Data Lake

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Industrial Automation – Turn-key Solution

Achievements
Software  SCADA, AMS, MES,
Batch, EMS, APC, etc. • Improved Production
Advanced
Control Solutions Procedure Management

Process Control • Energy Conservation

 DCS, PLC, SIS, etc.

• Enviroment Protection

Instrumentation • Product Quality

Improvement
 Transmitters, Actuators, Valves, Analyzer, etc.

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Industrial Automation – Competitive Advantages

Items HOLI Multis Local Advantages of Hollysys

 Industry leading brand name recognition

Brand Name through more than 20 years’ operation.
 Continuous investment in R&D to deliver
Pricing advanced technology.
 Extensive service network in more than 60
Service
industrial cities across China, focusing on
service and long-term client relationship.
Customization
 Cost structure advantage enables Hollysys
deliver pricing competitive solution and
Quality products.

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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)

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High-speed Rail – Signaling System

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High-speed Rail – Business Overview

High-speed Rail Signaling System

 HSR signaling products: ATP , TCC, LEU and etc.
 In China:
 Market Position:
 1 of the only 3 approved providers in 300-350km/h segment;
 1 of the only 3 approved providers in 200-250km/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-Shenzhen High-speed rail line
 Competitors: Bombardier, Siemens, Ansaldo, Hitachi.

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China Subway Market

In operation Total Length

City
China Subway Market Growth (km) by 2020 (km)
In # kilometers

8,314 Beijing 604 1,000

Shanghai 643 900

4,630
Tianjin 147 304
3,173
Guangzhou 247 700

Shenzhen 179 425

2014 2016 2020E Nanjing 187 330

(As of the end of 2015. Source: China Association of Metros)

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Subway Automation – Business Overview
 Clients:
China and international subway construction authorities
 Market position:
Signaling
One of the key proprietary subway signaling system
System provider
 Competitors:
Siemens, Alstom, Thales

 Clients:
SCADA Beijing, Shenzhen, Guangzhou, Hong Kong MTR
Placeholder for text
 Market position:
SCADA
The leading SCADA (Supervisory Control and Data
Acquisition) system supplier
 Competitor:
Nanjing Automation Research Institute (NARI)

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Internationalization Presence

Beijing Headquarter

Xi’an Facility

India Office
Hangzhou Facility

Singapore Office
Indonesia Office
Bond

Concord

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Hollysys Management Team

Working
Name Title Previous Experience
Years

• General Manager of Hollysys Group

CEO • Master of Computer Science from the 6th Research

Mr. SHAO Baiqing
& 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
at Globe Specialty Metals Inc. and Zoomlion Heavy
CFO 23 years
Industry Science & Technology Co.,Ltd.
• MBA degree in Finance from the Wharton School,
the University of Pennsylvania.
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Market Leadership Position
10,000+ customers JV with China General Nuclear

30,000 projects Power Holding Corp

JV with Shen Hua Group
customer base
 Successful integration of rail team
Industry leading automation and
 Acquisition of Concord and Bond
control brand name

Market
Leadership

 Early entry to high-speed rail Wide range of core technologies

 Early entry to nuclear Various industry expert solutions
 Re-focusing in industrial automation  650+ R&D engineers
 Increasing R&D investment
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State of the Art Production Line

In-house Production

 State of the art production line

 Almost fully automated production process
 Enough capacity for accelerated growth
 Multiple round of precise testing
 Flexible and efficient in house production for different demand

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 Revenue by Fiscal Year
In US$ million

540.8
531.4 544.3
521.3

431.9

349.1
321.7
262.8

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

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 Non-GAAP Net Income by Fiscal Year
In US$ million

121.5
108.9
103.3

86.9

70.1

57.4 57.6

42.0

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

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 National Spread Service Network, Professional & High Quality Service

80.0 70.0%
74.3
60.0%
After Sale Revenue 70.0 60.0%
In US$ million
60.0
50.0%

50.0 46.3
40.0%
40.7
40.0 35.6
30.0%
30.0

20.0%
20.0 14.3% 13.8%

7.6% 13.7% 10.0%

10.0
10.7%
6.9% 7.9%
0.0 0.0%
FY2015 FY2016 FY2017 FY2018
After Sales Revenue After Sale Growth After Sale as Revenue%

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 Gross Margin & EBIT Margin Performance

38.20%
Gross Margin of Each Business Sector FY2018 24.3%
20.14%

32.7%
FY2017 19.8%
Total Solution 35% - 40% 19.4%
Industrial
Automation 37.9%
FY2016 26.1%
Nuclear 60% - 75% 16.7%

41.2%
High-speed Rail FY2015 25.2%
40% - 50%
Signaling 16.5%
Rail
Transportation 34.7%
FY2014 21.3%
Subway SCADA 15% - 20% 17.8%

36.2%
FY2013 19.5%
Design, 16.0%
M&E Solution and
electrification, 10%- 15%
others Non-GAAP Gross Margin Non-GAAP EBIT Margin
installation
Non-GAAP Net Margin

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 Heavy R&D Investment to Continuously Deliver Leading Technologies

R&D Expenditure
New Products Development
In US$ million

36.5 35.8 36.6 36.6

32.5
30.1
25.6 Subway Signaling Motion Control

9.3%
7.6% 8.0%
7.0% 6.7% 6.7% 7.0%

FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 Energy Conservation Industrial Internet of
Environment Protection Things (IIOT)
% of revenue

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 Sufficient Cash On-hand & Solid Operating Cash Flow Performance

Debt In $MM
CAPEX Operating Cash Flow Cash and equivalents + time deposits
23.92
FY2018
In $MM 402.1
122.2

29.1
FY2017
293.8

83.3 84.0 30.4

FY2016
271.8
69.8

31.1
FY2015
46.7 257.5

30.7 28
FY2014
190.5

9.1 8.4 7.9

4.6 3.7 1.9 36.1
FY2013
133.1
FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

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 High Backlog Ensures Another Strong Year Ahead

Backlog Backlog Breakdown as of Sep 30, 2018

In US$ million In US$ million

Industrial
176.5 Automation

556 568.5 569

527.2 524 Rail
488.7
Transportati
389.8 on
244.7
M&E
Solution

95.0

FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

Total Backlog: US$516.2 million

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 Automation for Better Work , Life and Environment

Striving to be a world leading automation and control system provider

Macro Enviroment Strategy

 Automation solutions to offset
 Demographic Change, shortage labor cost increase
of labor  Dedicated customized solutions for
Dedicated customized energy
solutions conservation and efficiency
 Environmental protection improvment
Customized control system:
• Alternative energies: Nuclear power, wind power etc.
• Water process  Leading position in China’shigh-
 Urbanization Process of China
speed rail and subway automation
control market
 Customer’s buying behavior
 Customer- centric approach,
change enlarge service team and enhance
service capabilities

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Automation for Better Life

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

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