China Ming Yang Wind Power (MY), $375mm Market cap of 41,875mm at price mid-point of $15 Scheduled for Thursday, Sept 30

SUMMARY

. Competition forces prices declines, see below . Wind turbine manufacturing capacity apparently exceeds current demand. The Chinese government is in the process of restricting wind turbine manufacturing capacity growth. The policy is expected to hurt smaller entrants not larger players who are well-positioned with major customers

Annualized price/earnings multiple of 11 is based on an unusual income statement

. 20% gross profit (for the six months ended June 30, 2010) seems unusually low but . 65% of gross profit drops to net income, which is highly highly unusual. . For the six months ended June 30, 2010 paid no taxes and actually received a tax credit.

. Founded in 2006 and appears to have expanded based on industry relation ships, plus acquisition of manufacturing expertise . Well-positioned to benefit from the projected significant growth in China’s wind power equipment industry.

BUSINESS

. Largest non-state owned or controlled wind turbine manufacturer in China, as measured by installed capacity of wind turbines at the end of 2009 . 4.1% market share in terms of newly installed capacity in 2009, according to BTM Consult ApS, or BTM, an independent consulting firm specializing in renewable energy. . Among the five largest domestic branded wind turbine manufacturers in China as measured by newly installed capacity in 2009, according to BTM. . Also according to BTM, China had advanced to first place in the world in terms of newly installed capacity of wind turbines, with 13,750 megawatts, or MW, in 2009, and second place in the world in terms of cumulative installed capacity, with 25,853MW by the end of 2009.

. As of June 30, 2010 had sales contracts with 14 end customers to deliver 1,776 units of wind turbines.

COMPETITION FORCES PRICE DECLINES

. The average contract selling price for MY’s 1.5MW wind turbines and technical support and maintenance services, based on sales contracts entered into in the six months ended June 30, 2009 and 2010, respectively, on a per kW basis, decreased by 22.2% from RMB5,265 per kW to RMB4,098 per kW (US$604.3 per kW). . The average revenue per unit of MY’s wind turbines decreased to RMB7.5 million (US$1.1 million) per unit for the 310 units for which we recognized revenue in the six months ended June 30, 2010, from RMB7.7 million per unit for the 78 units for which we recognized revenue in the same period in 2009. . The decrease in average revenue per unit was principally due to the increasing competition and pricing pressure we faced in the market.

CUSTOMERS

. Include the five largest Chinese state-owned power producers: China Datang Corporation, or China Datang; China Huadian Corporation, or Huadian; China Guodian Corporation, or Guodian; China Power Investment Corporation, or CPIC; and China Huaneng Group, or Huaneng; or their alternative energy subsidiaries, such as China Longyuan Power Group Corporation Limited, or Longyuan, which is a subsidiary of Guodian and a company listed on the Hong Kong Stock Exchange. . According to the Chinese Wind Energy Association, a member of the World Wind Energy Association, these customers were among the top wind farm operators in China as measured by newly installed wind capacity in 2009, with an aggregate installed capacity

PRODUCT LINE

. Consist of two models of wind turbines, each with a rated power capacity of 1.5MW, currently the most widely used wind turbine model in China, designed and developed to cater to the wind and other weather conditions and power grids in China. . Cooperates with aerodyn Energiesysteme, one of the world’s leading wind turbine design firms based in Germany, to develop 1.5MW wind turbines and share intellectual property rights. . Also obtained exclusive licenses from aerodyn Asia Co., Ltd., or aerodyn Asia, to manufacture and distribute in China wind turbines utilizing its advanced super-compact drive, or SCD, technology, with a rated power capacity ranging from 2.5MW to 3MW, or the 2.5/3.0MW SCD wind turbines, and a rated power capacity of 6.0MW, or the 6.0MW SCD wind turbine. . In May 2010, completed the first 2.5/3.0MW SCD wind turbine prototype, which was delivered and installed in a tidal flat area in Rudong, Jiangsu Province in August 2010.

MARKET

. The number of wind turbine manufacturers has increased significantly in the past few years, especially in China, due primarily to the strong support from the Chinese central government. . According to BTM, domestic wind turbine manufacturers increased their market shares in China significantly in recent years, as measured by installed capacity, from 41% in 2006 to 87% in 2009. . The installed capacity of domestic manufacturers of wind turbines are expected to reach 5,000MW per annum by the end of 2010, according to the 11th Five-Year Development Plan for Renewable Energy of China. . Although China has recently implemented measures to curb the over-expansion of wind turbine manufacturing industry, it appears that smaller companies and new market entrants will more likely be negatively affected by this policy change

. While the impact on larger companies like us will be less significant because of their existing scale, advanced technology and relationships with customers.

COMPETITION

. Major domestic competitors include Sinovel, Goldwind, Dongfang and United Power. Sinovel is the largest wind turbine manufacturer in the domestic market, responsible for approximately 20.4%, 22.5% and 25.1% of new wind turbine installation in 2007, 2008 and 2009, respectively, according to BTM. . Key international competitors in China include Vestas from Denmark, Gamesa Corporación Tecnológica S.A. from Spain and GE Energy, the alternative energy arm of GE from the United States.

INTELLECTUAL PROPERTY

As of June 30, 2010, MY had one copyright, 19 patents and ten patent applications pending in China, all of which were granted initial approval.

LICENSING

. Has non-exclusive rights transferred from Mingyang Electrical to use aerodyn Energiesysteme’s blade technologies for MY’s 1.5MW wind turbines. . MY’s technology partners including aerodyn may license their relevant technologies to MY’s competitors or other third parties.

USE OF IPO PROCEEDS

$390mm

• US$230 million for the expansion of production capacity and value chain including

• US$100 million for building our manufacturing facilities for wind turbines and key components

• US$20 million for purchasing manufacturing equipment

• US$110 million for potential acquisitions of, or investments in, components suppliers, although MY is not currently negotiating for any such acquisitions or investments

• US$80 million for research and development, including

• US$65 million for the development of wind turbine technologies, including large multi-megawatt wind turbines and SCD wind turbines, as well as the development of our solar-wind hybrid systems

• US$15 million for the construction of our Guangdong Mingyang Wind Power Technology Research Institute and other research platforms.

 

China Ming Yang Wind	MY, C+, 7					Post IPO shares: 125mm
Wind turbine mfg				June 10
Guangdong, China			2009	6 mos		IPO Mkt
Revenues ($mm)			$173	$342		Cap (mm)
Gross profit %			6%	20%		$1,875
Net income ($mm)*			-$33	$44		@$15
Net income %			-19%	13%
*2% tax benefit for June six months
VALUATION RATIOS
annualizing June 6 mos	IPO Mrkt	Price /	Price /	Price /	Price /	% offered
for sales & earnings	Cap (mm)	Sales	Earnings	BookValue	TangibleBV	in IPO
China MingYang WindMY	$1,875	1.4	11	4.0	4.1	20%
SCORECARD		Mgt	Market	Market Do-	Proprie-	Total
1-5, 5 is high			Growth	mination	tary	rating
20 is perfect		2	2	2	1	7