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Investor Presentation May 2008

Investor Presentation May 2008. Safe Harbor Statement.

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Investor Presentation May 2008

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  1. Investor Presentation May 2008

  2. Safe Harbor Statement Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Any statements set forth above that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors include, but are not limited to, the company’s ability to market existing and new products, ability to access to capital for expansion, and changes from anticipated levels of sales, future national or regional economic and competitive conditions, changes in relationships with customers, dependence on our flagship product profits and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission and other regulatory authorities. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This presentation was developed by the Company, 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 guaranteed by CHBT as being 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.

  3. Equity Snapshot • Listed on the OTC Bulletin Board • Symbol: CHBT • Price (05/05/08): $10.50 • Market Cap: $179.3 mil • Shares Outstanding: 17.1 mil • Revenue (ttm): $38.0 mil • Net Income (ttm): $12.4 mil • EPS (ttm): $0.72 • P/E (ttm): 14.6 • P/S (ttm): 4.7 • P/B (ttm): 5.1 • EV/EBITDA (ttm): 9.4 Insider / Institutional Ownership: 60.2% / 35.9% Auditor: BDO McCabe Co. Ltd. Fiscal Year End: March 31

  4. Investment Highlights • Strong revenue and profit growth with high margins • Proprietary technology creates sustainable, decisive competitive advantages • Strong brand with significant franchise value • Rising demand for China’s probiotics driven by increasing wealth and consumption of dairy products • Entry into bulk additives market further propels growth • Attractive valuation

  5. Corporate Overview Revenues Net Income ($ in Millions) 30.6 29.3 Mission Statement: To become the dominant supplier of naturally occurring probiotic bacteria in China 22.2 21.9 10.9 9.6 8.1 8.4 FY2006 FY2007 9 Mos 2007 9 Mos 2008 • One of the largest probiotics suppliers in China • Shining is one of the most recognized brands in Shanghai • Proprietary technology offers significant cost and product quality advantages • 307 employees (03/31/2008) • 60 retail centers in China – 46 in Shanghai (03/31/2008) • Operates in retail and bulk additive spaces

  6. What are Probiotics? “Live microorganisms which, when administered in adequate amounts, confer a health benefit on the host” – World Health Organization • Benefits of probiotics • Improves health of G.I. tract • Stimulates immune system • Helps break down nutrients properly • Reduces creation of toxins • Reduces symptoms of lactose intolerance • Decreases prevalence of allergy in susceptible individuals • Reduces some risks associated with certain cancers • 3 basic methods of delivery • Dairy products • Dietary supplements (capsules, tablets, or powders) • Other food and beverages * Sample: Bifido Bacteria, one kind of probiotic Source: ww.usprobiotics.org

  7. Projected Rapid Growth • Chinese Probiotic Usage and Growth (Metric Tons) Source: Domestic Probiotics Market Analysis and Forecast Report by Beijing Leadership Management Consulting Co. Limited

  8. Market Snapshot • Chinese affluence drives demand for health food • Demand for health food in China expected to reach $9.7B by 2010 (Source: Pacific Bridge Medical) • Demand for milk/yogurt increasing significantly • Sales of yogurt drinks rose by 25% per year in 2005 and 2006 • Chinese Bureau of Statistics forecasts tenfold increase in domestic dairy consumption, 2007-2015 • U.S. banks investing in Chinese dairy industry • Restricted use of antibiotics stimulates probiotic demand • Over-prescription of antibiotics in China • Chinese government is encouraging probiotics supplements to combat antibiotics abuse • China has limited probiotics production capacity • Current demand relies on imports from European manufacturers

  9. Current Key Products Product Key Components Uses Calms digestive system, enhances G.I. health and protects / strengthens liver function Shining Essence (48% of sales) L. acidophilus & B. bifidium Monascus rice and L. acidophilus Reduces high blood pressure, high blood sugar levels and hyperlipidemia Shining Signal (13% of sales) B. adolescentis & lentinusedodes Shining Golden Shield (13% of sales) Enhances the body’s immune system Vitamin C, L. Arginine, and other amino acids Facilitates brain cell development and increases alertness Shining Energy (11% of sales) * As of Third Quarter ended December 31, 2007

  10. New Product Development • Additives for Yogurt • Essential to yogurt-based drinks • One of the fastest-growing food product segments in China in 2005 and 2006 • Additives for Milk Powder • Commonly added to infant formula • Improve digestion in babies • Additives for Other Products • Ice creams • Buns and bakery products

  11. Supermarkets Distribution – Current and Planned New Manufacturing Facility Milk/Yogurt Products via Bulk Additives Retailers / Pharmacies Company-Owned Retail Centers

  12. Strategies for Growth • 2 Pronged Strategy • Health food business: geographical expansion - 300 Shining retail centers • Launch food additive business • Leveraging on • Highly recognized Shining brand • Our cost and quality advantage • Strong R&D capability: introduce new and complementary products • Growing demands for probiotics:establish 150 mt / year production facility to capitalize on the market opportunity Shining Retail Center mt = metric tons

  13. Retail Expansion Strategy • 300 retail centers by March 31, 2009 • 550 square feet / center • Initial investment about $40,000 per center • Financed through operating cash flow • Payback period < 1 year

  14. Bulk Additive Strategy • Launch “Shining Probiotics” for bulk additives line • Produce bulk food additives for dairy and animal feed industries • Commenced construction of 150 mt / year production facility in December 2007, to be completed in 2008 CY • Products sold directly to major international and domestic dairy and food manufacturers • Revenue potential of new plant = $90 MM per year CY = Calendar Year; mt = metric tons

  15. New Industry-Leading Facility • The only probiotics plant currently in development in China that will be able to meet the domestic demand for bulk additives Initial revenue opportunity at Phase I capacity = $90MM / year • Phase 1 = 150 mt / year of production capacity • Phase 2 = scalable to 300 mt / year • Production yield allows company to sell for as little as one-sixth competitors’ price while maintaining 70%+ gross margin • Projected to be online in late 2008 CY CY = Calendar Year; mt = metric tons

  16. Proprietary Production Process Bacteria-Based Activation • Leading edge production technology • Fermentation: Very high production yield = low production cost and high margins • Superior probiotic strands: Better functionality and product quality • Micro-encapsulation: Very long shelf life Bacteria-Based Cultivation Multistage Fermentation Bacteria Extraction Granule Emulsification Freeze-Drying Micro-Encapsulation Double-Aluminum Packaging

  17. Management and Director Team Mr. Jinan Song, Founder, Chairman and CEO Founder and CEO since 1999; Masters degree in politics and economics from Harbin Industrial University Mr. Raymond Li, CFO 20 years of finance experience in financial reporting, due diligence, M&A activity, staff management and tax issues Mr. Henry Tai, VP of Corporate Development 20 years of experience in direct investments, corporate finance and auditing in Australia, China, Hong Kong and the United Kingdom Mr. Simon Yick,Independent Director 20 years in corporate finance, direct investment and auditing Dr. Chin Ji Wei, IndependentDirector 20 years of academic experience in horticulture; authored 50+ papers; awarded five patents, Science and Progressive Award Dr. Du Wen Min, Independent Director Specialist in Study of Liver Disease; Deputy Director in charge of the Centre for Adverse Drug Reactions in Shanghai

  18. Strong Financial Performance Net Sales ($ in Million) 31.7% 30.6 CAGR = 45.7% 29.3 22.2 21.9 14.4 FY 2005 FY 2006 FY 2007 9 Mos 9 Mos 2007 2008 Net Income ($ in Million) 18.5% CAGR = 41.3% 10.9 9.6 8.4 8.1 5.5 * For Fiscal Years Ended March 31 FY 2005 FY 2006 FY 2007 9 Mos 9 Mos 2007 2008

  19. Income Statement, 2006-2008 *The earnings per share figures reflect an increase in weighted-average shares related to the share exchange transaction in March 2006. For Fiscal Years Ended March 31

  20. Balance Sheet March 31 December 31 ($ in thousands) 2007 2006 2007 Cash and cash equivalents 26,992 19,841 59,082 Current assets 41,897 31,833 74,499 Total assets 44,580 33,427 85,321 2.0 1.5 3.0 Current ratio Current liabilities 20,670 21,090 24,889 Total liabilities 20,670 21,090 49,889 23,910 12,337 35,432 Stockholder’s equity

  21. Attractive Valuation Company Ticker Market Trailing PEG P/S EV / Cap P/E (ttm) (ttm) EBITDA China-Biotics, Inc. CHBT $ 179.3M 14.58 0.47 4.72 9.35 Martek Biosciences MATK 1.2B 30.72 1.54 3.67 16.41 Perrigo Co. PRGO 3.9B 38.43 1.29 2.54 21.21 Shanghai Jiaoda Onlly Co., Ltd 600530.SS 314.3M 49.32 N/A N/A 4.69 Nu Skin Enterprises Inc. NUS 1.1B 26.59 1.13 0.98 10.06 Herbalife Ltd. HLF 2.8B 16.62 0.92 1.25 8.08 AVERAGE (Excluding CHBT) 1.9B 32.34 1.22 2.63 13.94 Data as of May 5, 2008, Yahoo! Finance. and www.jrj.com.cn

  22. Investment Highlights • Strong revenue and profit growth with high margins • Proprietary technology creates sustainable, decisive competitive advantages • Strong brand with significant franchise value • Rising demand for China’s probiotics driven by increasing wealth and consumption of dairy products • Entry into bulk additives market further propels growth • Attractive valuation

  23. Contact Information CCG Elite Investor Relations Crocker Coulson, President 1325 Avenue of the Americas, Suite 2800 New York, NY 10019 Phone: (212) 245-1010 E-mail：crocker.coulson@ccgir.com Web Site: www.ccgelite.com China-Biotics Inc. Raymond Li, Chief Financial Officer No. 999 Ningqiao Road, Jinqiao Export Processing Zone, Pudong, Shanghai 201206, China Phone: (86) 21-58349748 Web Site: www.chn-biotics.com

  24. Thank you. May 2008

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