Table of Contents

Rpt. 18371835 04-Nov-2011

HARBIN ELECTRIC INC MAXIM GROUP LLC - HE, ECHO

6-9

Rpt. 18358808 03-Nov-2011

HARBIN ELECTRIC INC ROTH CAPITAL PARTNERS, LLC - TOBIN, MARK

10 - 13

Rpt. 18342293 01-Nov-2011

HARBIN ELECTRIC INC ROTH CAPITAL PARTNERS, LLC - TOBIN, MARK

14 - 22

Rpt. 18343519 31-Oct-2011

HARBIN ELECTRIC INC ROTH CAPITAL PARTNERS, LLC - TOBIN, MARK

23 - 26

Rpt. 18315784 27-Oct-2011

HARBIN ELECTRIC INC DISCLOSURE INSIGHT - DISCLOSURE INSIGHT INC

27 - 31

Rpt. 17883103 14-Oct-2011

HARBIN ELECTRIC INC VALIDEA - REESE, JOHN

32 - 43

Rpt. 18234798 13-Oct-2011

HARBIN ELECTRIC INC WRIGHT INVESTORS SERVICE - WRIGHT REPORTS

44 - 83

Rpt. 16571234 10-Oct-2011

HARBIN ELECTRIC INC VALUENGINE, INC. - ANON

84 - 94

Rpt. 18221692 10-Oct-2011

HARBIN ELECTRIC INC SADIF-INVESTMENT ANALYTICS SA - RESEARCH SADIF

95 - 104

Rpt. 18214475 07-Oct-2011

HARBIN ELECTRIC INC ROTH CAPITAL PARTNERS, LLC - RESEARCH DEPARTMENT

105 - 114

These reports were compiled using a product of Thomson Reuters

www.thomsonreuters.com

1

Table of Contents

Rpt. 18211261 06-Oct-2011

HARBIN ELECTRIC INC ROTH CAPITAL PARTNERS, LLC - TOBIN, MARK

115 - 119

Rpt. 16690175 01-Oct-2011

HARBIN ELECTRIC INC NEW CONSTRUCTS LLC - NEW CONSTRUCTS

120 - 132

Rpt. 18185070 30-Sep-2011

HARBIN ELECTRIC INC ROTH CAPITAL PARTNERS, LLC - TOBIN, MARK

133 - 136

Rpt. 18187396 30-Sep-2011

HARBIN ELECTRIC INC MAXIM GROUP LLC - HE, ECHO

137 - 142

Rpt. 18168312 26-Sep-2011

HARBIN ELECTRIC INC ROTH CAPITAL PARTNERS, LLC - TOBIN, MARK, ET AL

143 - 150

Rpt. 18127034 14-Sep-2011

HARBIN ELECTRIC INC MAXIM GROUP LLC - HE, ECHO

151 - 156

Rpt. 18066684 25-Aug-2011

HARBIN ELECTRIC INC MAXIM GROUP LLC - HE, ECHO

157 - 162

Rpt. 18056665 23-Aug-2011

HARBIN ELECTRIC INC ROTH CAPITAL PARTNERS, LLC - TOBIN, MARK, ET AL

163 - 166

Rpt. 18001866 10-Aug-2011

HARBIN ELECTRIC INC ROTH CAPITAL PARTNERS, LLC - TOBIN, MARK

167 - 170

Rpt. 18005012 10-Aug-2011

HARBIN ELECTRIC INC MAXIM GROUP LLC - HE, ECHO

171 - 178

These reports were compiled using a product of Thomson Reuters

www.thomsonreuters.com

2

Table of Contents

Rpt. 18005873 10-Aug-2011

HARBIN ELECTRIC INC ROTH CAPITAL PARTNERS, LLC - TOBIN, MARK

179 - 184

Rpt. 18006037 10-Aug-2011

HARBIN ELECTRIC INC THOMSON REUTERS STREETEVENTS - ANON

185 - 197

Rpt. 17975367 04-Aug-2011

HARBIN ELECTRIC INC MAXIM GROUP LLC - HE, ECHO

198 - 203

Rpt. 17881429 19-Jul-2011

HARBIN ELECTRIC INC ROTH CAPITAL PARTNERS, LLC - TOBIN, MARK, ET AL

204 - 211

Rpt. 17865338 15-Jul-2011

HARBIN ELECTRIC INC WRIGHT INVESTORS SERVICE - WRIGHT REPORTS

212 - 251

Rpt. 17862912 14-Jul-2011

HARBIN ELECTRIC INC MAXIM GROUP LLC - HE, ECHO

252 - 257

Rpt. 17844540 11-Jul-2011

HARBIN ELECTRIC INC DATAMONITOR - COMPANY RESEARCH - DATAMONITOR INDEPENDENT RESEARCH

258 - 286

Rpt. 17817547 05-Jul-2011

HARBIN ELECTRIC INC DATAMONITOR - COMPANY RESEARCH - DATAMONITOR INDEPENDENT RESEARCH

287 - 301

Rpt. 17808159 01-Jul-2011

HARBIN ELECTRIC INC SADIF-INVESTMENT ANALYTICS SA - RESEARCH SADIF

302 - 311

Rpt. 17786481 28-Jun-2011

HARBIN ELECTRIC INC MAXIM GROUP LLC - HE, ECHO

312 - 317

These reports were compiled using a product of Thomson Reuters

www.thomsonreuters.com

3

Table of Contents

Rpt. 17759182 22-Jun-2011

HARBIN ELECTRIC INC DATAMONITOR - COMPANY RESEARCH - DATAMONITOR INDEPENDENT RESEARCH

318 - 345

Rpt. 17749707 21-Jun-2011

HARBIN ELECTRIC INC MAXIM GROUP LLC - HE, ECHO

346 - 351

Rpt. 17750090 21-Jun-2011

HARBIN ELECTRIC INC ROTH CAPITAL PARTNERS, LLC - TOBIN, MARK, ET AL

352 - 355

Rpt. 17744724 20-Jun-2011

HARBIN ELECTRIC INC ROTH CAPITAL PARTNERS, LLC - TOBIN, MARK

356 - 359

Rpt. 17710799 10-Jun-2011

HARBIN ELECTRIC INC MAXIM GROUP LLC - HE, ECHO

360 - 365

Rpt. 17667080 27-May-2011

HARBIN ELECTRIC INC MAXIM GROUP LLC - HE, ECHO

366 - 371

Rpt. 17592608 12-May-2011

HARBIN ELECTRIC INC THOMSON STREETEVENTS - ANON

372 - 386

Rpt. 17590364 11-May-2011

HARBIN ELECTRIC INC ROTH CAPITAL PARTNERS, LLC - TOBIN, MARK

387 - 390

Rpt. 17590905 11-May-2011

HARBIN ELECTRIC INC MAXIM GROUP LLC - HE, ECHO

391 - 398

Rpt. 17604204 11-May-2011

HARBIN ELECTRIC INC ROTH CAPITAL PARTNERS, LLC - TOBIN, MARK

399 - 403

These reports were compiled using a product of Thomson Reuters

www.thomsonreuters.com

4

Table of Contents

Rpt. 17544115 03-May-2011

HARBIN ELECTRIC INC MAXIM GROUP LLC - HE, ECHO

404 - 409

Rpt. 17538157 02-May-2011

HARBIN ELECTRIC INC ROTH CAPITAL PARTNERS, LLC - TOBIN, MARK

410 - 413

Rpt. 17537903 02-May-2011

HARBIN ELECTRIC INC WILLIAM BLAIR & COMPANY - DRAB, BRIAN

414 - 416

Rpt. 17491377 20-Apr-2011

HARBIN ELECTRIC INC ROTH CAPITAL PARTNERS, LLC - TOBIN, MARK, ET AL

417 - 422

Rpt. 17470953 14-Apr-2011

HARBIN ELECTRIC INC MAXIM GROUP LLC - HE, ECHO

423 - 428

Rpt. 17460602 12-Apr-2011

HARBIN ELECTRIC INC DISCLOSURE INSIGHT - DISCLOSURE INSIGHT INC

429 - 433

Rpt. 17421681 30-Mar-2011

HARBIN ELECTRIC INC SADIF-INVESTMENT ANALYTICS SA - RESEARCH SADIF

434 - 443

Rpt. 17402259 24-Mar-2011

HARBIN ELECTRIC INC ROTH CAPITAL PARTNERS, LLC - TOBIN, MARK

444 - 448

Rpt. 17384201 18-Mar-2011

HARBIN ELECTRIC INC WILLIAM BLAIR & COMPANY - DRAB, BRIAN

449 - 455

Rpt. 17378264 17-Mar-2011

HARBIN ELECTRIC INC ROTH CAPITAL PARTNERS, LLC - TOBIN, MARK

456 - 459

These reports were compiled using a product of Thomson Reuters

www.thomsonreuters.com

5

EQUITY RESEARCH

TERMINATION
China November 4, 2011
Closing Price (11/1/11): 12-Month Target Price: 52-Week Range: Market Cap (MM): Shares O/S (MM): Float (MM): Shares Short (MM): Avg. Vol. (000) Book Value/Share: Dividend/Yield: Risk Profile: Maxim Group FYE: December 1Q 2Q 3Q 4Q $23.30 NA $5.82 - $23.72 $731.6 31.4 14.5 8.3 2,340 $20.70 NA Medium Revenues ($M) 2011E 2012E $103.8A $122.1 $131.4A $157.4 $136.1 $155.3 $134.5 $153.8

Harbin Electric, Inc.
(HRBN – Nasdaq – $23.30) Termination of Coverage
We are terminating coverage of Harbin Electric, Inc. due to the company’s delisting from the Nasdaq stock exchange and becoming a privately-held company after a successful management buy-out (MBO) transaction that was closed yesterday, November 3, 2011. Trading of HRBN’s stocks stopped earlier on Tuesday, November 1, after the Market close. A retrospective summary of the MBO process. On October 11, 2010, HRBN’s Chairman and CEO Tianfu Yang (who owned 31% of HRBN at the time) announced a proposal to acquire the remaining outstanding shares at $24/share, along with Baring Private Equity Asia (Baring). However, on November 23, 2010, Yang and Baring terminated their exclusive agreement on the buyout, stirring concerns on the deal financing. On January 10, 2011, Abax Global Capital (Abax), a Hong Kong private equity firm, announced 5.4% equity ownership of HRBN and entered into a Standstill Agreement with the company, suggesting its active roll in the buyout. After going through Ernst & Young-conducted financial due diligence and advisor (Morgan Stanley and Lazard)-conducted operation due diligence, the buyout partners received approval of a $400M term loan from China Development Bank on June 9, 2011 and reached a definitive merger agreement with HRBN’s board on June 21, 2011. Subsequently, the company filed a preliminary proxy statement with the SEC on July 13, 2011, for a special shareholder meeting to vote on the merger; and on September 29, 2011, HRBN filed a definitive proxy statement, indicating SEC’s green light on the deal. A month later (on October 29, 2011), 90.6% of the total outstanding shares and 84.2% of the unaffiliated shares voted approval of the buyout. During the year-long-plus MBO process, HRBN’s shares were uncommonly volatile, with an average of 30%-40% below the announced buyout price of $24/share. In our view, this reflected (1) the mistrust of U.S. investors in Chinese companies in general, and (2) the lack of capital market experience and transparency of Chinese management, both were exaggerated by significant amount of market misinformation. Company description. Harbin Electric, Inc. (HRBN) is a diversified electric motor manufacturer and marketer in China. Its main product lines include industrial rotary motors, specialty linear motors, and specialty micro motors. About 80%-90% of the company’s sales derive from the Chinese domestic market, with the remainder from the international market. Please refer to our previous reports, from July 13, 2010 to September 30, 2011, for further details on our investment thesis. Our last recommendation was a Buy with a price target of $24/share.

$505.9 $588.6 FY Maxim Group Current Current FYE: December EPS P/E 2009A: GAAP $0.77 30.3 2010A: GAAP $2.46 9.5 2011E: GAAP $2.05 11.3 2012E: GAAP $2.49 9.4 LT Earnings Growth 10% - 15% GAAP Quarterly EPS Maxim Group FYE: December 1Q 2Q 3Q 4Q FY Consensus-First Call FYE: December 1Q 2Q 3Q 4Q FY Echo He, MD, PhD ehe@maximgrp.com Current 2011E $0.34A $0.55A $0.59 $0.57 $2.05 Current 2012E $0.51 $0.70 $0.67 $0.60 $2.49

GAAP Quarterly EPS 2011E 2012E $0.34A $0.51 $0.55A $0.70 $0.57 $0.67 $0.57 $0.60 $2.03 $2.57 (212) 895-3718

Maxim Group LLC 405 Lexington Avenue New York, NY 10174 – www.maximgrp.com
SEE PAGES 2-4 FOR IMPORTANT DISCLOSURES AND DISCLAIMERS 6

Harbin Electric, Inc. (HRBN)

DISCLOSURES

Source: Investars.com
Maxim Group LLC Stock Rating System As of:
% of Coverage Universe Expected Performance* Buy Hold Sell Expected total return of 15% or more over next 12 months Expected total return of plus or minus 14% over next 12 months Expected total negative return of at least 15% over next 12 months with Rating 61.8% 32.9% 5.3%

11/4/2011
% of Ratings for which Firm provided Banking Services in the last 12 months 51.1% 0.0% 0.0%

* Relative to Nasdaq Composite. An Under Review (UR) rating represents a stock that the Firm has temporarily placed under review due to a material change.

Maxim Group makes a market in Harbin Electric, Inc. Maxim Group expects to receive or intends to seek compensation for investment banking services from Harbin Electric, Inc. in the next 3 months.

I, Echo He, attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer. Furthermore, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report. The research analyst(s) primarily responsible for the preparation of this research report have received compensation based upon various factors, including the firm’s total revenues, a portion of which is generated by investment banking activities. Valuation Methods: Our Harbin Electric, Inc. valuation is based on the announced $24 per share price in the leverage buyout proposal. It is also supported by our comparable company analysis and discount cash flow method.

Maxim Group LLC

2

7

Harbin Electric, Inc. (HRBN)

Price Target and Investment Risks: Aside from general market and other economic risks, risks particular to our Harbin Electric, Inc. rating include: (1) Failure of the proposed LBO to be completed; (2) Slowdown of Chinese economy; (3) Raw material price increases; (4) High competition in industrial motor market; (5) Difficulties of developing linear motor market; and (6) Potential equity issuance.

RISK RATINGS
Risk ratings take into account both fundamental criteria and price volatility. Speculative – Fundamental Criteria: This is a risk rating assigned to early-stage companies with minimal to no revenues, lack of earnings, balance sheet concerns, and/or a short operating history. Accordingly, fundamental risk is expected to be significantly above the industry. Price Volatility: Because of the inherent fundamental criteria of the companies falling within this risk category, the price volatility is expected to be significant with the possibility that the investment could eventually be worthless. Speculative stocks may not be suitable for a significant class of individual investors. High – Fundamental Criteria: This is a risk rating assigned to companies having below-average revenue and earnings visibility, negative cash flow, and low market cap or public float. Accordingly, fundamental risk is expected to be above the industry. Price volatility: The price volatility of companies falling within this category is expected to be above the industry. High-risk stocks may not be suitable for a significant class of individual investors. Medium – Fundamental Criteria: This is a risk rating assigned to companies that may have average revenue and earnings visibility, positive cash flow, and is fairly liquid. Accordingly, both price volatility and fundamental risk are expected to approximate the industry average. Low – Fundamental Criteria: This is a risk rating assigned to companies that may have above-average revenue and earnings visibility, positive cash flow, and is fairly liquid. Accordingly, both price volatility and fundamental risk are expected to be below the industry.

Maxim Group LLC

3

8

Harbin Electric, Inc. (HRBN)

DISCLAIMERS
Some companies that Maxim Group LLC follows are emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. The securities discussed in Maxim Group LLC research reports may not be suitable for some investors. Investors must make their own determination as to the appropriateness of an investment in any securities referred to herein, based on their specific investment objectives, financial status and risk tolerance. This communication is neither an offer to sell nor a solicitation of an offer to buy any securities mentioned herein. This publication is confidential for the information of the addressee only and may not be reproduced in whole or in part, copies circulated, or disclosed to another party, without the prior written consent of Maxim Group, LLC (“Maxim”). Information and opinions presented in this report have been obtained or derived from sources believed by Maxim to be reliable, but Maxim makes no representation as to their accuracy or completeness. The aforementioned sentence does not apply to the disclosures required by NASD Rule 2711. Maxim accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to Maxim. This report is not to be relied upon in substitution for the exercise of independent judgment. Maxim may have issued, and may in the future issue, other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. Those reports reflect the different assumptions, views and analytical methods of the analysts who prepared them and Maxim is under no obligation to ensure that such other reports are brought to the attention of any recipient of this report. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by Maxim and are subject to change without notice. The price, value of and income from any of the securities mentioned in this report can fall as well as rise. The value of securities is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities. Investors in securities such as ADRs, the values of which are influenced by currency volatility, effectively assume this risk. Securities recommended, offered or sold by Maxim: (1) are not insured by the Federal Deposit Insurance Company; (2) are not deposits or other obligations of any insured depository institution; and 3) are subject to investment risks, including the possible loss of principal invested. Indeed, in the case of some investments, the potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to pay more money to support these losses.

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST

Maxim Group LLC

4

9

Mark Tobin.72 31. 12-Mo. Avg.6 $87.0 16.2A 426.43 $732.$23.8A 131. prior estimates. 2011 Global Energy & Industrials: China Harbin Electric.0 8. ratings.4A 106.82 .0 0.High Shares Out.com Sales (800) 933-6830. Target Price Changed Stock Data 52-Week Low . Vol. Inc.645.0 4.NASDAQ | Non-Covered Dropping Coverage Estimates Changed. (mil) Mkt. Effective with this note. Pro-forma EPS for all periods Revenue ($ millions) Yr Dec 1Q 2Q 3Q 4Q YEAR —2010— 105. Cap.Price Target Cash (mil) Tot.41A 0.5A 105.(mil) 3-Mo.53A NA NA NA —2012E— Curr NA NA NA NA NA $5. Trading of the company's common stock was suspended on Nasdaq after the yesterday's close. The company has filed the articles of merger with the Nevada Secretary of State.com Emma Jia Zhao. (949) 720-5775 mtobin@roth. | HRBN .4A NA NA NA —2012E— Curr NA NA NA NA NA 20.62A 2.0 12.0 HRBN One-Year Price and Volume History 30 25 20 15 10 5 Price May-11 Aug-11 Sep-11 Dec-10 Important Disclosures & Regulation AC Certification(s) are located on page 3 to 4 of this report.344 NA $87.65A 0. Roth Capital Partners.30 . LLC | 888 San Clemente Drive | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC Nov-11 Feb-11 Mar-11 Jan-11 Jun-11 Apr-11 Oct-11 Jul-11 10 . ezhao@roth. Trading (800) 933-6820 COMPANY NOTE | CHINA RESEARCH | November 3. we had assigned shares of HRBN a NEUTRAL rating and $24.5A —2011E— Curr 103.72A —2011E— Curr 0. Debt (mil) Est.4 NA HRBN: Dropping Coverage Due to Previously Announced Privatization We are dropping coverage of HRBN given the closing of the going-private transaction. and price target should not be relied upon.00 PT.4 1. Prior to dropping coverage. Rating Changed.66A 0.79A 0.$23. EPS Growth Auditor: FRAZER FROST LLP EPS $ Yr Dec 1Q 2Q 3Q 4Q YEAR —2010— 0.4A 109. 3Yr. CFA.

Inc.November 3.HARBIN ELECTRIC. linear motors and their integrated application systems. Ltd (HTFE). controller automation systems.. 2011 VALUATION NA RISKS NA COMPANY DESCRIPTION Harbin Electric. China Company Note . Page 2 of 4 11 . manufactures and sells an array of industrial electric motors. The Company operates. through its indirect wholly owned subsidiary. automobile specialty micro-motors. customized linear motors. engineers. Harbin Tech Full Electric Co. and other special motors. INC. develops. The Company offers three key product lines: industrial electric motors. and automobile specialty micro-motors.

/Past 12 Mos. and as such. that indicates an expectation of a total return of at least 10% over the next 12 months.November 3. Neutral: A rating. which at the time it is instituted and or reiterated.3 0. except for the first box. INC. Distribution of IB Services Firmwide IB Serv.0 5. price target and estimates should no longer be relied upon for UR-rated securities. directly or indirectly. I also certify that no part of my compensation was. at any given point in time. Prior rating. Inc.2 25. information and facts Page 3 of 4 12 .ROTH employs a rating system based on the following: Buy: A rating. that indicates an expectation of a total return between negative 10% and 10% over the next 12 months. Each box on the Rating and Price Target History chart above represents a date on which an analyst made a change to a rating or price target. price target and estimates for the security. Disclosures: ROTH makes a market in shares of Harbin Electric. ROTH changed its rating system in order to replace the Hold rating with Neutral. which at the time it is instituted and or reiterated. ROTH changed its rating system in order to incorporate coverage that is Under Review. The material. On May 26. Not Covered [NC]: ROTH does not publish research or have an opinion about this security. which may only represent the first note written during the past three years.1 Our rating system attempts to incorporate industry. which at the time it is instituted and or reiterated. Ratings System Definitions . Sell: A rating. China Company Note .0 0 0 4 28. company and/or overall market risk and volatility. which at the time it is instituted and or reiterated. Distribution Ratings/IB Services shows the number of companies in each rating category from which Roth or an affiliate received compensation for investment banking services in the past 12 month. 2011 Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. is or will be. Consequently.HARBIN ELECTRIC. related to the specific recommendations or views expressed in this report. LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. as of 11/02/11 Count Percent 53 28.0 9 13. buys and sells from customers on a principal basis. indicates the temporary removal of the prior rating. that indicates an expectation that the price will depreciate by more than 10% over the next 12 months.6 Rating Buy [B] Neutral [N] Sell [S] Under Review [UR] Count 189 69 0 14 Percent 69. our investment rating on a stock and its implied price movement may not correspond to the stated 12month price target. 2010. 2011. Under Review [UR]: A rating. ROTH Capital Partners. On September 28.

Copyright 2011. an investment in the stock may involve a high degree of risk and may not be suitable for all investors. Additionally. Additional information is available upon request. an offer or solicitation of the securities discussed. 2011 discussed in this report other than the information regarding ROTH Capital Partners. but are in no way guaranteed to be complete or accurate. INC. industry or security discussed in the report. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Member: FINRA/SIPC. LLC and its affiliates.November 3. No part of this report may be reproduced in any form without the express written permission of ROTH. Any opinions or estimates in this report are subject to change without notice. however. This report should not be used as a complete analysis of the company. are from sources believed to be reliable. China Company Note .HARBIN ELECTRIC. Page 4 of 4 13 . This is not.

com Emma Jia Zhao.CCCL's shareholders owning 13. companies. Our discussions with PEs. It includes a table with details for each company pursuing privatization. given its relatively large size and high profile. & Dual-Listing (8th Edition) This report provides an update on the activity within the U. ezhao@roth. We continue to view the Hong Kong stock exchange as the likely exit for most of these privatizations. We view China's credit markets as a key pacing item for the next wave of privatizations.SNDA announced the receipt of a preliminary non-binding proposal letter from Chairman/CEO to take the company private for US $41.S.Mark Tobin. with tentative financial support from Macquarie. offer price remained at $2. have established a definitive process and timeline for these transactions. to acquire all outstanding shares of the company.com Sales (800) 933-6830. and service providers indicate that interest in privatizations remains high. PRIVATIZATION UPDATE Since our last update (dated Sept 26. This.CRIC announced receipt of non-binding proposal from E-House (NYSE: EJ). Trading (800) 933-6820 INDUSTRY NOTE | CHINA MACRO | November 1. private and public companies. CCCL's shareholders (former SPAC founders) approached the board with a suggestion to take the company private. PE investment.HRBN shareholders approved privatization. Important Disclosures & Regulation AC Certification(s) are located on page 7 to 9 of this report. Furthermore. 2011 China U.1% stake. HRBN's going-private deal was approved by shareholder vote. LLC | 888 San Clemente Drive | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC 14 . but the group would continue to have discussions with the board on possible strategic alternatives to maximize shareholder value. Each CRIC share would be exchanged for $1. Oct 28 . Roth Capital Partners.Privatization. We anticipate future deals will trade at narrower discounts to the proposed buy-out prices. including PE and VC funds.-Listed China . PE Investment.6 E-House shares.65 per share in cash. ROTH co-hosted the ROTH Capital . particularly after a definitive agreement is signed.4% of the company. We view the imminent closing of HRBN's buy-out (expected within one week) as a key catalyst for other privatization candidates. CADC announced board approval and signing of a definitive agreement (which we believe as one of the major meaningful milestones in privatization activities).S. The proposal was later declined by the board. and duallisting. Oct 17 . currently the largest shareholder owning 54. re-listing. the company expects deal completion within one week. combined with several other privatizations that have closed within the past several months.60 cash and 0. TAKE-AWAYS FROM BEIJING VC/PE CONFERENCE Last week. which was attended by over 800 people. the group filed an updated 13D stating that the board had declined such option. particularly with several successful transactions.ChinaVenture Investment Conference in Beijing. Key events over the past month include: s s s s s Sep 27.35 per ADS in cash. CFA. Oct 24 .4% of the company disclosed the submission of initial take-private proposal to company board via a 13D filing. but look to SNDA's privatization to provide an indication of the prospects for re-listing on mainland exchanges. The buyer group controlled approximately 68. on Oct 4. (949) 720-5775 mtobin@roth. Oct 29 . plus two new privatization/buy-out announcements (SNDA and CRIC).CADC announced entering into a definitive agreement and plan of merger with the buyer group led by company's Chairman/CEO and COO.-listed China sector related to privatization. 2011). and service providers.

Vice Chairman & CEO Chairman & COO China Real Estate (4) Fushi Copperweld China Fire & Security Information Corp CFSG CRIC FSIN Bain Capital E-House (China) Chariman & CEO.P.November 1.8M Board Approval / Definitive Agreement Initial Filing of SC 13E3 Voting Requirement Implied Equity Value (3) Pending N/A N/A $47.49 (2. 2011.3M BofA.2x $1.1x $0. LLC Source of funding N/A N/A N/A N/A N/A Intended to be financed by debt Debt Financing Detail Post-deal Private Equity Ownership Board Financial Advisor Board Legal Advisor (1) N/A N/A N/A Skadden.1M. Dunn & Crutcher Gibson.8M.60) Pending N/A N/A $91. / Lazard Freres & Co.50 26.6M China Development Bank: US$ 400M Abax: US$25M 23.3x $23.6 shares of EJ common stock plus $1.6x $2.86 (1.00 100. Slate.5% --50.0% --10. Abax Holdings Limited (NYSE: Global Capital (Management's 59. Expected to close in Q4' 2011 Under board review Under board review. Dunn & Crutcher LLP LLP Premium of bid price above the closing price on previous trading day before announcement (2) Valuation multiples are based on bid price over TTM and NTM EPS as of deal announcement date.30 (97.36 (44. N/M indicates not meaningful (3) Implied Equity Value is calculated based on latest available bid price and shares outstanding number as disclosed (4) The offer price is 0.1%) Nov-03-2010 29.3M Jun-20-2011 Jul-13-2011 >50% total & >50% of disinterested shares $750. N/A indicates not available. later delisted from NYSE Amex and moved to OTC on August 18.4x $8.2% $11. LLC / Morgan Joseph TriArtisan LLC Not disclosed Preliminary discussions with J. ROTH Capital Partners Page 2 of 9 15 . (exclusive partnership with Theme Investment terminated on Sept 2. 2011. (2) Equity: Bain$160. Mgmt rollover$264.2M Oct-11-2010 40.8x 5.95 (10. (2) Equity: Abax cash$38.1% stake already agreed to EJ) vote for the agreement) Mar-07-2011 59.6 in cash. Meagher & Flom. Shares halted since Sept 21 at a last price of $1.8x 7.8% --17.1% $6.7%) Board approved Jun-30-2011 14. Abax rollover$40.65 15.2x 36.9x 14. Abax note-$25M.8% --5.9x 10. Shares halted starting Apr 11.6% $24.5%) Oct-17-2011 68. LLP N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A BofA Merrill Lynch N/A N/A Cowen and Company. Expected to close within a week Apr-29-2011 31.1M May-20-2011 Jun-10-2011 >75% total & >50% of disinterested shares $257.25 22.00 43.5x $5.4%) Board informed.60 (62. we convert to dollar value using EJ's closing price on Oct-27-2011 Source: Company Filings.4% $41.7x 3.6% $12.5% $2.8M (1) Debt: $60M.26 (14. HSBC US$ 60M 75. 2011 Buyers (as announced) Puda Coal PUDA Chairman Shanda Interactive SNDA Family of Chairman & CEO Announcement Date Pre-deal Buyer/mgmt Ownership % Bid Price per Share or ADS Premium over previous day close Price Revision Date Revised Price P/E (TTM) (2) P/E (NTM) (2) (1) Jul-26-2011 49.CHINA Summary of On-going Deals China Advanced Construction Materials China Natural Gas CADC CHNG Chairman & CEO.4% --8.7%) Under board review Harbin Electric HRBN Chairman & CEO. data sourced from ROTH research if companies are covered.262. 2011 Pending N/A N/A $360.0% $4. or Bloomberg if otherwise.62 22. Abax Global Capital China Macro .0x $39. Arps.2% --8.2% Morgan Stanley & Co.8% Barclays Capital Shearman & Sterling LLP Pending N/A N/A $937.3x 16. Citi.2x $6.6%) Oct-28-2011 54.9M Pending N/A N/A $439.00 20.9%) Current Price (10/31/2011) Current Discount to Bid Price Status Shareholder meeting Under board review approved deal on Sept 22.1% $9.75 (3.1%) Shareholder meeting approved deal on Oct 29. Morgan No plan to involve N/A N/A Gibson.35 23.0M Pending N/A N/A $2.2% --2. Bloomberg.8x 8.0M (1) Debt: CDB-$400M.5% --49. Mgmt rollover$51.7M. 2011.

data sourced from ROTH research if companies are covered.1% $1.3% --N/M N/A Sinoenergy SNEN Skywide Capital Management (owned by management) SOKO Fitness & Spa Group SOKF Chairman & CEO (key mgmt) together with several existing institutional investors Jul-25-2011 90.9% $6.4% --15. 2011.0% --N/M 18.32 26.16 44. Arps. Primavera (key mgmt).8% $4. LLC Shearman & Sterling LLP 77.3x Nov-11-2010 55. 2011 Sept 15.0% $4.4x 8.10 $6.00 $13.3x (3) Completed on Feb Board declined the Withdrawn on option 24.0x Mar-10-2008 39.4% May-31-2011 $7.5% --N/M 11.52 N/A --N/A N/A May-16-2011 34.20 8. GM founders) Investment Sep-27-2011 13.10 58.50 $3.3% $19. Meagher & Flom LLP / Maples and Calder Not involved Brean Murray.8 in cash.7x NA Apr-08-2010 83. Chairman & CEO Chairman & CEO shareholders Chairman & CEO. 2011 27.20 $6.70 21. Mullin. 2011 11.50 $4.0x 13.0x 90.7x Qiao Xing Mobile (2) China Macro .6% Mar-21-2011 $8. Richter & Hampton LLP / Thorp Alberga N/A Morgan Stanley Asia Limited NA N/A Not disclosed N/A N/A Premium of bid price above the closing price on previous trading day before announcement The offer price is 1.0% $10. Not involved Not involved Not involved Not involved Not involved CITIC Bank US$ 25M Nov-01-2010 Nov-26-2010 N/A Debt Financing Detail Board Approval/Definitive Initial Filing of SC 13E3 Not involved Not involved Oct-28-2010 N/A N/A N/A May-31-2011 Jun-14-2011 Jan-03-2011 Oct-22-2010 >50% of disinterested voting shareholders representing >75% of voting disinterested shares Not involved Not disclosed Oct-12-2009 Nov-13-2009 N/A N/A N/A Jun-27-2011 N/A N/A Voting Requirement >50% of toal shares N/A N/A >50% of disinterested shares >50% total & >50% of disinterested shares >2/3 of voting shares at EGM >50% of total shares N/A N/A >50% of shareholders representing >75% of voting shares N/A Post-deal Private Equity Ownership Board Financial Advisor Board Legal Advisor (1) (2) Not involved Stephens Inc.2x Mar-08-2011 20. Lewis & Bockius LLP N/A N/A N/A Duff & Phelps. form merger.55 10. 2011 Standard Chartered US$ 70M Mar-21-2011 May-03-2011 China Development Bank US$ 500M Apr-20-2011 May-31-2011 Completed on Aug Abandoned due to Completed on Sep Completed on July Completed on Aug Completed on Apr Withdrawn on Jun 25.9 shares of XING common stock plus $0. 2011 form merger.10 9. Arent Fox LLP Not involved N/A Not involved N/A Not involved Morgan Stanley Asia Limited Sheppard. Capital Ally. 2010 27.90 $1. (original SPAC CDH Inservice ARCH. N/M indicates not meaningful Source: Company Filings.2% $10. Carret & Co.6% --8.November 1.0x 8. we convert to dollar value using XING's closing price on Sept-8-2010 (3) Valuation multiples are based on bid price over TTM and NTM EPS as of deal announcement date.72 $1.92 $3.03 67. Chairman & CEO. Sept 16. Slate. Shortlack of quorum on 29. 2011 Macquarie has proposed to provide the financing N/A N/A Completed on Aug Completed on 19.60 54.0% --28.2% Houlihan Lokey Shearman & Sterling LLP / Maples and Calder Not involved Imperial Capital.4% --N/M N/A Jun-27-2011 95.4% N/A $2. 2011. 2008 Apr 7.28 48. Morgan.15 15. 2011. LLC O'Melveny & Myers LLP and Walkers 27.00 $7.9x Mar-25-2011 77.50 $3.0% $3.9x Oct-12-2009 39.5% --6.3x 7. Short15.1% $1.8% $8. N/A indicates not available.78 19.9x Tiens Biotech Group Tongjitang Chinese Medicines TCM TBV TIENS (USA) Hanmax CEO & Director Investment (controlled by (owned by CEO) / Fosun Chairman & CEO) Announcement Date Pre-deal Buyer/mgmt Ownership % Bid Price per Share or ADS Price 1-Day Prior to Announcement Premium over previous day close (1) Price Revision Date Revised Price P/E (TTM) P/E (NTM) Status (3) Oct-28-2010 23.00 $6. Inc. or Bloomberg if otherwise.5% --125. 2011 Buyers (as announced) QXM Parent Company Qiao Xing Universal Resources.7% Bank of America Merrill Lynch Skadden.1% $7. Bloomberg. ROTH Capital Partners Page 3 of 9 16 .CHINA Summary of Completed or Abandoned Deals BMP Sunstone BJGP Sanofi-Aventis China Security & Chemspec Surveillance China Ceramics CNinsure International Technology Funtalk China CCCL CISG CPC CSR FTLK Group of TPG Asia. (Nasdaq: XING) Sep-09-2010 61.8x 5.66 30.

increasing competition.00 PT . Depressed steel prices and continuous market consolidation have caused many steel makers facing challenging market conditions.00 target is based on 6. potential slowdown of new housing construction and failure to complete and integrate acquisitions or capacity expansion. Factors that may impede CFSG shares from reaching price target include a buyout process does not materialize or substantial weakness in the company's fundamentals.6x our FY11 EPS estimate. accounting for more than half of quarterly revenue. Page 4 of 9 17 . From 2009 to 2010. substituted by other external wall decorative materials. Government's policies with the intention to push down housing price might adversely affect developers' confidence. the exterior ceramic tile industry is highly fragmented. extended customer payment period may have led to recent CFSG decrease in cash and increasing A/R balance. CFSG's major revenues come from the iron and steel industry.. RISKS Change in macro policies. Failure to complete and integrate acquisitions or capacity expansion . Concentration risk. increasing competition will lower industry's selling price. Concerns on over-capacity. thus decrease the company's profitability. which in turn. The company's revenue recognition and profit generation is currently highly relied upon its recently signed $92M total solution contract with Wuhan Iron and Steel. Inc. Given product similarities. Potential slowdown of new housing construction . VALUATION Our $9. Factors that may impede share price from reaching the target include usage limitation due to safety and high energy consumption concerns. Any unexpected changes or progress delay in project execution will significantly impact CFSG's financial performance. have placed the industry under close monitoring by the central government.November 1. RISKS Safety concerns and high energy consumption may limit the use of exterior ceramic tiles Exterior ceramic tiles may be substituted by other external wall decorative materials Increased competition may reduce profitability . average coal price increased 15%.Coal is a key input of ceramic tiles production and accounts for 20% of COGS. and significant changes in the steel industry can impact the company business prospect. Extended customer payment period. Ltd. The increase of coal price may adversely affect the cost structure .00 price target is based on the going private offer price.CHINA China Macro . Failure to successfully integrate acquisitions could significantly impact the company's growth prospects.The exterior ceramic tiles industry is directly impacted by new housing construction. Inc.S and in China.081 per ton. China Fire & Security Group. slower the pace of new housing construction. Inability to transfer the coal price increase will narrow the profitability in the future. Accordingly.Our $16. from RMB 936 per ton to RMB 1.Capacity expansion through internal build or acquisition are the main driver of the company's growth.With over 300 manufacturers. accompanied with imposed tariffs on steel exports. VALUATION We maintain our BUY rating and $16. a discount to peers in the U. horizontal consolidations. 2011 China Ceramics Co. Fushi Copperweld.

The inability to complete this transaction could negatively impact share performance. Going private transaction risk. HRBN is subject to market fluctuations and volatility of two major raw materials. and rapid decline in copper prices. Fushi's selling prices are highly dependent on copper.50 price target is based on a 6. Factors that may impede HRBN shares from reaching our price target include: • • There are still numerous steps in the privatization process. 2011 Our $10. This lawsuit could consume financial and management resources. can be largely affected by central and local government policies. we note that his tenure with FSIN is limited and he has yet to oversee the filing of an audited annual report for the company.50 per share.50. Harbin Electric. which is led by Shanda's Chairman & CEO. RISKS Volatile raw material prices. VALUATION Our $24 PT is based on the offer price of the proposed buy-out. RISKS Change in macro policies in China.0x multiple applied to our 2011 EPS estimate of $1. aluminum and steel prices. Inc. a shareholder class action lawsuit was filed against the Company and certain officers and directors. such as delay in construction. Shanghai Hongtai. The company's current CFO.CHINA VALUATION China Macro . The development of urban railways can experience delays that out of control of HRBN. including Copperweld. and Dalian Jinchuan. Management turnover. copper and steel respectively. Execution/integration risk.70/share in cash. We note that our target is slightly below the proposed Fu/Abax going private bid price of $11. Associated with its going private proposal. presenting financial and business risk. Factors that may impeded shares of SNDA from achieving our price target include: 1) Shanda's Board of Directors not accepting takeout offer 2) Inability for 'Buyer Group' to finance the transaction and 3) 'Buyer Group' withdrawing privatization offer. FSIN continues to integrate its acquired operations. Two of HRBN's major catalysts. some of which could lead to delays in completing the transaction.13 and adding back $3. RISKS The investment in shares of Shanda Interactive involves various risks that could adversely affect the company's operations. oil pump for oilfield and linear motors for urban metro lines. these risks include the following: Page 5 of 9 18 .35 per ADS from a 'Buyer Group'. Craig Studwell. Its overall global expansion strategy faces execution risk due to a variety of factors. Litigation risk. Shanda Interactive Entertainment VALUATION Our $41 price-target is based on the preliminary non-binding proposal offer of $ 41. Changes in these prices may adversely impact demand for FSIN's bi-metallic products and its operational results.November 1. was appointed in October 2010. Studwell as highly experienced and capable. Fu) and Abax Global Capital to acquire all of the outstanding shares of common stock for $11. Factors that may impede FSIN shares from reaching price target include failure of completion of the going private buy-out. unsuccessful ramping up of CCS facilities in China. FSIN's Board of Directors received a going private proposal from its Chairman (Mr. In November 2010. While we view Mr. A slow-down in China''s economic growth and continued inflation could impact sales and compress margins. Volatile raw materials costs.

The majority of SNDA's revenues come from its two oldest games MirII and Woool (70% of its net revenues in 2008). the company could miss our earnings estimates. Shanda's mgt has a track record of drastically changing company strategy.CHINA China Macro . Should players lose interest in these games or if pirated versions of these games become more rampant. The online game industry is regulated by various ministry departments of China. Page 6 of 9 19 . and changing its revenue model from pay-to-play to free-to-play. Increasing government regulation. which was then banned by the state TV regulators. Should the government decide to increase regulation and enforcement of any existing laws or introduce new regulation it would likely have an adverse impact on both the potential growth of the industry and SNDA. their willingness to take bold risks it may cause near-term earnings uncertainty. Increasing competition. Uncertainty in pipeline. and minors from entering internet cafés. with hundreds of new games being introduced each year and new operators entering the market. player usage time. While this reflects mgt's ambitions and some of their past reforms have proved successful. If new games do not meet our expectations. Competition in China's online game market is fierce. 2011 Revenue dependency. SNDA has an expansive game portfolio however the company has enjoyed only limited success with its newest releases. such as trying to enter the TV content market. Increased competition forces companies to increase spending on sales and marketing expenses to keep and gain players.November 1. it would negatively impact the company's earnings. Further increases in sales and marketing expenses could negatively impact operating margins. which restrict certain content. Change in strategy.

Ltd. Harbin Electric. Newport Beach. Within the last twelve months. Inc. ROTH has received compensation for investment banking services from China Ceramics Co. is or will be. ROTH changed its rating system in order to incorporate coverage that is Under Review. directly or indirectly. 2011.CHINA China Macro .. please contact: The Director of Research at (800) 678-9147 or write to: ROTH Capital Partners. ROTH has managed or co-managed a public offering for China Ceramics Co. stock. Ltd. 2010... related to the specific recommendations or views expressed in this report.. Fushi Copperweld.. For important disclosure information regarding the companies in this summary report. China Fire & Security Group.. On May 26. 888 San Clemente Drive. rights or warrants to purchase shares of Fushi Copperweld.. 2011 Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. LLC. Page 7 of 9 20 . CA 92660 Disclosures: ROTH and/or its employees. Ltd. ROTH changed its rating system in order to replace the Hold rating with Neutral. On September 28. officers.November 1. Within the last twelve months.. directors and owners own options. buys and sells from customers on a principal basis. and Shanda Interactive Entertainment and as such. ROTH makes a market in shares of China Ceramics Co. Inc. Attention: Director of Research. I also certify that no part of my compensation was. Inc. Inc.

November 1. Page 8 of 9 21 . which may only represent the first note written during the past three years.CHINA China Macro . Distribution Ratings/IB Services shows the number of companies in each rating category from which Roth or an affiliate received compensation for investment banking services in the past 12 month. 2011 Each box on the Rating and Price Target History chart above represents a date on which an analyst made a change to a rating or price target. except for the first box.

0 5. company and/or overall market risk and volatility. that indicates an expectation of a total return of at least 10% over the next 12 months. LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. Page 9 of 9 22 . which at the time it is instituted and or reiterated. as of 11/01/11 Count Percent 53 27. ROTH Capital Partners. Neutral: A rating. our investment rating on a stock and its implied price movement may not correspond to the stated 12month price target.ROTH employs a rating system based on the following: Buy: A rating. Additional information is available upon request.CHINA Distribution of IB Services Firmwide China Macro . that indicates an expectation of a total return between negative 10% and 10% over the next 12 months. Under Review [UR]: A rating. are from sources believed to be reliable. Additionally. information and facts discussed in this report other than the information regarding ROTH Capital Partners.6 24. 2011 Rating Buy [B] Neutral [N] Sell [S] Under Review [UR] Count 190 68 0 14 Percent 69. This is not. however. which at the time it is instituted and or reiterated. price target and estimates for the security. price target and estimates should no longer be relied upon for UR-rated securities. but are in no way guaranteed to be complete or accurate./Past 12 Mos. The material.1 IB Serv.9 0. Ratings System Definitions .2 0 0 4 28. Copyright 2011.9 9 13. indicates the temporary removal of the prior rating. Consequently. industry or security discussed in the report. Prior rating. This report should not be used as a complete analysis of the company. LLC and its affiliates. that indicates an expectation that the price will depreciate by more than 10% over the next 12 months. Not Covered [NC]: ROTH does not publish research or have an opinion about this security. Member: FINRA/SIPC. Sell: A rating. an investment in the stock may involve a high degree of risk and may not be suitable for all investors. which at the time it is instituted and or reiterated. which at the time it is instituted and or reiterated.6 Our rating system attempts to incorporate industry. at any given point in time. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. an offer or solicitation of the securities discussed.November 1. Any opinions or estimates in this report are subject to change without notice. No part of this report may be reproduced in any form without the express written permission of ROTH.

4A 125. The company expects the transaction to be completed within the following week with letters of transmittal mailed within two business days of the effective date of the merger. Deal Expected to Close Within a Week HRBN's shareholders voted to approve its privatization transaction.66A 0.00 $87. $5.0 8. Avg. (mil) Mkt.9E 20. Trading (800) 933-6820 CHINA FLASH NOTE | EQUITY RESEARCH | October 31.com Emma Jia Zhao.2% of unaffiliated shares) voted in favor of the proposal.41A 0. EPS Growth Auditor: FRAZER FROST LLP EPS $ Yr Dec 1Q 2Q 3Q 4Q YEAR P/E —2010— 0.79A 0. LLC | 888 San Clemente Drive | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC 23 .0 16.62A 2. Debt (mil) Est.2E 490.55 .4A 109.1E 130.6% of common shares outstanding (~84.3x —2011E— Curr 0. HRBN announced on Oct 29th that shareholders voted in favor of the merger to take the company private.43 $708.4 15% s s —2012E— Curr 2. Approximately 90. CFA.57E 2. ~90.2A 426.406 $24.5A 105.65A 0.0 12.64E 8.(mil) 3-Mo.05E 11. (949) 720-5775 mtobin@roth.Price Target Cash (mil) Tot.4A 106.com Sales (800) 933-6830.53A 0.5A —2011E— Curr 103.7% of the company's total outstanding shares of common stock participated in the vote.0 4.5E —2012E— Curr 568.54E 0. 2011 Global Energy & Industrials: China Harbin Electric.0x | HRBN .$23.20 31. Inc.0 HRBN One-Year Price and Volume History 30 25 20 15 10 5 May-11 Nov-10 Dec-10 Aug-11 Sep-11 Feb-11 Mar-11 Jan-11 Jun-11 Apr-11 Oct-11 Jul-11 Price Important Disclosures & Regulation AC Certification(s) are located on page 3 to 4 of this report. 12-Mo.$22.NASDAQ | Neutral HRBN: Shareholders Approve Privatization. Company Update Stock Data 52-Week Low .8 1.82 .681.0 0. Vol.72A 8.Mark Tobin.8A 131. 3Yr. The company expects the deal to be completed in the following week.5x s Pro-forma EPS for all periods Revenue ($ millions) Yr Dec 1Q 2Q 3Q 4Q YEAR —2010— 105.6 $87. the stock will be de-listed from NASDAQ. Roth Capital Partners.High Shares Out. ezhao@roth. Upon closing. Cap.

automobile specialty micro-motors. The Company offers three key product lines: industrial electric motors. October 31. copper and steel respectively. can be largely affected by central and local government policies. some of which could lead to delays in completing the transaction. controller automation systems. The Company operates. Inc. Ltd (HTFE). INC. oil pump for oilfield and linear motors for urban metro lines. The development of urban railways can experience delays that out of control of HRBN. 2011 VALUATION Our $24 price target is based on the offer price of the proposed buy-out.. Factors that may impede HRBN shares from reaching our price target include: s There are still numerous steps in the privatization process. through its indirect wholly owned subsidiary. Page 2 of 4 24 . Volatile raw materials costs HRBN is subject to market fluctuations and volatility of two major raw materials. linear motors and their integrated application systems. customized linear motors. Harbin Tech Full Electric Co. manufactures and sells an array of industrial electric motors. engineers. and automobile specialty micro-motors. Two of HRBN's major catalysts. s A slow-down in China's economic growth and continued inflation could impact sales and compress margins. develops. and other special motors. such as delay in construction.HARBIN ELECTRIC. COMPANY DESCRIPTION Harbin Electric. RISKS Change in macro policies in China.

6 Rating Buy [B] Neutral [N] Sell [S] Under Review [UR] Count 189 68 0 14 Percent 69. is or will be. The material. buys and sells from customers on a principal basis. which at the time it is instituted and or reiterated. that indicates an expectation of a total return between negative 10% and 10% over the next 12 months.ROTH employs a rating system based on the following: Buy: A rating. Neutral: A rating. Distribution of IB Services Firmwide IB Serv. ROTH changed its rating system in order to incorporate coverage that is Under Review. ROTH Capital Partners. Prior rating.1 Our rating system attempts to incorporate industry. that indicates an expectation of a total return of at least 10% over the next 12 months.HARBIN ELECTRIC. price target and estimates should no longer be relied upon for UR-rated securities.0 5. and as such. On May 26.0 0. I also certify that no part of my compensation was. our investment rating on a stock and its implied price movement may not correspond to the stated 12month price target. company and/or overall market risk and volatility. Under Review [UR]: A rating. as of 10/28/11 Count Percent 52 27.2 0 0 4 28. information and facts Page 3 of 4 25 . price target and estimates for the security. Not Covered [NC]: ROTH does not publish research or have an opinion about this security.5 9 13. except for the first box. Disclosures: ROTH makes a market in shares of Harbin Electric. Distribution Ratings/IB Services shows the number of companies in each rating category from which Roth or an affiliate received compensation for investment banking services in the past 12 month. Inc.5 25. ROTH changed its rating system in order to replace the Hold rating with Neutral. 2010. which at the time it is instituted and or reiterated. at any given point in time. that indicates an expectation that the price will depreciate by more than 10% over the next 12 months. Sell: A rating. Ratings System Definitions . indicates the temporary removal of the prior rating. Each box on the Rating and Price Target History chart above represents a date on which an analyst made a change to a rating or price target. which at the time it is instituted and or reiterated. related to the specific recommendations or views expressed in this report. directly or indirectly./Past 12 Mos. 2011 Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. October 31. LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. which at the time it is instituted and or reiterated. 2011. Consequently. INC. On September 28. which may only represent the first note written during the past three years.

HARBIN ELECTRIC. Member: FINRA/SIPC. 2011 discussed in this report other than the information regarding ROTH Capital Partners. industry or security discussed in the report. This is not. October 31. however. INC. This report should not be used as a complete analysis of the company. Additionally. No part of this report may be reproduced in any form without the express written permission of ROTH. Copyright 2011. Additional information is available upon request. an investment in the stock may involve a high degree of risk and may not be suitable for all investors. Any opinions or estimates in this report are subject to change without notice. but are in no way guaranteed to be complete or accurate. an offer or solicitation of the securities discussed. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. LLC and its affiliates. are from sources believed to be reliable. Page 4 of 4 26 .

and/or interfere with underlying fundamentals. acquisition activity. classification of the change in the fair value of warrants with the income statement. the appointment of a non-top tier auditor. revenue recognition policy for certain services including after-sales services. D.1% of the company’s outstanding common shares as of 18-Jun-11. HRBN entered into a definitive agreement and plan of merger with Tech Full Electric Company Limited.I. accounting for transactions related to a joint research and development agreement with IEECAS. In Jun-11.00 in cash without interest. disclosure regarding grant income received from the government. HRBN will be a privately-held company.com www. Co. 27 . and timing of the risk factors we found among the 100 we research over the most recent 5 years. Cap. Inc. accounting/auditor issues. each share of HRBN common stock will be converted into the right to receive $24. RATING™ High Risk D. Detailed. Each D. Comment letters are available from 5 SEC reviews. capital markets events. REPORT HRBN $22. HRBN stated that the "purpose of the advance was to accommodate an urgent cash need of a transaction for this related entity. harvested from 5 years’ of SEC filings. Rating™ Our process is simple. well-organized. a company wholly owned indirectly by CEO Yang.I. HRBN will become a wholly-owned subsidiary of Tech Full Electric Company. Tianfu Yang has served as Chairman & CEO since Jan-05 and owned 31. Moore Stephens Wurth Frazer and Torbet." As of 31Dec-10.Please see http://www. LLP. the company’s eligibility to file on Form 10-QSB beginning with the quarter ended 31-Mar-07. a related party transaction. The second review (9-Nov-07 to 7-Jan-08) pertained to the 2006 10-KSB and raised issues including disclosure regarding the 395% increase in SG&A expenses in 2006. Ratings™.) owned by CEO Yang. disclosure regarding construction in progress. nature.I.com/legal for certain disclosures regarding ITG Inc. High Risk It is our opinion that companies with a High Risk rating carry so much risk as to hold the potential to overwhelm underlying fundamentals. SEC Activity: A response we received from the SEC to a Freedom of Information Act request indicated no investigative activity as of 19-Oct-11. Report® we publish. sell. Ltd. distract its management. In Dec-06. range from Low to High Risk. and non-SEC investigative activity. (a member of FINRA and SIPC) required under NASD Rule 2711(h).I.98 Mkt. Required Disclosure . $722 million O c t o b e r 2 7 . LLP and Frost. Immediately prior to the merger.disclosureinsight. Report® identifies and summarizes those risk factors that we believe hold the potential to destabilize a company. We consistently research the same 100 risk factors on each company. Additional legal and patent notices apply. Pursuant to the agreement.com ©2011 Disclosure Insight.disclosureinsight. PLLC formed a new partnership firm named Frazer Frost. or hold its securities. In Jan-10.. and the chairman and CEO positions being held by one person support our opinion of a High Risk rating for HRBN. stability of the board and executives. D. and accounting for payments in connection with a development agreement with 763-595-0900 direports@disclosureinsight. ® Harbin Electric. the advance had been repaid to HRBN. Frazer Frost was just outside of the top 50 accounting firms by revenue in 2010. which is atypical in our experience. HRBN reported 7 acquisitions for $204 million. The merger is expected to close in the fourth quarter of the current fiscal year and if completed. an upcoming transaction that would take HRBN private.I.D. PROFILE® Insider ownership. HRBN appointed Moore Stephens Wurth Frazer and Torbet. CEO Yang is also the brother of VP Tianli Yang. across the following major categories: SEC activity. Inc. except for shares owned by Tech Full Electric Company and certain of HRBN’s employees and officers. LLP as its new auditor. All Rights Reserved. of which over $54 million was allocated to goodwill. and in-depth analyst notes are available to subscribers for each D. They are based on the number.I. The first review (20-Jan-06 to 8-Feb-07) pertained to the registration statement on Form SB-2 filed 13-Jan-06 and its various amendments. 2 0 11 Our Process and D. This review lasted longer than 6 months.5 million to an entity (Tai Fu Industrial. HRBN made an advance of $1. Our reports otherwise take no view on a public company’s fundamental outlook or whether you should buy. On 28Dec-10.I.

disclosure regarding a significant increase in inventory. a former state-owned-enterprise acquired in Oct-09. Disclosure controls and procedures were subsequently declared effective as of 30-Sep-08. These material weaknesses rendered HRBN’s internal control ineffective on the consolidated level. and the registration statement on Form S-3 filed 24-Jul-08. On 27-Aug-09. Inc. Zedong Xu has served as CFO and Principal Accounting Officer since 24-Jan-05. In Dec-06. At the time. a member of the nominating and compensation committees) passed away. LLP and Frost. HRBN entered into a definitive agreement and plan of merger with Tech Full Electric Company Limited. In Jun-11. and inventory recording. In Jan-10. Aug-08. each share of HRBN common stock will be converted into the right to receive $24. On 29-Sep-11. the company was not in compliance with listing standards related to audit committee composition. 2007 10-K/A. Capital Markets: HRBN reported 7 acquisitions for $204 million. October 27. Feng Bai (then age 39. Ltd (CEF). as a result of the departure of director Feng Bai and the death of director Patrick McManus (both audit committee members). effectiveness of internal controls. valuation of inventory allowance. The 5 material weaknesses related to: bank reconciliation. HRBN dismissed Kabani & Company. Suofei Xu (then age 43) was last listed as a director in the S-3 filed 24-Jul-08. calculation of provision of income tax. A “threshold security” is any equity security of any issuer that is registered under Section 12 of the 5 YEARS OF DUE DILIGENCE IN ONE REPORT. This firm was subsequently approved as the company’s new auditor. reconciliation and classification of notes receivable.Disclosure Insight D. Inc. HRBN will become a wholly-owned subsidiary of Tech Full Electric Company. The third review (21-Jul-08 to 27-Oct-08) pertained to the 2007 10-KSB. disclosure regarding risk factors. Page 2 of 5 28 . Report Harbin Electric. accounting for an income tax rebate. a company wholly owned indirectly by CEO Yang. 2011 Shelton Technology. The changes to the statements of cash flows were insignificant. Moore Stephens Wurth Frazer and Torbet. Dr. Patents Pending. Weisberg was a managing Director and Head of the Special Situations . Pursuant to the agreement. as its auditor and appointed Moore Stephens Wurth Frazer and Torbet. The review pertained to management’s assessment of internal control. In Aug-09. The fifth review (28-Apr-10 to 14-May-10) pertained to the registration statement on Form S-3 filed 20-Apr-10 and the amendment filed 30-Apr-10. Tianfu Yang has served as CEO since 24-Jan-05. HRBN's disclosure controls and procedures were not effective as of 31-Dec-07. exhibits. The 2007 10-KSB was amended 3 times (Jul-08. except for shares owned by Tech Full Electric Company and certain of HRBN’s employees and officers. and the exhibit index. HRBN has been on NASDAQ’s list of “threshold securities” for months. HRBN will be required to pay a $23 million termination fee. The Board: There have been 5 departures. and disclosure regarding controls and procedures. Oliver Weisberg (then age 34) resigned. HRBN received a letter from NASDAQ stating that. signatures. a member of the audit and compensation committees) did not stand for re-election at the annual meeting. Chair of the audit committee.Asia Group at CEF. HRBN will be a privatelyheld company. Inc. of which over $54 million was allocated to goodwill. In Jul-09. HRBN disclosed the discovery of 5 material weaknesses in internal control that existed as of 31-Dec-10 at Xi’an Simo. Ching Chuen Chan and Yunyue Ye were subsequently appointed to the board and audit committee. The merger is expected to close in the fourth quarter of the current fiscal year and if completed. The largest acquisition was the Oct-09 purchase of Xi’an Simo for $112 million. and clarification regarding the use of an independent appraiser to determine the fair value of the acquired assets of Hengda. There was no disclosure regarding the details of his departure. HRBN announced that it had filed definitive proxy materials with the SEC in connection with the merger and that mailing of such proxy materials to shareholders was expected to begin immediately. www. exhibits. Executive Suite: Stable. Christopher Chung-Yi Hsu (then age 25) resigned in connection with his resignation from Citadel Equity Fund. HRBN reported that its disclosure controls and procedures were effective as of 30-Jun-11. CEO Yang has been Chairman since 24-Jan-05. a majority holder of HRBN’s guaranteed senior secured floating rate notes. A special shareholder meeting will be held on 29-Oct-11 to vote on the matter. due to the company’s failure to include management’s report on internal control over financial reporting in its 2007 10-KSB. at which point HRBN regained compliance on 31-Aug-09. Accounting/Auditor: In Dec-06. of which $42 million was allocated to goodwill.I. PLLC formed a new partnership firm named Frazer Frost.disclosureinsight.00 in cash without interest. No disagreements were disclosed between HRBN and Kabani & Company. LLP as the replacement. All Rights Reserved. Patrick McManus (then age 55. Immediately prior to the merger. In Mar-11. The fourth review (20-Aug-09 to 30-Sep-09) pertained to the 2008 10-K and raised the following issues: inclusion of certain contractual obligation amounts in the contractual obligations table. In Mar-07. and Oct-08) to restate a variety of disclosures relating to controls and procedures. If the agreement is terminated under certain circumstances. HRBN filed an amended 2010 10-K on 29-Sep-11 for the purpose of amending and supplementing the statements of cash flows. LLP.com 2011 Disclosure Insight.

Ltd. www. A security ceases to be a threshold security if it does not exceed the specified level of fails for 5 consecutive settlement days. Report Harbin Electric. for 5 consecutive settlement days: i) there are aggregate fails to deliver at a registered clearing agency of 10. Page 3 of 5 29 .5 million to an entity (Tai Fu Industrial. where.10% was held by CEO Yang.I. October 27. As of 18-Jun-11. Are conference calls routinely held? Are there multiple classes of stock? Is this a controlled company? Yes No No Is there a small float? (<50% of shares outstanding. All Rights Reserved.000 shares or more per security. of which 31. The in-depth analyst notes used to produce this report are available to clients on our website. There were 6 instances of stock price volatility >10% in the past year. HRBN stated that the "purpose of the advance was to accommodate an urgent cash need of a transaction for this related entity.com 2011 Disclosure Insight. 2011 Exchange Act. HRBN made an advance of $1. Patents Pending. On 28-Dec-10.20% of HRBN’s outstanding stock." As of 31-Dec-10.) Is revenue concentrated/otherwise not meaningful? Were noteworthy related party transactions found? No No Yes This D. We also note that CEO Tianfu Yang and VP Tianli Yang are brothers.. or that is required to file reports under Section 15(d) of the Exchange Act. 5 YEARS OF DUE DILIGENCE IN ONE REPORT. the advance had been repaid to HRBN.disclosureinsight. Non-SEC Investigative Activity and Reviews: Nothing of note.Disclosure Insight D.5% of the issuer’s total shares outstanding. ii) the level of fails is equal to at least 0.) owned by CEO Yang. Co.I. and iii) the security is included on a list published by a self-regulatory organization. directors and executive officers as a group owned 35. Inc. Inc. Report® represents the summation of 100 separate risk factors we analyzed over a 5-year period.

Inc. In our opinion. transmitted. and are proprietary. Report® has commenced. the nature and timing of the risk factors we found do not concern us at the time of report publication. Ratings™ we may assign: High Risk: It is our opinion that companies with a High Risk rating carry so much risk as to hold the potential to overwhelm underlying fundamentals.™. Favorites™. 5 Years of Due Diligence in One Report™. charts and other data compilations or collective works are owned by Disclosure Insight. Patents Pending. Watch List®. or stored for subsequent use. and with few exceptions.Disclosure Insight D.I. D. forwarding electronically. The Medium Risk .000 per infringement. rented.). Medium Risk . Profile®. Disclosure Insight.com 2011 Disclosure Insight. D. seq. but have shown sufficient improvement. D. we will permit employees to engage in trading of the sort that would be deemed in conflict with this policy such as “extreme financial hardship” as defined by the CFA Institute Code of Ethics. Score®. albeit not enough to yet warrant a lower risk rating as they could just as easily become High Risk again. Low Risk: Companies with a Low Risk rating carry a low risk profile. or derivatives thereof. Mailbox®. Photocopying or electronic distribution of any of the accompanying material or contents without the prior written consent of Disclosure Insight. D.I. Intellectual Property This material is copyrighted 2000 to 2011 by Disclosure Insight.Positive Bias: Companies with a Medium Risk rating have at least one risk factor that concerns us. including but not limited to all data. Inc. Achieve the Return. October 27. On a severely limited basis. excerpting. Report®. We similarly place no holding period limits or restrictions 5 YEARS OF DUE DILIGENCE IN ONE REPORT. violates U. 2011 Disclosures: The following are the D.I. In addition.I. its employees to freely trade in any securities so long as such trading is not deemed as in conflict with this policy or client subscribers. www.Negative Bias rating can also be assigned to those companies previously rated as High Risk that have shown some improvement. The Medium Risk . requires its employees and principals to adhere to the CFA Institute Code of Ethics and Standards of Professional Conduct regarding potential conflicts of interest. Medium Risk .Negative Bias: Companies with a Medium Risk rating have at least one risk factor that concerns us. Inc. sublicensed. illegal copying includes regular photocopying. All Rights Reserved. Inc. prohibits its employees and principals from trading of any kind in any individual public company securities. and may be punishable by statutory damages of up to $150.®. All rights reserved. Such prohibitions on newly received FOIA data shall remain in place from when the material is received until either 5 days after it has been published or production on the data point otherwise ceases.I. text. Database®.disclosureinsight. copyright law. faxing.I. or derivatives thereof. We assign a Negative Bias to the Medium Risk rating to those companies that in our opinion carry sufficient risk that the rating could deteriorate to High Risk. Better Disclosure for Better Decisions®.I. Inc. displayed.S.Positive Bias rating can also be assigned to those companies previously rated as carrying higher risk. altered. performed. and encourages. We assign a Positive Bias to the Medium Risk rating for those companies that in our opinion carry at least one risk factor that could potentially deteriorate into a higher risk challenge. D. plus attorneys’ fees (17 USC 504 et. D. Disclosure Insight. in whole or in part in any manner. This includes prohibiting its employees and principals from trading in their own accounts in any manner which might be deemed in conflict with client subscribers. D. Inc. and sharing of online access. Inc. and Just Because its Public Information Doesn’t Mean it’s Public Knowledge® are service/trademarks of Disclosure Insight. Focus List®. Potential Conflicts of Interest Disclosure Insight.I. Disclosure Insight®. without the prior written consent of Disclosure Insight. Assess the Risk.I. on any company on which production of a new D. reproduced. design. Report® has been published or its production otherwise ceases. images. Disclosure Insight.I.I. Inc. Page 4 of 5 30 . Further. Without advance permission. The works of authorship contained in the accompanying material. otherwise permits.I.I. Inc.I. or one of its affiliates and may not be copied. distributed. on any company on which we have received a response from the United States Securities and Exchange Commission (or other regulatory authority) to one of our Freedom of Information Act (FOIA) requests which suggests the presence of an undisclosed SEC or other governmental investigation and/ or law enforcement activity. Report Harbin Electric. D. D. Inc. Inc. prohibits its employees and principals from trading of any kind in any individual public company securities. Rating™. D. Such prohibitions shall remain in place until either 5 days after the individual D.

does not engage in investment banking activities or take any security positions. exchange traded funds (ETFs). www. except those necessary for routine corporate treasury functions. 2011 on such personal trading. All Rights Reserved. and derivatives thereof which may include covered names as components of the overall funds and/or ETFs. include trading in mutual funds. This could. Page 5 of 5 31 . Inc.disclosureinsight.Disclosure Insight D.disclosureinsight. and often does.com 5 YEARS OF DUE DILIGENCE IN ONE REPORT. Patents Pending. Disclosure Insight. Inc. Inc. Report Harbin Electric. October 27.com 2011 Disclosure Insight. ADDITIONAL DISCLOSURES ARE AVAILABLE AT www.I.

please see the FAQ section at the end of this report. OVERVIEW This stock receives a fundamental grade of "B" based on Validea's Guru Analysis system. & Controls Bas e d on 10/13/2011 Clos e Price of $22. which also show signs of financial strength.3%. INC. ANALYSIS SUMMARY Strategy Name Contrarian Investor Book/Market Investor Growth Investor Growth/Value Investor Low PE Investor P/E Growth Investor Value Investor Price/Sales Investor Patient Investor Momentum Investor Based On Book By/About David Dreman Joseph Piotroski Martin Zweig James O'Shaughnessy John Neff Peter Lynch Benjamin Graham Kenneth Fisher Warren Buffett Validea Score 29% 0% 46% 25% 40% 93% 57% 48% 0% 50% * Overall fundamental grade is based on a w eighted scoring system in w hich the strategies at the top of the table are more significant than those at the bottom (the strategies used to determine our "A" rated stocks are above the dividing line in the table and the strategies used to determine the "B" rated stocks are below ). (NASD: HRBN) INDUSTRY: Electronic Instr. This stock passes Validea's P/E Growth Investor strategy based on our interpretation of the published criteria of Peter Lynch with a score of 93%. For further details on our scoring system. although there are typically some minor flaws.03 SECTOR: Technology Current Rating: Buy Reiterate B on 10/14/2011.Guru Stock Report HARBIN ELECTRIC. 32 . although they do not pass the top performing strategies required to receive an "A" grade. Although all the strategies used in this report have exhibited market outperformance on a risk-adjusted basis. The strategy looks for stocks that trade at a discount to their long-term earnings growth rates. Stocks that receive this grade typically have mostly favorable fundamental attributes. "B" rated stocks pass the fundamental tests of at least one of our guru strategies. Validea's Guru System classifies this stock as both a growth and value stock given its PE Ratio of 11. strategies at the top of the table have displayed superior historical risk-adjusted performance in our testing to those at the bottom.8 and its historical EPS growth rate of 31.

Stocks that score highly based on the best performing riskadjusted guru strategies or are favored by multiple top performing guru strategies are given a higher rating versus their counterparts. but also to certain international markets. or sooner in the event of an earnings report. Validea is a premier online independent research provider. Inc. Martin Zweig and many others.. The Company operates four manufacturing facilities in China: Harbin Tech Full Electric Co. Each stock is scored using a five point rating system that assesses the security's investment prospects. or a major stock price change. Validea has created a ratings scale that is dynamic and weights more heavily the best performing approaches as identified and tracked by Validea. value.COMPANY PROFILE Harbin Electric. The Company offers a range of industrial rotary motors. It sells its products in China. (Xi'an Tech Full Simo). It designs. with A and B stocks having the best potential for long-term market outperformance. including small. and large-sized motors and some specialized motors... (Harbin Electric) is a holding company. RATING HISTORY Date 4/4/2008 4/17/2009 7/10/2009 8/21/2009 3/18/2011 Action Upgrade Downgrade Upgrade Downgrade Upgrade Old Rating C B C B C New Rating B C B C B METHODOLOGY This report provides a detailed analysis of HRBN based on the publicly disclosed methodologies of Wall Street legends. Ltd. Warren Buffett. specialty micro-motors and industrial rotary motors. Using these strategies. Shanghai Tech Full Electric Co. 33 . Reports are updated every two weeks. Rooted in fundamental analysis and built on core investing principles. in an effort to provide timely and valuable analysis and coverage. Ltd. supplies and services a range of electric motors. momentum). including linear motors.e. (Shanghai Tech Full). (Harbin Tech Full). growth. Ltd. as interpreted by Validea. The Company offers three product lines: linear motors (LMs) and integrated systems. including names like Peter Lynch. Validea's ratings are limited to companies that exhibit profitability. The firm's Guru Stock Report unites the quantitative strategies of the world's most successful investors. Weihai Tech Full Simo Motor Co. develops. The Company acquired Xi'an Tech Full Simo in October 2009. Ben Graham. manufactures.. Ratings range from A to F (correlates to Strong Buy to Sell). each report contains an in-depth description of the guru methodologies. specialty micro-motors and industrial rotary motors. (Weihai Tech Full) and Xi'an Tech Full Simo Motor Co. Ltd. and examines the stock using multiple approaches (i. other significant news. such as high/low voltage motors and speed control motors. medium.

2 percent average annual return from 1977 until his retirement in 1990. Investment Strategy Lynch's approach centers on a variable that he is famous for developing: The price/earnings/growth ratio. but that's really just a starting point for him. The PEG divides a stock's price/earnings ratio by its historic growth rate to find growth stocks selling on the cheap. based on the average of the 3. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for HRBN (27.56% last year.3%. ("Go for a business that any idiot can run -. "stalwarts" (stocks with growth rates between 10 and 20 percent and multi-billiondollar sales).) Lynch's bestseller One Up on Wall Street is something of a "stocks for the everyman/everywoman". and free cash flow. the P/E/G ratio for HRBN (0. his strategy goes far beyond investing in a restaurant chain you like or a retailer whose clothes you buy. the higher the P/E multiple you should be willing to pay for its stock. However an increase of up to 5% is considered bearable if all other ratios appear attractive. In this particular case. SALES AND P/E RATIO: [NEUTRAL] For companies with sales greater than $1 billion.GURU ANALYSIS OF: HARBIN ELECTRIC. Lynch's common sense approach and quick wit made him one of the most quoted investors on Wall Street. HRBN. any idiot probably is going to run it. earnings per share growth rate. as earnings growth over 50% may be unsustainable. It's important to note that Lynch used different criteria for different categories of stocks.29%).17%) to be acceptable (equity is three to ten times debt). INC. EPS GROWTH RATE: [PASS] This methodology favors companies that have several years of fast earnings growth.38) is very favorable. this methodology likes to see that the P/E ratio remain below 40. This is a quick way of determining the fairness of the price. This methodology likes to see earnings growth in the range of 20% to 50%." is one of his many pearls of wisdom.82%. for a company. Inventory to sales for HRBN was 33. is not considered large enough to apply the P/E ratio analysis. Since inventory to sales has decreased from last year by -18. or "PEG". He also used special criteria for financial stocks. 4 and 5 year historical eps growth rates. Lynch is known for saying that investors can get a leg up on Wall Street by "buying what they know". and "slow-growers" (those with single-digit growth rates and high dividend payouts). However. Lynch guided Fidelity Investment's Magellan Fund to a 29. breaking his approach down into easy-to-understand concepts. Lynch's rationale: The faster a firm is growing. almost doubling the S&P 500's 15. Along with the PEG. This ratio is one quick way to determine the financial strength of the company. which is acceptable. based on the average of the 3.73%. he focused on fundamental variables like the debt/equity ratio.78) relative to the growth rate (31. DETERMINE THE CLASSIFICATION: This methodology would consider HRBN a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (11. as these companies have a proven formula for growth that in many cases can continue many more years. whose sales are $450. The EPS growth rate for HRBN is 31.because sooner or later. it is a red flag. 4 and 5 year historical eps growth rates. HRBN passes this test. while for this year it is 14. inventory/sales ratio. 34 .8 million. INVENTORY TO SALES: [PASS] When inventories increase faster than sales.8 percent yearly return over that time. an investor can analyze the P/E ratio relative to the EPS growth rate. Large companies can have a difficult time maintaining a growth rate high enough to support a P/E above this threshold. (HRBN) P/E GROWTH INVESTOR BASED ON: Peter Lynch SCORE: 93% STYLE: Growth/Value Perhaps the greatest mutual fund manager of all-time. with the three main categories being "fast-growers" (stocks with EPS growth rates of at least 20 percent per year).

is considered a bonus if it is above 35%. Keep in mind. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. however. Keep in mind. According to this methodology. NET CASH POSITION: [NEUTRAL] Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. a high value for this ratio dramatically cuts down on the risk of the security. that it does not adversely affect the company as it is a bonus criteria. though not a requirement. This ratio for HRBN (10. 35 .07%) is too low to add to the attractiveness of this company.53%) is too low to add to the attractiveness of the stock.FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio. The Net Cash/Price ratio for HRBN (7. that it does not adversely affect the company as it is a bonus criteria. This methodology prefers not to invest in companies that rely heavily on capital spending. however.

while the net current assets are $163. Companies that meet this criterion are typically financially secure and defensive. based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years.5 million. must be "moderate". would enjoy an invaluable "margin of safety" in their investment activities. long-term debt must not exceed net current assets (current assets minus current liabilities).1% passes the EPS growth test. 36 .7 million. Defensive investors who followed his advice. HRBN's current ratio of 2. and have adjusted this requirement to be a 27% gain over the 9 year period. Although this methodology would avoid HRBN. we will provide the rest of the analysis. Companies that meet this criterion display one of the attributes of a financially secure organization.8 million. HRBN's sales of $450. pass this test. SALES: [PASS] The investor must select companies of "adequate size". At that time they were not the driving force of the market as they are today. P/E RATIO: [FAIL] The Price/Earnings (P/E) ratio. the Price/Book multiplied by P/E cannot be greater than 22. while the P/E is 15. HRBN's P/E of 15. HRBN passes this test. he said. Stocks with moderate P/Es are more defensive by nature. Companies with this type of growth tend to be financially secure and have proven themselves over time. That is. This includes companies with annual sales greater than $340 million. Benjamin Graham argued for investing in stocks that were significantly undervalued relative to their intrinsic worth. HRBN's EPS growth over that period of 1. based on trailing 12 month sales. Graham's defensive investor strategy is considered by many to be the ultimate value strategy and has stood the test of time more than perhaps any strategy ever created.50. which is one sector that this methodology avoids. CURRENT RATIO: [PASS] The current ratio must be greater than or equal to 2. SECTOR: [FAIL] HRBN is in the Technology sector. Widely recognized as the father of securities analysis. PRICE/BOOK RATIO: [FAIL] The Price/Book ratio must also be reasonable. as we feel times have changed.VALUE INVESTOR BASED ON: Benjamin Graham SCORE: 57% STYLE: Deep Value The Value Investor strategy is based on the book "The Intelligent Investor" by Benjamin Graham.197. We have data for 9 years.18 passes the test. Technology and financial stocks were considered too risky to invest in when this methodology was published.00. which this methodology states is not greater than 15. which he measured principally by their future earnings potential. HRBN fails the Price/Book test. HRBN's Price/Book ratio is 1. LONG-TERM EPS GROWTH: [PASS] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years.00 (using the 3 year PE) fails this test. LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [PASS] For industrial companies. The long-term debt for HRBN is $50.

04% passes this test. and you want to avoid them. and therefore HRBN passes the first requirement. whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 1. but the following year's earnings should be a new high. LONG-TERM EPS GROWTH RATE RELATIVE TO GROWTH IN THE LATEST 2 QUARTERS: [FAIL] This methodology looks unfavorably at any company whose earnings growth in the latest 2 quarters has been less than half of the long-term earnings growth rate. Look for a general upward trend in weekly relative strength.5% for Q6 to Q2 and -32. This a positive sign.19. HRBN fails this criterion. HRBN's annual earnings growth rate over the past five years of 30. technical and chart pattern characteristics of the 500 best growth stocks over the past 30 years. SAME QUARTER LAST YEAR): [PASS] Although HRBN's EPS growth for this quarter relative to the same quarter a year earlier (-32. as measured by the S&P 500. HRBN's current stock price ($22. HRBN's relative strength of 54 is too low to pass the test. This type of price action is favorable.93%) is below the minimum 18% that this methodology likes to see. but prefers higher than 25%.9% for Q5 to Q1) have slowed substantially to a point less than its long-term growth rate of 30. you want to pick stocks that are selling near or at their high. EARNINGS CONSISTENCY: [FAIL] According to this methodology. which is the stock's price performance compared with the overall market over the past year. It shows a company's weekly performance in comparison to the overall market. 4 MONTH S&P RELATIVE STRENGTH LINE: [PASS] This methodology likes to see confirmation from this indicator when buying as a sign of a company's recently strong momentum.0%. This is a very positive sign. 1. CONFIRM AT LEAST ONE OTHER LEADING STOCK IN THE INDUSTRY: [PASS] 37 . In that book. HRBN. Low priced stocks and stocks selling at their low are low for a reason. as the stock price is potentially close to breaking out to a new high on above average volume. As long as all the other numbers are in check.03) is within 15% of the 52-week high ($23. although above 90 is preferred.91.76. as earnings growth in the 2 most recent quarters (-48. HRBN's relative strength trend has been increasing over the last 4 months.01. PRICE PERFORMANCE COMPARED TO ALL OTHER STOCKS: [FAIL] A company's weighted relative strength. earnings have been accelerating over the past 4 quarters. 0. a massive study was described that identified the common fundamental. Instead. these companies should continue to perform well over the next 3 months. as more than 1 dip is unacceptable to the methodology. ANNUAL EARNINGS GROWTH: [PASS] This methodology looks for annual earnings growth above 18%. One dip is allowed. 0. QUARTERLY EPS CHANGE (THIS QUARTER VS.MOMENTUM INVESTOR BASED ON: Validea SCORE: 50% STYLE: Growth/Momentum The Momentum Investor strategy is based on the book "How To Make Money In Stocks".46). This methodology is based on the general principal that stocks are priced at what they are worth at the time. should be no less than 80. as the best stocks usually act better than the overall market. CURRENT PRICE LEVEL: [PASS] Investors should keep an eye open for stocks that are trading within 15% of their 52-week highs. fails this criterion. each year's EPS numbers should be better than the previous year's. The Momentum Investor strategy seeks to identify the "very best" companies that have high Relative Strength and buy them at the "right" time.46. 2.

& Controls). or who have a Debt/Equity ratio less than 2. Look at the number of companies within an industry that have a weighted relative strength above 80. Insiders own 34. Institutions own 37. as there are 22 companies that have a relative strength at or above 80.05% of HRBN's stock. RETURN ON EQUITY: [FAIL] Preferred companies must have a ROE of at least 17%. There is confirmation in HRBN's industry (Electronic Instr. management is more likely to act in the best interest of the company. thus passing the criterion. In another method. INSIDER OWNERSHIP: [PASS] Companies with the best prospects have strong insider ownership. which we define as 15% or more. & Controls) is currently one of the top performing industries. but there is no indication that a large number of institutions is too many. HRBN's industry (Electronic Instr. Management's representation is large enough and passes this test. look for industries with the most stocks making new 52-week highs.1% is below the minimum 17% that this methodology likes to see. When there is strong insider ownership. 38 . as their interests are right in line with that of the shareholders. HRBN's ROE of 14. INSTITUTIONAL OWNERSHIP: [PASS] Some institutional ownership is preferred. HRBN passes this test.38% of HRBN's stock. the stock still passes the test.Make sure that a company's industry is attractive by confirming that at least one other company in the industry has a relative strength above 80. Because there is some institutional ownership present.11. However. DECREASING LONG-TERM DEBT/EQUITY: [PASS] Companies who have consistently cut debt over the last 3 years. are looked at favorably. passes this test. as fewer shares mean bigger price jumps when demand surges. SHARES OUTSTANDING: [NEUTRAL] Shares outstanding should be less than 30 million. Although HRBN exceeds the preferred level with shares outstanding of 31 million. which has a Debt/Equity ratio of 0. and choose only the top 30% of those industries from which to select stocks. there is no penalty for a large number of shares outstanding as long as all the other parameters are met. and therefore fails the criterion. LOOK FOR LEADING INDUSTRIES: [PASS] Investors should consider stocks in top performing industries. HRBN.

34 is considered extremely unfavorable. HRBN's free cash per share of 2. the stock would fail this methodology's first criterion. HRBN's Debt/Equity of 27. Companies should have enough free cash available to sustain three years of losses. This is based on the premise that companies without cash will soon be out of business. the P/S ratio is O. little debt.54 does not pass this criterion.K. The strategy looks for stocks whose low price-to-sales ratios are accompanied by strong earnings growth. PRICE/SALES RATIO: [FAIL] The prospective company should have a low Price/Sales ratio..5. Non-cyclical companies with Price/Sales ratios greater than 1. is above 1. PRELIMINARY GRADE: No Interest in HRBN At this Point Is HRBN a "Super Stock"? NO Price/Sales Ratio: [FAIL] The Price/Sales ratio is the most important variable according to this methodology.32 passes this criterion. passes this criterion. FREE CASH PER SHARE: [PASS] This methodology looks for companies that have a positive free cash per share. PRICE/RESEARCH RATIO: [FAIL] This methodology considers Technology and Medical companies with low Price/Research ratios to be attractive. HRBN's Price/Sales ratio of 1. This ratio indicates how much a market values a company's Research and Development (R&D).5 and less than 3 should not be purchased. Fisher is a money manager. HRBN's Price/Research ratio of 202. LONG-TERM EPS GROWTH RATE: [PASS] This methodology looks for companies that have an inflation adjusted EPS growth rate greater than 15%. HRBN's inflation adjusted EPS growth rate of 28. TOTAL DEBT/EQUITY RATIO: [PASS] Less debt equals less risk according to this methodology. THREE YEAR AVERAGE NET PROFIT MARGIN: [PASS] This methodology looks for companies that have an average net profit margin of 5% or greater over a three year period. HRBN's three year net profit margin. which averages 15. and positive free cash flow. If you are currently holding this stock.PRICE/SALES INVESTOR BASED ON: Kenneth Fisher SCORE: 48% STYLE: Growth/Value The Price/Sales Investor strategy is based on the book "Super Stocks" written by Kenneth Fisher.97% passes this test.17% is acceptable. 39 . HRBN's P/S ratio of 1.54 based on trailing 12 month sales. Companies with Price/Research ratios greater than 15 should never be purchased.94%. The prospective company should have a low Price/Sales ratio. because they either spend too little on R&D or are extremely overvalued. thus passing the test. best-selling author and long-time Forbes columnist who wowed Wall Street in the early 1980s when his book first popularized the idea of analyzing price-to-sales ratios (PSR) as a means of identifying attractive stocks. but if you are thinking about purchasing it.

newsletter writer and frequent guest on the PBS television series "Wall Street Week. Sales growth for the prior must be greater than the latter. Annual earnings should be up for at least the past five years. HRBN's revenue growth is 81. the change from this quarter last year to the present quarter (24. based on the average of the 3.55) pass this test. P/E RATIO: [PASS] The P/E of a company must be greater than 5 to eliminate weak companies.6%) of the current year. The earnings numbers of a company should be examined from various different angles. since cost-cutting and other non-revenue-producing measures alone can't support earnings growth forever. should be positive and growing faster than they were (a) a year ago. And sales should be growing as fast as or faster than earnings.78.29%. REVENUE GROWTH IN RELATION TO EPS GROWTH: [PASS] Revenue Growth must not be substantially less than earnings growth. and (c) over the preceding three years. Earnings growth in the past 4 quarters should be at least half of the long-term EPS growth rate.00. (b) in the preceding three quarters. To evaluate stability. while it's earnings growth rate is 31. and then compared to the previous quarter last year compared to the previous quarter (-1. but not more than 3 times the current Market P/E because the situation is much too risky.6%) must be examined. Therefore. The 4 tests immediately following are detailed below. earnings persistence. For earnings to continue to grow over time they must be supported by a comparable or better sales growth rate and not just by cost cutting or other non-sales measures. This strategy looks at the rate which earnings grow and evaluates this rate of growth from different angles." The strategy searches for stocks that meet a long host of earnings criteria. 40 . POSITIVE EARNINGS GROWTH RATE FOR CURRENT QUARTER: [FAIL] The growth rate of the current quarter's earnings compared to the same quarter a year ago must also be positive. HRBN's P/E is 11.93% fails this test. 4 and 5 year historical eps growth rates.41%. HRBN's growth rate of -32. and never greater than 43. Therefore. for example. SALES GROWTH RATE: [PASS] Another important issue regarding sales growth is that the rate of quarterly sales growth is rising. by Martin Zweig. it passes the first test. HRBN's EPS for this quarter last year ($0. and earnings acceleration. the stock has to pass the following four criteria. Three of these angles are stability in the trend of earnings. based on trailing 12 month earnings.82) pass this test. HRBN had 3 quarters of skimpy growth in the last 2 years. Zweig is a renowned money manager. EARNINGS GROWTH RATE FOR THE PAST SEVERAL QUARTERS: [FAIL] Compare the earnings growth rate of the past four quarters with long-term EPS growth rate. Quarterly earnings. HRBN's EPS ($0.GROWTH INVESTOR BASED ON: Martin Zweig SCORE: 46% STYLE: Growth The Growth Investor strategy is based on the book "Winning on Wall Street". To evaluate this. while the current market PE is 15. CURRENT QUARTER EARNINGS: [PASS] The first of these criteria is that the current EPS be positive. HRBN passes this criterion. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. A stock should not be considered if it posted several quarters of skimpy earnings. For HRBN this criterion has been met.

passes this test. based on the average of the 3.93% must be greater than or equal to the historical growth which is 31. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: [FAIL] The EPS growth rate for the current quarter. fails this test. A high level of total debt. 0.29%. If a company does have a high level. To fulfill this requirement a company's earnings must increase each year for a five year period. (versus the same quarter one year ago) then the stock fails. with one exception: if the growth rate in earnings between the current quarter and the same quarter one year ago is greater than 30%. TOTAL DEBT/EQUITY RATIO: [PASS] A final criterion is that a company must not have a high level of debt.EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN PRIOR 3 QUARTERS: [FAIL] If the growth rate of the prior three quarter's earnings.19. 1.01. 41 .62%) and passes this test. due to high interest expenses. can have a very negative effect on earnings if business moderately turns down. HRBN's Debt/Equity (27. and it would therefore fail this test. Since this is not the case HRBN would therefore fail this test. whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 1. -32.86%.91.76. 4 and 5 year historical eps growth rates.9%.17%) is not considered high relative to its industry (46.93%. and 2. HRBN. 0. then the stock would pass. (versus the same three quarters a year earlier) is greater than the growth rate of the current quarter earnings. HRBN's long-term growth rate of 31.29%. an investor may want to avoid this stock altogether. EARNINGS PERSISTENCE: [FAIL] Companies must show persistent yearly earnings growth. -32. 11.46. LONG-TERM EPS GROWTH: [PASS] One final earnings test required is that the long-term earnings growth rate must be at least 15% per year. The growth rate over this period for HRBN is -32.

F . Our second tier strategies are based on our interpretation of the published writings of Peter Lynch. A . Is there any affiliation between Validea and the gurus that the strategies are based on? No. D . Stocks in this grouping typically have many major fundamental weaknesses that would eliminate them from any consideration by our guru strategies. O'Shaughnessy.e. James P.. Stocks in this category typically exhibit elements of fundamental strength. C . as derived by Validea. These strategies have all exhibited strong risk-adjusted performance in our historical testing."A" rated stocks receive a score of 90% from at least one of our top tier guru strategies. the names of individual investment advisors (i. The vast majority of the investors that our guru strategies are based upon were long term investors.com from published sources. For example."B" rated stocks receive a score of 90% from at least one of our second tier guru strategies. James P.Frequently Asked Questions What is Validea's Guru Analysis? Guru Analysis provides an in depth analysis of any stock using Validea's interpretation of published writings by or about 10 of history's best investors including Peter Lynch. The reports can be utilized by both value and growth investors because there are multiple methodologies within the report that appeal to each investment style and several that combine both. Stocks in this category exhibit the fundamental criteria that have proven most predictive of future stock performance in our historical testing. but also have some noticeable weaknesses. Kenneth Fisher and Benjamin Graham. B ."C" rated stocks have an average score from all of our strategies of at least 25%. Kenneth Fisher and Martin Zweig. What do the individual guru scores mean? The scores for each strategy represent a weighted percentage of how well a particular stock meets a guru's criteria. in the Patient Investor strategy based on Warren Buffett. Warren Buffett. 42 . or any knowledge or approval by such persons of the content of this report. Joseph Piotroski. Stocks in this grouping typically have several major fundamental weaknesses that would not be looked upon favorably by both value and growth investors. What type of investors can use Validea's Guru Stock Reports? Validea's Guru Stock reports are geared toward long and medium-term investors. O'Shaughnessy. The strategies with the best historical risk-adjusted performance are weighted more heavily in determining the letter grade. John Neff. the 'gurus') appearing in this report are for identification purposes of his/her methodology only. John Neff and Martin Zweig."D" rated stocks have an average score from all of our strategies between 20% and 25%. a stock will automatically fail if it does not meet the requirement of consistent earnings over the past 10 years. Benjamin Graham. What does the Validea Rating overall letter grade indicate? The Validea Rating indicates how well the stock meets the investment criteria of the 10 strategies in this report. Stocks in this category exhibit the fundamental criteria that is sought by these strategies. David Dreman. Our top tier strategies are based on our interpretation of the published writings of David Dreman. Not all criteria are weighted equally and some of our strategies have criteria that are important enough to automatically result in a 0% score if they are failed. The letter grades are determined as follows."F" rated stocks have an average guru score from all of our strategies below 20%. and are not intended to suggest or imply any affiliation with or endorsement or even agreement with our reports personally by such gurus. the Motley Fool. Warren Buffett. With Guru Analysis you can analyze any stock step by step using any one of these strategies and can see exactly why the stock passes or fails each methodology.

Validea does not have investment banking relationships with the firm whose security is mentioned in this report. nor any of its data or content providers shall be liable for any errors or delays in the content. or for any actions. owners. monetary or otherwise. The information in this report is not intended as a recommendation to buy or sell securities. its publishers. or may not be fully disclosed herein). Validea IS NOT an investment advisor. judgments and opinions thereon. losses or damages. or even agrees with any of the representations made with respect to specific securities as derived by Validea from its interpretation of his or her investment methodology. The use of a guru's name does not mean that he personally endorses. as derived from published sources.com Email: info@validea. the holdings may. and in general. Accuracy or completeness of the information contained herein is not guaranteed and is not intended to be relied upon for transactional purposes. Neither Validea nor any of its employees own shares equal to one percent or more of the company. hence it does not endorse or recommend any securities or other investments. Fundamental data provided by Reuters Validea does not make markets in any of the securities mentioned in this report. does not engage in Investment Banking activities/services.com For More Information: http://www. Validea and its employees may have long/short positions or holdings in the securities or other related investments of companies mentioned herein (if so. Neither Validea. Validea IS an information service for financial institutions.com 43 .validea. and no-one at a covered company sits on the board of Validea. investors.DISCLAIMER: The use of the name of a financial analyst. Officers or Directors of Validea are not Directors or Officers of covered companies. Contact Info: Validea. investors and traders. or any companies mentioned in this report. taken in reliance of such information. identified as a "guru" represents the interpretation by Validea of that person's key investment analysis principles. Market prices and certain other information in this report have been carefully compiled from publicly available sources believed to be reliable and are for general informational purposes only.

Inc. specialty micro-motors and industrial rotary motors.A. Stock Chart Officers Chairman & Chief Executive Tianfu Yang Chief Financial Officer Zedong Xu Executive Vice President & Secretary Christy Young Shue Stock Price (9/23/2011): 19. CT 06461 U.434. Ltd.168 Closely Held Shares: 10.882 Most Recent Qtr Last 12 Months 44 .430 Exchanges: NAS Share Type: Common Harbin Electric. Inc.642. such as high/low voltage motors and speed control motors. The Company offers three product lines: linear motors (LMs) and integrated systems.481. and large-sized motors and some specialized motors.1% 52 Weeks 14. Shanghai Tech Full Electric Co. Weihai Tech Full Simo Motor Co. Dollars Wright Quality Rating:CAA20 440 Wheelers Farms Road Milford.00 0. Dollars Fiscal Year Ends: December Employees 4. (Weihai Tech Full) and Xi'an Tech Full Simo Motor Co. supplies and services a range of electric motors.55 1..S. It designs. Ltd. including linear motors.88 Ratio Analysis Dividends 0. but also to certain international markets..250 Major Industry: Machinery & Equipment Sub Industry: Miscellaneous Machinery & Equipment Country: United States Currency: U.539. Key Data Ticker: HRBN 2010 Sales: 426.4% Earnings / Dividends (as of 6/30/2011) Earnings 0. COMPANY PROFILE Figures in U.90 Recent stock performance 1 Week -1. including small.S. (Xi'an Tech Full Simo). specialty micro-motors and industrial rotary motors. It sells its products in China. The Company offers a range of industrial rotary motors. The Company acquired Xi'an Tech Full Simo in October 2009. The Company operates four manufacturing facilities in China: Harbin Tech Full Electric Co.Company FundamentalsCompany Fundamentals\Company Profile A Wright Investors' Service Research Report: Harbin Electric..S. medium. Ltd. (Shanghai Tech Full).9% 4 Weeks 32. (Harbin Tech Full). develops. Ltd.943 Total Shares Outstanding: 31. (Harbin Electric) is a holding company. manufactures..00 Market Capitalization: 625.0% 13 Weeks 33.

59 Dividend Yield Price / Sales Ratio Price / Book Ratio 1.86% Address Phone +86 86 451-8611-6757 Home Page http://www. Except for quotations by established news media. Inc.00% 1.Price / Earnings Ratio 10. recording. or transmitted for commercial purposes. photocopying. but accuracy. or otherwise without prior written permission. stored in a retrieval system.harbinelectric. 45 . electronic.00% 0. Information is believed reliable. All Rights Reserved. in any form or by any means.com Ha Ping Lu Ji Zhong Qu Harbin Kai Fa Qu. Harbin 150060 UNITED STATES Copyright ©2000-2011 Distributed by Wright Investors' Service.47 Payout Ratio 0. completeness and opinions are not guaranteed. no pages on this site may be reproduced.45 % Held by Insiders 33. mechanical.

specialty micro-motors and industrial rotary motors.86 million of which 56% was North America). With sales of $426. It sells its products in China. operates in the Motors and generators sector. this equates to sales of US$96.Company Fundamentals\Comparative Business Analysis A Wright Investors' Service Research Report: Harbin Electric. Competitor Analysis Harbin Electric.48 million for the year ending December of 2010. (2010 sales of $762. Sales Analysis Harbin Electric reported sales of $426. (Harbin Tech Full). Inc. The Company offers three product lines: linear motors (LMs) and integrated systems.4% 46 .S.A.56 million of which 75% was Manufacturing Operations). This represents an increase of 91.0% 96. This is a great deal lower than the three comparable companies. sales have increased a total of 1.. Ltd..271 per employee.0%) Dec 2010 426. Ltd. The Company acquired Xi'an Tech Full Simo in October 2009.571 per employee. Inc. Dollars) Harbin Electric currently has 4. and Cascade Corporation ($409. develops. including linear motors. when the company's sales were $223. ($273. This analysis compares Harbin Electric with three other companies: Kulicke And Soffa Industries.784 238. but also to certain international markets. Sep 2010 762. CT 06461 U. Note that some of the figures stated herein could be distorted based on exact classification of employees and subcontractors. Recent Sales at Harbin Electric 426 223 121 24 40 65 2005 2006 2007 2008 2009 2010 (Figures in Millions of U.7% Dec 2010 273. manufactures. Inc.191 and US$258. which had sales between US$171. American Railcar Industries.. The Company offers a range of industrial rotary motors.com 440 Wheelers Farms Road Milford. Wright Comparative Business Analysis Report Report Date: 9/23/2011 Company Description Harbin Electric. Inc.571 Taiwan (29.78 million of which 91% was Equipment).563 -35. The Company operates four manufacturing facilities in China: Harbin Tech Full Electric Co. Weihai Tech Full Simo Motor Co. Year Ended Sales Sales Sales/ (mlns) Growth Emp (US$) Largest Region 91. Provided By CorporateInformation. Inc. Sales at Harbin Electric have increased during each of the previous five years (and since 2005. Shanghai Tech Full Electric Co. Inc. Inc.0% versus 2009. such as high/low voltage motors and speed control motors.2%) 171. medium. and large-sized motors and some specialized motors.S. including small.23 million. Ltd. Sales Comparisons (Fiscal Year ending 2010) Company Harbin Electric American Railcar Industries. specialty micro-motors and industrial rotary motors.0%) 258.191 the United States (100.48 million . Ltd. (Xi'an Tech Full Simo). It designs. supplies and services a range of electric motors.704%). (Shanghai Tech Full).481 Kulicke And Soffa Industries.430 employees.271 the United States (100. (Weihai Tech Full) and Xi'an Tech Full Simo Motor Co.. (Harbin Electric) is a holding company.

Profitability Comparison Gross Earns Profit EBITDA bef. Profitability Analysis On the $426.1% of sales. or 18.47 times sales. Note that the earnings number Includes Or Excludes Extraordinary Charge Or Credit. This was significantly better than the 11.36 times book value..45 1.4% 46. the Price / Earnings ratio is 10. The company's price to book ratio is higher than that of all three comparable companies.42% 0.46 per share. Summary of company valuations (as of 9/23/2011).82 million.8% 5.2%).2% Company Harbin Electric Harbin Electric Kulicke And Soffa Industries.1%. The three comparable companies had EBITDA margins that were all less (between 2.1% of sales). Dividend Analysis This company has paid no dividends during the last 12 months. when the profit margin was 8.0% of sales.07 and 1.78 and 1.5% and 22.5%) Recent Stock Performance For the 52 weeks ending 9/23/2011.Cascade Corporation Jan 2011 409.3% of sales. In 2010.9% 32.8% of sales.9% 13. There was a wide variation in the gross profit margins at the three comparable companies.07 1. which are trading between 1.54 million .1% 18.e.8% 22. This is at a higher ratio than all three comparable companies. In terms of inventory turnover.10 million. Earnings per share rose 219. Thus.0% 27.88 per share.20% The market capitalization of this company is $625.4% 24. Year Margin Margin extra 2010 2009 34. when the EBITDA margin was equal to 27. Harbin Electric is trading at 1.0%) than that achieved by Harbin Electric.18 10.4% 227.3%.1% 8. this is a 47 . The gross margin in 2010 was the lowest of the previous five years (in 2007. The capitalization of the floating stock (i. or 24. when the company reported earnings of 2. earnings per share totalled $1.30 1.9% of sales to 46.91 7.0% 18. 2010 American Railcar Industries.858 30. the stock of this company was up 14.84 million.2% return the company achieved in 2009.. (Extraordinary items have been excluded). earnings before extraordinary items at Harbin Electric were $76. 2010 Cascade Corporation 2011 Inventory Analysis As of December 2010. when cost of goods sold totalled 63.98 million.40% 0.8 Price/ Price/ 52 Wk Book Sales Pr Chg 1.5% -9.18 times sales. This profit margin is an improvement over the level the company achieved in 2009. the cost of goods sold totalled $281.3% 11. The company's return on equity in 2010 was 23. or 65. Inc.e.699 the United States (43.1% of sales.1% 36.5% 2. This gross profit margin is lower than the company achieved in 2009. This EBITDA margin is worse than the company achieved in 2009. the company had 82 days of inventory on hand (another way to look at this is to say that the company turned over its inventory 4. During the 12 months ending 6/30/2011.6% of sales.59. These 12 month earnings are lower than the earnings per share achieved during the calendar year ending last December.5% in 2010 from 2009. Company Harbin Electric Kulicke And Soffa Industries. During the past 13 weeks. taxes. the gross margin had been as high as 51. the gross profit was 34. Inc.36 1.78 37. The company has not paid any dividends during the previous 6 calendar years. from 11.3 N/A 8. Since the cost of goods sold was $281. that which is not closely held) is $413. the stock has increased 33. the value of the company's inventory totalled $62. The company's earnings before interest.48 million in sales reported by the company in 2010. which are trading between 0. This company is currently trading at 1.45 times book value. depreciation and amorization (EBITDA) were $102.6 3.5 times per year).75 million .4% to $19.12% 1.10 million for the year. Inc.47 14.9% of sales (i. Inc. American Railcar Industries.90. Cascade Corporation P/E 10.

2010 American Railcar Industries.06 million versus $3. MODIFIED OR FRAMED WITHOUT PRIOR WRITTEN PERMISSION.significant improvement over December 2009. Inc.8% 66 7. CONTENT MAY NOT BE REPRODUCED. WRIGHT INVESTORS' SERVICE. the company has increased the amount of money it has spent on Research and Development (in 2007.6% Kulicke And Soffa Industries. FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT. The long term debt to equity ratio of the company is 0.31 0. IN NO EVENT WILL THE WINTHROP CORPORATION. Harbin Electric spent $2. IS NOT TO BE CONSIDERED AS INVESTMENT ADVICE AND SHOULD NOT BE RELIED UPON FOR INVESTMENT DECISIONS. THE CONTENT OF THIS REPORT IS PROTECTED BY APPLICABLE COPYRIGHT LAWS. 2010 Cascade Corporation 2011 Copyright 2001-2011 The Winthrop Corporation Distributed by Wright Investors' Service. RELIABILITY OR TIMELINESS OF THE CONTENT. WITHOUT WARRANTY OF ANY KIND. NO REPRESENTATION OR WARRANTY IS MADE REGARDING THE ACCURACY. INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY. Inc.07 million and total liabilities (i. which is equivalent to 0.4% 76 0.09 million on R&D. INDIRECT. As of December 2010. This is an improvement over the end of 2009. EXPRESS OR IMPLIED.e. NO MATTER WHAT THE CAUSE.12 0.12. All Rights Reserved Important Legal Notice THIS REPORT IS PROVIDED FOR GENERAL INFORMATION ONLY. Financial Position As of December 2010. 48 . which was 0. the accounts receivable for the company were $87. SPECIAL OR CONSEQUENTIAL DAMAGES. the company's long term debt was $50. In 2009. Financial Positions Company Harbin Electric LT Debt/ Days Days R&D/ Year Equity AR Inv.9% of sales. Inc.61 million.75 million.91 million. Sales 2010 0.. OR ANY OF THEIR DATA PROVIDERS BE LIABLE FOR ANY DIRECT. Research and Development Research and Development Expenses at Harbin Electric in 2010 were $3. DISTRIBUTED. when Harbin Electric had 164 days of sales in accounts receivable.8% of sales.42 million in 2010). equivalent to 193 days in inventory. when the company's inventory was $74.17 75 94 55 59 82 0. INC. VISITORS SHOULD VERIFY INFORMATION WITH OTHER RELIABLE SOURCES. During each of the previous 3 years. which is equivalent to 75 days of sales. THIS REPORT IS PROVIDED AS IS. THE REPORTS ARE COMPUTER GENERATED AND MAY BE SUBJECT TO PROGRAMMATIC AND/OR CONTENT ERRORS. Harbin Electric spent $1. all monies owed) were $151.0% 88 0.42 million.89 0.

50 7. but accuracy.0% 0.00 0.19 n/c 53. Dollars Price Harbin Electric.8 2. completeness and opinions are not guaranteed.0% 0. Inc.3 8. INCLS $. no pages on this site may be reproduced. $.0% 0. $. stored in a retrieval system. electronic.0% 0.1 10.8% n/a 68. in any form or by any means. All Rights Reserved.54 17.65 4.26 PRETAX CR & $.0% 10.5% 9. Equity Capital Earnings 12 Book Month Value Earnings Begin Per % Yr Share Change n/a 1. or otherwise without prior written permission.34 n/a 13.00 0.16 PRETAX CR & $. recording. 49 . Information is believed reliable.0% 0.9% 0.46 219.03 PRETAX CR IN DEC 2006 (B): YEAR END CHANGED FROM JUL IN 2004 (C): NAME CHANGED FROM TORCH EXECUTIVE SERVICES LTD (D): BASED ON FULLY DILUTED SHARES (E): A DEVELOPMENT STAGE COMPANY.7 1.66 1.0% 0.48 2.0% 0. or transmitted for commercial purposes.90 12.8 1.00 0.6 n/c 5.S.0% 0.3% 2. photocopying.00 0. INCLS$.4% 0.04 PRETAX CHG DEC.4% 26.77 D AD D AD AD AD Year Value Ratios Dividends Calendar Year 2005 2006 2007 2008 2009 2010 9/23/2011 Market Price/ Price/ Price Earnings Book Dividend Last Ratio Ratio Yield 8.0% 0.4 9.0% 0.00 0.94 7.1% 34.55 PRETAX CHG JUN & $.8% 10. A DEVELOPMENT STAGE COMPANY REFLECTS 1 MONTH OF DATA Copyright ©2000-2011 Distributed by Wright Investors' Service.U.05 25.8% 0. Except for quotations by established news media.10 PRETAX CR MAR).4% 26.7 26.5 6.77 -35.0 28.99 20. NOM PRETAX CR JUN & $.5% 9.01PRETAX CR SEP. mechanical.04 PRETAX CHG DEC.10 8.00 0.38 (A): INCLUDES OR EXCLUDES EXTRAORDINARY CHARGE OR CREDIT .280.9% 23.01 0.1% 34.7 7.97 PRETAX CHG IN 2009 ($. Inc.0% 0.5 % Earned Growth % Profit Rate (ROE) 12 Month % Dividends Payout Per Ratio Share 0.04 PRETAX CHG IN 2008 ($.0% -9.INCLUDES OR EXCLUDES EXTRAORDINARY CHARGE OR CREDIT.4% 10.35 19.91 1.02 PRETAX CR & $.0% 0.01 PRETAX CR MAR).00 0.280.Company Fundamentals\Summary Analysis SUMMARY ANALYSIS: Per Share.9% 30.38 PRETAX CHG SEP.6 1.0% 68.88 n/c 23.5% 1. INCLS $. $.

9% 10.558 96.379 21. electronic.6% 16.891 48.403 120.6% 10. Taxes.728 49.3% 24.Company Fundamentals\Sales Analysis SALES ANALYSIS: Figures in thousands of U.439 45.089 49.481 Cost of Goods Sold After Tax Income before Extraordinary Charges and Credits Amount in thousands Employees After Tax Sales Income Per Per Number Employee Employee 180 270 490 2.820 223.030 25.9% 61.8% 91.6% 38. Except for quotations by established news media.9% 109. and Amortization (EBITDA) Amount in thousands Sales Amount in thousands 23.3% 18. in any form or by any means. Information is believed reliable. Inc.5% 141. Dollars Harbin Electric.6% 20. photocopying.340 Year 2005 2006 2007 2008 2009 2010 YearAmount to-year in Growth thousands n/c 70.892 63.000 42.556 68.809 21. or otherwise without prior written permission.495 12.0% 19.475 60.102 65.010 17.0% % of Sales % of Sales % of Sales 11. mechanical.600 37.234 426.291 34.430 131.8% 25.903 25.354 149.0% Copyright ©2000-2011 Distributed by Wright Investors' Service. Earnings before Interest.702 58.416 65.7% 31.688 133.554 53. no pages on this site may be reproduced.899 32. Depreciation. or transmitted for commercial purposes.815 18.8% 21.410 45.8% 84. 50 . All Rights Reserved.689 4.6% 281.357 43.7% 84.8% 70.8% 76. stored in a retrieval system.2% 48. completeness and opinions are not guaranteed. but accuracy.S.900 4.271 55.644 40.647 8. recording.000 4. Inc.

050 14.850 3.0% 19.840 16.000 12.180 4.2% -53.900 16.3% -13.Dec 2007 Jan .Mar Apr .950 20.0% -15.Mar Apr .100 14.440 8.500 11.2% 4.650 14.500 15.650 8.1% 42.850 7.5% 8.Jun Jul .740 13.150 15.030 12.Sep Oct .Jun Jul .6% -23.120 19. Dollars Harbin Electric.Sep Oct .050 12.9% -27.0% -4.Jun Jul .9% 21.920 4.2% 14.1% -22.250 8.S.5% -1.500 5.Company Fundamentals\Price Analysis PRICE ANALYSIS: Per Share.260 25.Dec 2008 Jan .1% 10.1% 251.460 20.450 3.4% Quarter 2005 Jan .000 21.9% 33.Mar Apr .1% 50.3% 245.Mar Apr .250 12.6% 9.590 16.4% 157.Dec 2009 Jan .Jun Jul .000 9.0% 154.5% -4.7% 5.9% 123.910 11. Inc.900 13.Sep Oct .880 20.890 17.000 2.540 21.9% 7.550 12.Dec 2006 Jan .Mar Apr .Jun Jul .2% -9.Dec 2010 Jan .700 12.100 11.900 19.5% 59.150 8.000 3.480 12.1% -69.9% 31.Mar Apr .6% 90.280 15. High Price 4.900 n/a -7.000 18.250 25.Dec 2011 Jan .5% 6.750 11.8% 33.960 11.000 7.1% n/a n/a n/a n/a 233.1% 222.4% -3.690 15.060 16.640 16.010 Closing Quarterly 12 months Price %Change %Change 3.250 6.6% -49.6% -32.110 22.820 51 .800 4.790 24.550 16.350 20.3% 55.Jun Jul .6% 42.6% -15.250 8.940 13.Mar Apr .000 9.5% -0.250 9.3% -26.700 Low Price 2.760 28.4% -13.650 17.1% 6.700 4.Jun 9/23/2011 17.U.000 16.3% 7.500 8.Sep Oct .890 4.700 27.500 16.Sep Oct .5% -16.300 7.910 16.0% 71.990 6.361 26.210 11.910 15.Sep Oct .

Copyright ©2000-2011 Distributed by Wright Investors' Service. mechanical. no pages on this site may be reproduced. or otherwise without prior written permission. Except for quotations by established news media. electronic. All Rights Reserved. Inc. but accuracy. or transmitted for commercial purposes. in any form or by any means. 52 . Information is believed reliable. stored in a retrieval system. completeness and opinions are not guaranteed. recording. photocopying.

completeness and opinions are not guaranteed.23 0.0% 0.00 0.00 n/a % Payout n/c 0.77 -35.00 0.01 PRETAX CR MAR).17 0.0% 0.20 0. n/a 0.00 0. electronic.00 0.5% n/a n/c INCLUDES OR EXCLUDES EXTRAORDINARY CHARGE OR CREDIT . Inc.19 0. mechanical.10 PRETAX CR MAR). Information is believed reliable.00 0.00 0. n/a n/a n/a 0.00 0. no pages on this site may be reproduced.00 0.38 PRETAX CHG SEP.00 Q2 Jun.71 0.12 0.16 PRETAX CR & $.00 0.00 0.00 0.26 0.55 PRETAX CHG JUN & $. in any form or by any means.0% 0. stored in a retrieval system.04 PRETAX CHG DEC.21 0.00 0.9% 30. A DEVELOPMENT STAGE COMPANY REFLECTS 1 MONTH OF DATA Copyright ©2000-2011 Distributed by Wright Investors' Service.00 0.26 PRETAX CR & $. or otherwise without prior written permission.00 0. NOM PRETAX CR JUN & $.00 0.03 PRETAX CR IN DEC 2006 (B): (C): (D): (E): YEAR END CHANGED FROM JUL IN 2004 NAME CHANGED FROM TORCH EXECUTIVE SERVICES LTD BASED ON FULLY DILUTED SHARES A DEVELOPMENT STAGE COMPANY.82 0. Inc.00 0.0% -9.18 0. n/a 0.00 0.0% n/c Quarterly Reported Earnings Q1 Mar.34 -0.00 0.97 PRETAX CHG IN 2009 ($.00 0.27 0.00 0.INCLUDES OR EXCLUDES EXTRAORDINARY CHARGE OR CREDIT.57 n/a Q4 Dec.66 AD 1. n/a n/a 0. INCLS$.00 0.46 219.00 0. 0.24 0. $. Except for quotations by established news media.00 0.20 0.0% 0.37 0.12 0.8% 0.31 -0.U.34 0.00 0.0% 0. or transmitted for commercial purposes.0% 0.55 Q3 Sep.00 0.27 0.8% AD 0. Dollars Fiscal Year Ends in December Earnings Per Share 12 Months Calendar % Years Earnings Change 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (A): E BCE Harbin Electric.21 0. n/a n/a n/a 0.00 0. All Rights Reserved.01 D 0. INCLS $.00 0. 53 .66 0.00 0.Company Fundamentals\Earnings & Dividends Analysis EARNINGS AND DIVIDENDS ANALYSIS: Per Share.41 n/a n/a n/a n/a D 0.00 n/a Q4 Dec. photocopying.00 n/a n/c n/c n/c n/c n/c n/c n/c n/c n/c n/c Quarterly Reported Dividends Q1 Mar. n/a 0.34 Q2 Jun. Dividends Per Share 12 Months % Dividends Change n/a 0.07 0.00 n/a Q3 Sep.S.00 0.02 PRETAX CR & $.00 0.19 n/c n/c n/c n/c 53.01PRETAX CR SEP.00 0.04 PRETAX CHG DEC.3% AD 2.00 0.04 PRETAX CHG IN 2008 ($.00 0. $. $.21 0.00 0. n/a n/a n/a 0. but accuracy.00 0. recording.00 0.00 0. INCLS $.91 AD 1.

0% 0.4% 0.0% 1.8% 1.6% 0.0% 1.0% 55.0% 0.0% 25.1% 1.8% 0.2% 0.0% 0.0% 0.7% 2.2% 5.1% 0.6 34.8% 19. Fiscal Year Fiscal Year End Date Assets Total Assets Cash & Short Term Investments Cash Short Term Investments Receivables (Net) Inventories -Total Raw Materials Work in Process Finished Goods Progress Payments & Other Prepaid Expenses Other Current Assets Current Assets .5% 3.6% 9.1% 0.6% 1.3% 1.2% 2.0% 13.2% 235.Total Long Term Receivables Investment in Associated Companies Other Investments Property Plant and Equipment .0% 83.1% 0.5 20.6% 0.6% 0.9% 0. 2009 2008 2007 2006 Figures are expressed as Percent of Total Assets.2% -0.1% 0.4% 531.Common Size Balance Sheet .9% 14.2% 0.8% 0.3 17.6% 0.0 18.0% 45. Inc.1% 18.4% 8.8% 132.9% 0.5% 0.0% 0.0% 0.7% .3% 10.6% 6.7% 1.1% 29.5% 0. Dollars.7% 0.1% 23.0% 0.8% 0.3% 93.0% 54 30.4% 15.7% 9.0% 0.5% 0.9% 6.8% 0.1% 30.1% 3.6% 3.4% 2.1% 18.2% 0.0 72.9% 9.0% 0.3% 0.1% 2.0% 32.0% 0.0% 53.2% 40.5% 1.3% 0.3% 14.(Common Size): Harbin Electric.4% 17.Gross Accumulated Depreciation Property Plant and Equipment – Net Other Assets Deferred Charges 2010 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 574.0% 10.2% -1.4% 17. Total Assets are in millions of U.1% 41.S.Financial Statement AnalysesFinancial Statement Analyses\Balance Sheet .4% 4.4% 46.9% 1.

8% 30.0% 1.0% 4.6% 2.4% 7.0% 0.0% 0.Debit Deferred Tax Liability in Untaxed Reserves Other Liabilities Total Liabilities Non-Equity Reserves Minority Interest 9.2% 0.0% 2.8% 14.9% 34.3% 0.3% 14.6% 0.8% 51.8% 17.0% 2.7% 235.1% 8.0% 25.0% 55 .6% 0.4% 0.5% 32.8% 0.0% 0.0% 17.0% 0.3% 0.3% 26.8% 0.2% 3.3 4.1% 25.9% 14.0% 30.9% 0.7% 8.7% 100.4% 8.Total Long Term Debt Long Term Debt Excluding Capitalized Leases Capitalized Lease Obligations Provision for Risks and Charges Deferred Income Deferred Taxes Deferred Taxes .8% 0.0% 0.8% 25.0% 0.0 10.0% 1.Credit Deferred Taxes .8% 0.0% 574.Tangible Other Assets Intangible Other Assets Total Assets Liabilities & Shareholders' Equity Total Liabilities & Shareholders' Equity Accounts Payable Short Term Debt & Current Portion of Long Term Debt Accrued Payroll Income Taxes Payable Dividends Payable Other Current Liabilities Current Liabilities .0% 2.0% 0.4% 100.0% 2.4% 0.0% 0.6 1.6% 0.3% 0.0% 0.0 0.6% 100.9% 100.2% 132.9% 0.0% 0.5% 10.5% 531.0% 5.7% 4.7% 0.6% 0.7% 0.0% 5.2% 36.7% 5.0% 19.0% 9.0% 0.2% 100.0% 0.0% 0.5 3.0% 8.0% 1.0% 1.0% 0.0% 0.0% 0.0% 0.0% 93.7% 3.4% 13.0% 0.5% 0.0% 0.0% 0.

or transmitted for commercial purposes.0% 62.4% 100.0% 0. electronic. All Rights Reserved. or otherwise without prior written permission.0% 63.0% 0. Inc. 56 .0% 0.0% Copyright ©2000-2011 Distributed by Wright Investors' Service. completeness and opinions are not guaranteed.1% 100. but accuracy. in any form or by any means.0% 100.0% 0.8% 100. Except for quotations by established news media.0% 48.0% 0.0% 0.0% 0.0% 0.0% 74. Information is believed reliable. photocopying.Preferred Stock Preferred Stock Issued for ESOP ESOP Guarantees Preferred Issued Common Equity Total Liabilities & Shareholders' Equity 0.2% 100. mechanical. stored in a retrieval system. no pages on this site may be reproduced.0% 0.0% 73.0% 0.0% 0.0% 0.0% 0. recording.0% 0.

4% 64.0% 13.1% -26.8% 83.5% 340. Electric.722.5% 1.2% 35.7% -26.750. 2007 2006 Fiscal Year Fiscal Year End Date Assets Total Assets Cash & Short Term Investments Cash Short Term Investments Receivables (Net) Inventories -Total Raw Materials Work in Process Finished Goods Progress Payments & Other Prepaid Expenses Other Current Assets Current Assets .(Year to Year Percent Change): Harbin Figures are the Percent Changes from the Prior Year.5% 0.1% -24.5% 97.1% 213.Year-Year % Change Balance Sheet .9% -3.5% 3.6% 76.7% -32.9% -100.4% 241.1% 166. Inc.3% 66.Financial Statement Analyses\Balance Sheet .2% 112.6% 101.4% 286.7% 175.3% -78.3% 44.1% 337.222.5% -19.7% -5.7% 2.6% 57 .5% 286.7% 21.0% 158.275.9% 898.7% -56.2% 192.8% 94.6% 10.2% 3.6% 558.5% -35.1% 77.4% 164.8% 460.8% -18.2% 1.8% -97.5% 18.1% 297.Gross Accumulated Depreciation Property Plant and Equipment – Net Other Assets Deferred Charges 2010 2009 2008 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 8.5% 125.3% 20.0% -5.4% 365.6% 232.5% -16.5% 7.1% 38.7% 45.0% -12.4% 274.0% 109.6% 336.5% 152.8% 113.1% 35.0% 99.4% 42.1% 906.9% 754.6% 256.Total Long Term Receivables Investment in Associated Companies Other Investments Property Plant and Equipment .

7% 909.6% 58 .Tangible Other Assets Intangible Other Assets Total Assets Liabilities & Shareholders' Equity Total Liabilities & Shareholders' Equity Accounts Payable Short Term Debt & Current Portion of Long Term Debt Accrued Payroll Income Taxes Payable Dividends Payable Other Current Liabilities Current Liabilities .1% 3.0% -0.0% -28.2% 125.8% 15.1% 217.7% 1.5% 0.3% 292.9% 1.2% -52.9% -86.5% 77.Debit Deferred Tax Liability in Untaxed Reserves Other Liabilities Total Liabilities Non-Equity Reserves Minority Interest 250.5% 863.2% 726.7% 1.Total Long Term Debt Long Term Debt Excluding Capitalized Leases Capitalized Lease Obligations Provision for Risks and Charges Deferred Income Deferred Taxes Deferred Taxes .7% 91.037.8% 821.832.8% 196.0% -16.4% 42.5% -51.7% -34.341.Credit Deferred Taxes .2% 24.8% 409.5% 1.9% 125.9% 252.170.7% 48.1% 274.3% 987.7% 153.9% -86.4% -67.7% 46.5% -0.9% 8.9% 15.037.0% -86.9% 225.7% -34.0% 77.3% 42.7% 149.5% 565.1% 26.2% 20.3% 8.8% 1.6% -40.4% 303.8% 50.0% -44.5% 398.1% -41.8% 274.

Except for quotations by established news media. mechanical. All Rights Reserved. 59 . photocopying.9% 42.4% 77.5% 87.5% 8. in any form or by any means. but accuracy. Inc.Preferred Stock Preferred Stock Issued for ESOP ESOP Guarantees Preferred Issued Common Equity Total Liabilities & Shareholders' Equity 27. electronic.7% 83. recording.2% 88.0% 274.5% 125.9% Copyright ©2000-2011 Distributed by Wright Investors' Service. Information is believed reliable. stored in a retrieval system. no pages on this site may be reproduced.5% 106. completeness and opinions are not guaranteed. or transmitted for commercial purposes. or otherwise without prior written permission.

4 53.6 0.5 0.3 -2.3 60 .2 8.0 0.Total Long Term Receivables Investment in Associated Companies Other Investments Property Plant and Equipment .0 0.7 0.Gross Accumulated Depreciation Property Plant and Equipment – Net Other Assets Deferred Charges 2010 2009 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 313.3 58.3 0.9 0.4 33.7 0.5 0.4 8.8 0.0 97.2 0.8 1.3 3.Financial Statement Analyses\Balance Sheet .1 1.0 1.5 161.7 20.0 96.4 28.0 0.6 5.4 0.9 0.1 4.0 34.2 0.2 33. 2008 2007 2006 Fiscal Year Fiscal Year End Date Assets Total Assets Cash & Short Term Investments Cash Short Term Investments Receivables (Net) Inventories -Total Raw Materials Work in Process Finished Goods Progress Payments & Other Prepaid Expenses Other Current Assets Current Assets .0 111.8 2.2 0. Dollars.8 2.(5 Year Averages): Harbin Figures in millions of U.9 11. Inc.5 59.8 3.3 0.2 14.0 14.4 -1.0 0.6 18.3 71.2 7.6 0.0 33.2 6.2 8.6 0. Electric.5 60.5 11.3 1.1 27.5 32.Five-Year Averages Balance Sheet .6 4.8 1.0 54.6 91.0 0.9 50.7 50.1 23.0 0.0 0.4 1.0 1.6 203.S.5 8.

8 7.1 313.8 313.0 0.4 20.7 39.1 0.6 5.4 12.3 0.3 12.0 8.2 50.4 8.4 12.0 4.1 19.0 0.0 0.8 0.2 203.2 2.Total Long Term Debt Long Term Debt Excluding Capitalized Leases Capitalized Lease Obligations Provision for Risks and Charges Deferred Income Deferred Taxes Deferred Taxes .8 19.Debit Deferred Tax Liability in Untaxed Reserves Other Liabilities Total Liabilities Non-Equity Reserves Minority Interest 22.4 0.0 0.3 0.0 0.Tangible Other Assets Intangible Other Assets Total Assets Liabilities & Shareholders' Equity Total Liabilities & Shareholders' Equity Accounts Payable Short Term Debt & Current Portion of Long Term Debt Accrued Payroll Income Taxes Payable Dividends Payable Other Current Liabilities Current Liabilities .0 0.7 67.0 0.0 30.0 0.4 13.7 203.0 0.8 1.0 4.7 0.4 59.3 11.8 31.7 18.9 19.0 2.2 0.4 50.0 97.0 0.0 1.8 30.0 0.3 6.5 19.0 61 .Credit Deferred Taxes .5 0.3 18.3 0.0 11.3 5.9 0.0 0.2 5.0 5.0 18.6 1.1 97.1 0.4 97.2 35.0 0.5 4.6 19.

9 50. no pages on this site may be reproduced.3 0.0 0.0 30. Information is believed reliable. electronic. or transmitted for commercial purposes.0 0.1 Copyright ©2000-2011 Distributed by Wright Investors' Service.0 210.0 0.8 97.Preferred Stock Preferred Stock Issued for ESOP ESOP Guarantees Preferred Issued Common Equity Total Liabilities & Shareholders' Equity 0. completeness and opinions are not guaranteed.0 131. photocopying. mechanical.0 0.0 0.0 65.6 203. recording.0 0.7 313.0 0.2 0. but accuracy. or otherwise without prior written permission.4 0.0 0. stored in a retrieval system. Except for quotations by established news media. 62 . All Rights Reserved. in any form or by any means. Inc.

1% 0.0% 0.0% 5.7% 65.3% 14.6% 9.3% 2.0% 0.0% 0.0% 0.0% 0.0% 0.6% 63 .0% 0.0% 18.0% 0.0% 0.6% 31.0% 0.0% 0.8 2007 65.2% 0.0% 3.1% 25.8% 13.0% 51.0% 0.(Common Size): Harbin Electric.0% 0.0% 0.7% 0.0% 0.0% 0.6% 0.0% 1.0% 0.4 Figures are expressed as Percent of Net Sales or Revenues.S. General & Administrative Expenses Other Operating Expenses Operating Expenses .6% 21.4% 0.0% 78.0% 0.0% 3.5% 36.5% 48.0% 0.2% 0. Depletion & Amortization Gross Income Selling. Taxes.9% 63.Pretax Extraordinary Charge .6% 1.0% 0.5 2009 223.0% 0.7% 1.7% 0.6% 58.0% 0.1% 0.2% 37.1% 0.3% 39.6% 48.8% 45.6% 0.6% 0.3% 19.8% 21.6% 53.8% 49.3% 17. Dollars.7% 25.5% 0.9% 24.0% 0.6% 3.0% 0.0% 0.9% 25.1% 2.7% 30.9% 0.5% 63.1% 75.8% 45.0% 71.3% 23.1% 13.0% 0.8% 34. Depreciation & Amortization (EBITDA) Earnings before Interest & Taxes(EBIT) Interest Expense on Debt Interest Capitalized Pretax Income Income Taxes Minority Interest Equity in Earnings After Tax Other Income/Expense Discontinued Operations Net Income before Extraordinary Items/Preferred Dividends 65.0% 1.Increase/Decrease Pretax Equity in Earnings Other Income/Expense .Financial Statement Analyses\Income Statement .1% 0.0% 0.3% 34.0% 0.0% 25.1% 0.0% 0.9% 5.4% 21.2 2008 120.Pretax Non-Operating Interest Income Reserves .0% 0.4 2006 40.3% 49.3% -0.4% 0.0% 28.7% 2.0% 0. Net Sales or Revenues are in millions of U.Net Earnings before Interest.Total Operating Income Extraordinary Credit .0% 8.0% 0.0% 5. Fiscal Year Net Sales or Revenues Cost of Goods Sold Depreciation.9% 32.9% 0.0% 9.0% 0.0% 36.0% 22.2% 10.2% 1.9% 0.Common Size Income Statement .0% 6.5% 1.3% -1. 2010 426. Inc.0% 0.3% 10.0% 0.6% 1.0% 0.

0% 0. recording. electronic. in any form or by any means.available to Common 0. 64 .0% 25.0% 8. photocopying.Extraordinary Items & Gain/Loss Sale of Assets Preferred Dividend Requirements Net Income after Preferred Dividends . or transmitted for commercial purposes.8% 45.0% 0.0% 0.0% 0. mechanical.8% 21. stored in a retrieval system. Information is believed reliable. All Rights Reserved.0% 0. Except for quotations by established news media.0% 0. but accuracy. no pages on this site may be reproduced.6% Copyright ©2000-2011 Distributed by Wright Investors' Service. completeness and opinions are not guaranteed.0% 18. or otherwise without prior written permission. Inc.0% 0.0% 0.0% 0.

0% 67.3% 2.Pretax Extraordinary Charge .8% 69.3% 84.Pretax Non-Operating Interest Income Reserves .0% 170.4% 45.3% 86.8% 58.7% 62.1% 54.9% 71.7% 10.7% 79. General & Administrative Expenses Other Operating Expenses Operating Expenses .4% 65 .4% 91.(Year to Year Percent Change): Harbin Figures are the Percent Changes from the Prior Year.8% 58.2% 123.4% 93.4% -60. 2008 84.Increase/Decrease Pretax Equity in Earnings Other Income/Expense .4% 57.4% 77.1% 145.9% 255.3% -30.9% -4.0% -330.6% 106.0% 57.6% 100.0% 2006 70.6% 70.2% 61.6% 108.0% 65.0% 53.1% 12.342.1% 102.5% -21.0% 99.4% 25. Taxes.Net Earnings before Interest.1% 105.3% 3.3% 76.0% 98. Depletion & Amortization Gross Income Selling.0% 93.1% -86.5% 72.8% 100.Financial Statement Analyses\Income Statement .2% 204.4% 125.9% -8.1% Fiscal Year Net Sales or Revenues Cost of Goods Sold Depreciation.4% 50.Year-Year % Change Income Statement .2% 2009 84.Total Operating Income Extraordinary Credit .1% 40.1% 104.5% 100.6% 46.7% 121.2% 100.5% 21.7% 107. Electric. Depreciation & Amortization (EBITDA) Earnings before Interest & Taxes(EBIT) Interest Expense on Debt Interest Capitalized Pretax Income Income Taxes Minority Interest Equity in Earnings After Tax Other Income/Expense Discontinued Operations 2010 91.7% 2007 61.7% 14. Inc.1% 108.4% -95.3% 62.

1% -8. or otherwise without prior written permission.6% 50.0% -22.Net Income before Extraordinary Items/Preferred Dividends Extraordinary Items & Gain/Loss Sale of Assets Preferred Dividend Requirements Net Income after Preferred Dividends available to Common 291. All Rights Reserved.1% -8.4% 291. Except for quotations by established news media. Information is believed reliable. but accuracy. recording.3% 84. in any form or by any means.4% Copyright ©2000-2011 Distributed by Wright Investors' Service. mechanical. or transmitted for commercial purposes. no pages on this site may be reproduced. photocopying.0% -22. 66 . Inc.3% 84. electronic.6% 50. completeness and opinions are not guaranteed. stored in a retrieval system.

0 67.0 0.6 28. Taxes.0 1. 2010 2009 2008 2007 2006 175.8 26.0 0.6 16.Pretax Extraordinary Charge .9 0.9 2.0 0.9 0. Depletion & Amortization Gross Income Selling.Total Operating Income Extraordinary Credit .5 22.Five-Year Averages Income Statement .4 37.8 2.1 0.9 0.0 131.6 16.Increase/Decrease Pretax Equity in Earnings Other Income/Expense .2 0.4 0.4 1.7 3.0 67 38.0 0.9 0.4 18.1 21.3 9.1 55.7 18.0 5.0 0.0 0. Inc.0 0.7 0.0 5.4 Fiscal Year Net Sales or Revenues Cost of Goods Sold Depreciation.8 44.2 12.0 0.0 0.2 15.9 0.0 0.3 94.0 2.0 9.0 0. Depreciation & Amortization (EBITDA) Earnings before Interest & Taxes(EBIT) Interest Expense on Debt Interest Capitalized Pretax Income Income Taxes Minority Interest Equity in Earnings After Tax Other Income/Expense Discontinued Operations Net Income before Extraordinary Items/Preferred Dividends Extraordinary Items & Gain/Loss Sale of Assets 62.8 1. Dollars.0 .Pretax Non-Operating Interest Income Reserves .7 50.0 0.9 109.9 0.0 0.3 27.2 0.0 0.0 0.0 0.1 25.3 26.0 0.4 0.1 0.9 12.0 0.5 48.(5 Year Averages): Harbin Figures in millions of U.0 0.4 44.7 0.0 5.0 31.9 6.8 0.1 0.2 0. Electric.0 0.Net Earnings before Interest.1 33.1 0.0 0.5 0.0 1.0 9.1 0.Financial Statement Analyses\Income Statement .0 0.0 9.S.8 0.8 0.7 0.0 2.5 0.0 3.0 0.0 0. General & Administrative Expenses Other Operating Expenses Operating Expenses .1 14.

0 0. completeness and opinions are not guaranteed. stored in a retrieval system. 68 . or otherwise without prior written permission. mechanical. recording. photocopying. or transmitted for commercial purposes.0 0. in any form or by any means. All Rights Reserved.1 Copyright ©2000-2011 Distributed by Wright Investors' Service. Inc. but accuracy. Information is believed reliable. electronic.0 0. Except for quotations by established news media. no pages on this site may be reproduced.available to Common 0.0 9.Preferred Dividend Requirements Net Income after Preferred Dividends .1 14.1 31.4 18.

Fiscal Year Fiscal Year End Date Total Capital Percent of Total Capital Short Term Debt Long Term Debt Other Liabilities Total Liabilities Minority Interest Preferred Stock Retained Earnings Common Equity Total Capital Year to Year Net Changes Short Term Debt Long Term Debt Other Liabilities Total Liabilities Minority Interest Preferred Stock Retained Earnings Common Equity Total Capital Year to Year Percent Changes Short Term Debt Long Term Debt 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 472. 2010 2009 2008 2007 2006 Currency figures are in millions of U.6 -0.7 73.8% 22.0 9.0% 35.6 4.5 14.0% 16.5% 65.2% 100.7% 987.1% 0.8 0.8% 88.6% 92.9% 1.7 4.0% 1.7 0.0% -2.9 208.1% 3.2 12.8% 0.0% 0.9% 100.0 0.5% 15. Inc.0 4.Net Change Sources of Capital: Harbin Electric.0 9.6 0.0% 2.Financial Statement Analyses\Sources of Capital .8 0.0% 25.8 5.0% 28.9 -44.5 0.6% 0.8% 100.1 0.3 0.0% 0.0 0.0% 38.S.5% -86.0 0.3 -2.3 117.0% 0.0 0.4 1.9% 69 .8% 100.9 -0.3% 50.2% 1.0% 83.1% 0.8% 6.1% 9.0 1.2% 0. Year to year % changes pertain to reported Balance Sheet values.7 15. Dollars.0 2.0% 0.0% 19.1 11.7 9.0% 0.0 4.1 0.0 0.9 1.2% 40.0 -0.1 -2.3% 32.0 2.9 -1.7% 10.0% 27.4% 71.6% 61.0 6.6 2.0% 0.2% 1.9% 100.0 0.0% 28.1% 29.5% 16.5 4.0 2.037.6% 0.0 1.5 -0.6 6.4 0.8 354.

2% 151.6 -19.0% -16.8% 196. completeness and opinions are not guaranteed.2 46. recording.2% 33.7% 83.6% -40. photocopying.7% -34.9% 150.7 36.9 99. All Rights Reserved.1% 26.5% 33.6% 88.6% -28.2% 84.8% 47.6% 45.5 62.2% 24.4% 106.0% 95.5% 0. Information is believed reliable.6% 27.5 66.6 46. in any form or by any means.2 89. 70 .8 21.1% 87.9 21.5% 70.1 4.2 81.0% 174.0 0. mechanical. stored in a retrieval system.8 111.9 47.9% 59.Other Liabilities Total Liabilities Minority Interest Preferred Stock Retained Earnings Common Equity Total Capital Total Liabilities & Common Equity Total Liabilities Net Change in Liabilities as % of Total Liabilities Common Equity Net Change in Common Equity as % of Common Equity Cash Flow Operating Activities Financing Activities Investing Activities -67.0 45.4% 61.5 Copyright ©2000-2011 Distributed by Wright Investors' Service.9% 23.832. Inc.0% 199.4% 93. Except for quotations by established news media. but accuracy. electronic. or transmitted for commercial purposes. or otherwise without prior written permission.6 51.0% 419.3% 329.0 16.0% -86.4% 76.3 22.6% 48.5 71.9% 60.1 0.1 42.6% 180. no pages on this site may be reproduced.3 39.1 9.

Inc.5 4.6% Copyright ©2000-2011 Distributed by Wright Investors' Service.5 20. Depletion & Amortization % of Gross Property.0% 86. Inc.4 1.Number of Days Inventory Turnover Inventory . All Rights Reserved.0 4. completeness and opinions are not guaranteed.9 17. Plant & Equipment Depreciation.3 1.6 2. Depletion & Amortization Year to Year Change Depreciation. stored in a retrieval system. electronic.2% 62.4 4. recording.3 2.Number of Days Gross Property.5 79. Plant & Equipment Turnover Net Property.2 0.2 1.9 5.1 2.4% 79.2% 2.1 2.9 80.0 0.7 4. in any form or by any means. or otherwise without prior written permission. 2010 2009 2008 2007 2006 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 4.1 89.3% 6.4 5.2 108.0 104.6% 0.8 63.3 2.6 1.9% 2.4 3. 71 . Except for quotations by established news media.1% 145.Financial Ratio AnalysesFinancial Ratio Analyses\Accounting Ratios Accounting Ratios: Harbin Fiscal Year Fiscal Year End Date Receivables Turnover Receivables .4 2.0 20. mechanical.8 90.5 0.2 0. or transmitted for commercial purposes. but accuracy. Depletion & Amortization Year to Year % Change Electric. Plant & Equipment Turnover Depreciation.5 2.8 83.2 18. photocopying. no pages on this site may be reproduced. Information is believed reliable.9 124.7% 4.

2010 2009 2008 2007 2006 Figures are expressed as the ratio of Net Sales.7% 0.8% 81.1% 0.9% 33.0% 24.0% 126.0% 1.0% 1.8% 36.5% 18.4 166.0% 0. Inc.6% 14.6% 63.7% 70.4% 2.0% 88. electronic.8% 2.0% 112.5% 38.0% 0.7% 44. Fiscal Year Fiscal Year End Date Net Sales Cash & Cash Equivalents Short-Term Investments Accounts Receivable Inventories Other Current Assets Total Current Assets Total Long Term Receivables & Investments Long Term Receivables Investments in Associated Companies Other Investments Property.9% Copyright ©2000-2011 Distributed by Wright Investors' Service.0% 43. in any form or by any means. Inc.2% 120.0% 0.4% 194.4% 223.8% 0.S.0% 3. mechanical.0% 2.0% 0.0% 0. but accuracy. Plant & Equipment Gross Accumulated Depreciation Property Plant & Equipment Net Other Assets Total Assets 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 426.9% 237. All Rights Reserved.0% 0.6% 0.4 69.0% 192.0% 0.5% 52.6% 31. 72 . Information is believed reliable.3% 202.0% 22.0% 0.1% 0. completeness and opinions are not guaranteed.9% 0. recording.4% 78.8% 40.3% 1.1% 134.6% 27.2 43. stored in a retrieval system. or otherwise without prior written permission.0% 0.2% 0.8% 2.2% 36.8% 15.2% 0.1% 230.6% 20.8% 0. Except for quotations by established news media.8% 22. Net Sales are in millions of U. Dollars.0% 72.5% 65.8 40.0% 0.6% 40. or transmitted for commercial purposes.5 23. photocopying.4% 0.9% 0. no pages on this site may be reproduced.0% 26.0% 0.7% 2.0% 40.Financial Ratio Analyses\Asset Utilization Asset Utilization: Harbin Electric.

2 325.5 Copyright ©2000-2011 Distributed by Wright Investors' Service.7 4. 73 .7 21. Inc.7 325.6 3. or transmitted for commercial purposes.0 24.5 8. All Rights Reserved.5 8. but accuracy.0 3.4 3.7 6.2 6.2 19. 2009 2008 2007 2006 2010 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 19.7 8. photocopying.7 293.1 3.0 6.3 21.8 8. electronic.0 3. or otherwise without prior written permission. stored in a retrieval system.1 3. Inc.6 8.Financial Ratio Analyses\Fixed Charges Coverage Fixed Charges Coverage: Harbin Fiscal Year Fiscal Year End Date EBIT/Total Interest Expense EBIT/Net Interest EBIT/(Total Interest Exp + Pfd Div) EBIT/Dividends on Common Shares EBIT/(Dividends on Common + Pfd) EBITDA/Total Interest Expense EBITDA/Net Interest EBITDA/(Total Interest Exp + Pfd Div) EBITDA/Dividends on Com Shares EBITDA/(Dividends on Com + Pfd) Electric.6 3. mechanical.6 3. recording.4 293. Information is believed reliable.1 7. no pages on this site may be reproduced.1 22.7 3.6 5.8 8.7 3.7 3. completeness and opinions are not guaranteed.8 5. Except for quotations by established news media. in any form or by any means.

2% 1.0% 0.2% 17.0% 0.7% 86.3% 138.9% 132.1% 19.6% 4.1% 99.2% 22.5% 0.4% 45.8% 38. Inc.0% 0.6% 0.0% 0.5% 125.0% 0.9% 8.6% 11.0% 28.0% 0.0% 0.8% 18.4% 14.5% 136.0% 0.1% 39.8% 16.0% 0.0% 92.5% 48.9% 82.6% 18.8% 38.0% 9.0% 28.7% 0.6% 30.0% 140.5% 2.0% 0.0% 0.6% 30.6% 25.5% 17.8% 63.2% 0.0% 6.1% 39.8% 1.0% 6.3% 16.8% 63. 2010 2009 2008 2007 2006 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 50.0% 0.1% 0.2% 19.6% 25.8% 134.0% 0.0% 0.0% 0.0% 0.0% 0.5% 18.5% 0.1% 140.2% 74.0% 0.0% 0.0% 0.0% 136.0% 0.0% 0.0% 0.0% 74 .9% 14.0% 11.0% 0.Financial Ratio Analyses\Leverage Analysis Leverage Analysis: Harbin Fiscal Year Fiscal Year End Date Long Term Debt % of EBIT Long Term Debt % of EBITDA Long Term Debt % of Total Assets Long Term Debt % of Total Capital Long Term Debt % of Com Equity Total Debt % of EBIT Total Debt % of EBITDA Total Debt % of Total Assets Total Debt % of Total Capital Total Debt % of Total Capital & Short Term Debt Total Debt % of Common Equity Minority Interest % of EBIT Minority Interest % of EBITDA Minority Interest % of Total Assets Minority Interest % of Total Capital Minority Interest % of Com Equity Preferred Stock % of EBIT Preferred Stock % of EDITDA Preferred Stock % of Total Assets Electric.9% 132.7% 10.8% 38.5% 0.6% 0.2% 14.0% 10.2% 107.8% 134.3% 43.1% 28.9% 2.0% 0.0% 0.3% 16.

All Rights Reserved.0% 63.2% 3.0% 0.8% 47.8% 98.8% 71.6% 0. but accuracy.8% 18.9% 88.0% 0. Inc.9% 88.0% 74.0% 91.0% 0.1% 0.8% 3.4% 41.9% 20.0% 62. photocopying.2% 35.1% 0.9% 0.2% 83.5% 0.0% 73.6% 41.3% 54. completeness and opinions are not guaranteed.5% 0. Information is believed reliable.8% 82.1% 88.0% 0. or transmitted for commercial purposes. stored in a retrieval system.0% 51. in any form or by any means. mechanical.0% 48. no pages on this site may be reproduced.7% 0.0% 72.3% 4. recording.7% 0.0% 124. 75 .8% 66.5% 31.6% 28.5% 101.2% 58.4% 61.Preferred Stock % of Total Capital Preferred Stock % of Total Equity Common Equity % of Total Assets Common Equity % of Total Capital Total Capital % of Total Assets Capital Expenditure % of Sales Fixed Assets % of Common Equity Working Capital % of Total Capital Dividend Payout Funds From Operations % of Total Debt 0.0% 0. Except for quotations by established news media.1% Copyright ©2000-2011 Distributed by Wright Investors' Service.2% 79.0% 0. or otherwise without prior written permission.4% 13. electronic.0% 92.

0% 17.1 6.3 62.1 35.3% 2.0 38. Inc.4% 108.4% 89.5 41.6% 5.5 3.1 28.1% 83.4% 124.1 16.1 13.0% 46.3% 202.9 76 .0% 62.376. 2010 2009 2008 2007 2006 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 63.6 463.number of days Inventory to Cash & Equivalents .9 30.9 32.2% 101.5 11.5% 72.7 14.0% 21.0% 3.2% 170.0 32.3 802.545.9% 88.7 16.1% 112.Financial Ratio Analyses\Liquidity Analysis Liquidity Analysis: Harbin Fiscal Year Fiscal Year End Date Total Current Assets % Net Sales Cash % of Current Assets Cash & Equivalents % of Current Assets Quick Ratio Receivables % of Current Assets Receivable Turnover number of days Inventories % of Current Assets Inventory Turnover .1% 1.7% 18.6% 17.1% 590.9% 93.5% 20.9 20.1% 37.8% 17.6% 105.8% 527.0% 126.5% 79.4 23.1 18.4 18.3% 124.0 17.1% 1.3% 72.4% 34. Dollars) Operating Activities Electric.6% 28.0 0.4% 51.5% 18.1% 90.number of days Receivables % of Total Assets Current Ratio Total Debt % of Total Capital Funds from Operations % of Current Liabilities Funds from Operations % of Long Term Debt Funds from Operations % of Total Debt Funds from Operations % of Total Capital Cash Flow (in milllions of U.4% 98.5 42.6 9.367.2% 91.6% 80.4 571.1% 19.7% 27.6% 63.1 26.8% 35.3 9.0% 1.4% 86.8 15.S.9% 1.1% 51.3% 192.1% 17.

1 0. or otherwise without prior written permission. 77 .1 4. or transmitted for commercial purposes. photocopying. but accuracy. mechanical.2 81.5 Copyright ©2000-2011 Distributed by Wright Investors' Service.2 89. electronic.Financing Activities Investing Activities 22. in any form or by any means. All Rights Reserved. Except for quotations by established news media. Inc.0 47. stored in a retrieval system.7 36. completeness and opinions are not guaranteed. recording. no pages on this site may be reproduced.8 111.5 71. Information is believed reliable.1 39.

2010 2009 2008 2007 2006 Figures are expressed as per unit of respective shares.84 1.50 1.01 1.77 0.78 7.77 2.35 10.01 2.93 0. recording.00 0.35 1.66 7.00 1.00 0. no pages on this site may be reproduced. stored in a retrieval system.31 2.99 3.Financial Ratio Analyses\Per-Share Ratios Per Share Data: Harbin Electric. in any form or by any means. Information is believed reliable.65 2.46 2.38 7.93 0. or transmitted for commercial purposes.00 2.00 1.65 3. or otherwise without prior written permission.24 17.11 1.00 1. Inc.15 0.65 1.46 2.15 1.29 4. electronic.00 2.19 1. mechanical.46 0.34 2.56 1.38 4.47 1.91 0.58 5.93 0. Except for quotations by established news media.80 2.46 0.93 0.63 0.60 1. Fiscal Year Fiscal Year End Date Sales Operating Income Pre-tax Income Net Income (Continuing Operations) Net Income Before Extra Items Extraordinary Items Net Income After Extraordinary Items Net Income Available to Common Shares Fully Diluted Earnings Common Dividends Cash Earnings Book Value Retained Earnings Assets 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 13.11 0. Inc.91 0.77 0.01 0.00 1. Figures are in U.19 0.24 13.63 0. All Rights Reserved. photocopying.36 10.00 3.09 5.19 1.63 0.60 Copyright ©2000-2011 Distributed by Wright Investors' Service.S. completeness and opinions are not guaranteed.36 18.80 1. Dollars.00 0.11 1.11 1.46 2.43 0.31 0. 78 . but accuracy.15 1.00 0.

6% 34.8% 9. completeness and opinions are not guaranteed.0% 36.355.2% 18.9% 22.3% 48.5% 24.8% 9.4 63.0% 76. or otherwise without prior written permission.1% 22.7% 45.8% 23. stored in a retrieval system.5% 14.7% 30.5% 39.6% 53.8% 33.6% 17.0% 36.4% 0. 2010 2009 2008 2007 2006 Fiscal Year Fiscal Year End Date Gross Income Margin Operating Income Margin Pretax Income Margin EBIT Margin Net Income Margin Return on Equity .9% 25.5% 17.2% 14.3% 25.8% 36.7% 199.Financial Ratio Analyses\Profitability Growth Profitability Analysis: Harbin Currency figures are in U.450. but accuracy.1% 23.8% 34.8% 0.1% 6.5 22. Inc.2% 0.7% 13.0% 40.5% 2.2% 27.8% 21.0% 25. mechanical. recording. Information is believed reliable.1% 29.0% 20.3% 18.6% 45.0% 5. electronic. Except for quotations by established news media.200.0% 9.2% Copyright ©2000-2011 Distributed by Wright Investors' Service.S.3% 25. or transmitted for commercial purposes.0% 19.8% 16.5% 0.0% 13. photocopying. 79 .3% 28.0% 0.833 13.0% 0.9% 70.144.248 0.0% 7.8% 26.382 15.Total Return on Invested Capital Return on Assets Asset Turnover Financial Leverage Interest Expense on Debt Effective Tax Rate Cash Flow % Sales Selling. no pages on this site may be reproduced.0% 21.9% 19.8% 7.6% 36.5 39.4 18.2% 6. General & Administrative Expenses % of Sales Research & Development Expense Operating Income Return On Total Capital 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 31.2% 0.7 19. Inc.4% 1. All Rights Reserved. Electric.8% 49.7% 8.954 0.619.5% 34. in any form or by any means. Dollars.3% 10.6% 59.334 15.9% 3.9% 1.6% 51.

electronic.Current Year Public Market Value (Excludes Closely Held) .Three Year Average . Information is believed reliable. Wright Quality Rating Electric. Inc.Investment Acceptance: Harbin Currency figures are in millions of U.2% NAS 118 34 33.S.Current Year Trading Volume . mechanical. stored in a retrieval system. photocopying.Three Year Average . All Rights Reserved. or transmitted for commercial purposes.Wright Quality Rating AnalysesWright Quality Rating Analyses\Investment Acceptance Wright Quality Rating . completeness and opinions are not guaranteed. in any form or by any means. no pages on this site may be reproduced. CAA20 CAA20 508 626 336 414 2.5% 849. Except for quotations by established news media. but accuracy. Inc. recording.Current Year Turnover Rate .312 447. 80 .9% Investment Acceptance Rating Total Market Value of Shares Outstanding . Dollars.Three Year Average .Current Year Stock Exchange Listings Number of Institutional Investors Number of Shareholders Closely Held Shares as % of Total Shares Outstanding Copyright ©2000-2011 Distributed by Wright Investors' Service.Three Year Average . or otherwise without prior written permission.271 5.

9% 50 0 50 21. 81 . or otherwise without prior written permission. completeness and opinions are not guaranteed. but accuracy. in any form or by any means. no pages on this site may be reproduced.2 1. C C AA20 AA20 458 89. or transmitted for commercial purposes.6 2.S. Inc. Dollars) Lease Obligations (Millions of U. mechanical. Information is believed reliable.1 22.S.Wright Quality Rating Analyses\Financial Strength Wright Quality Rating . photocopying.0% 9. Dollars) Total Debt as % of Total Capital Fixed Charge Coverage Ratio: Pretax Income to Interest Expense & Preferred Dividends Fixed Charge Coverage Ratio: Pretax Income to Net Interest Income & Preferred Dividends Quick Ratio (Cash & Receivables / Current Liabilities) Current Ratio (Current Assets / Current Liabilities) Copyright ©2000-2011 Distributed by Wright Investors' Service. Dollars) Electric. Dollars) Total Shareholders' Equity as % Total Capital Preferred Stock as % of Total Capital Long Term Debt as % of Total Capital Long Term Debt (Millions of U.S.2 Long Term Debt including Leases (Millions of U. Except for quotations by established news media.Financial Strength: Harbin Wright Quality Rating Financial Strength Rating Total Shareholders' Equity (Millions of U.6% 0. stored in a retrieval system. All Rights Reserved. recording.3% 19. electronic. Inc.S.

no pages on this site may be reproduced.657.5% -4. mechanical.Basic Trend Cash Earnings Return on Equity . Except for quotations by established news media.Wright Quality Rating Analyses\Profitability & Stability Wright Quality Rating .Basic Trend Cash Earnings Return on Equity . Information is believed reliable.8% 99. or otherwise without prior written permission. CA CA A20 A20 20.Time-Weighted Normal .0% 16. All Rights Reserved.2% 16.6% 1. completeness and opinions are not guaranteed. electronic.Time-Weighted Average .Profitability & Stability: Harbin Wright Quality Rating Profitability & Stability Rating Electric. Inc. photocopying. stored in a retrieval system. Inc.7% 17.Stability Index Return On Assets (Time-Weighted Average) Pre-Tax Income as % of Total Assets (Time-Weighted Average) Operating Income as % of Total Assets (Time-Weighted Average) Operating Income as % of Total Capital (Adjusted Rate) Pre-Tax Income as % of Total Assets (Time-Weighted Average) Operating Income as % of Total Assets (Time-Weighted Average) Operating Income as % of Total Capital (Adjusted Rate) 1.0% 89.6% -4. but accuracy.6% Profit Rate of Earnings on Equity Capital . in any form or by any means. recording. or transmitted for commercial purposes.657. 82 .7% 17.0% 32.2% Copyright ©2000-2011 Distributed by Wright Investors' Service.

no pages on this site may be reproduced.3% 20.6% 0. recording. Electric. photocopying. Information is believed reliable.Corporate Growth: Harbin Figures are expressed on a Per Share Basis.Wright Quality Rating Analyses\Corporate Growth Wright Quality Rating . completeness and opinions are not guaranteed. mechanical.0% 91. Inc.0% 25.0% 25. but accuracy. or otherwise without prior written permission.0% Copyright ©2000-2011 Distributed by Wright Investors' Service. CAA CAA Wright Quality Rating Growth Rating Normal Earnings Growth Cash Earnings Growth Cash Earnings Stability Index Earned Equity Growth Dividend Growth Operating Income Growth Assets Growth Sales/Revenues Growth 20 20 20. Inc.0% 25. 83 . Except for quotations by established news media. All Rights Reserved.0% 25. or transmitted for commercial purposes. stored in a retrieval system. electronic. in any form or by any means.

6.Annual and Quarterly ValuEngine's fundamentally-based. and allocate capital for maximum returns. 2011 CONTENTS • • • • • • • • Valuation Snapshot Forecast Target Prices -1. the firm covers most major Canadian stocks and can provide coverage of Tokyo markets on an as needed basis. Copyright © 1998 . FL 32902 support@ValuEngine. ValuEngine's research will enhance your ability to evaluate individual stocks. and 12 Month Time Horizons Historical Price and Recommendation Chart Business Summary Optimal Buy-Sell Levels Overall Rankings Alternate Valuation Figures -PEG and Comparables' PEG Detailed Financials .2011 ValuEngine Inc PO Box 399 Melbourne. 3. In addition. quant-derived research is now available to private investors.com (800)381-5576 84 . ValuEngine currently covers @5500 US equities as well as @500 ADRs and foreign stocks that trade on US markets. manage your portfolio.VgluEngine TM The Leader in Stock Valuation and Forecasting DETAILED STOCK VALUATION REPORT HARBIN ELEC INC Ticker: HRBN Oct. 10.

2011 HARBIN ELEC INC(HRBN) VALUENGINE RECOMMENDATION & BASIC INFORMATION ©ValuEngine.93 18. we base this on actual earnings per share (EPS) for the previous four quarters of $1.14 2. 2011. 2011. we feel that HARBIN ELEC INC has the probability to ROUGHLY MATCH average market performance for the next year.79% 64. For HRBN.06% overvalued.55% -7. each playing a role in the valuation analysis. 10.10 $20. For more details on the ValuEngine One Year Forecast Target price and its components.com 2011 RECOMMENDATION NEGATIVE underperform NEUTRAL match POSITIVE outperform 25 22 20 10 Volume (million) 8 VALUENGINE RATING Price 18 15 12 10 2 8 5 RECOMMENDATION FACTORS Value Overall Rank Fair Value 1Yr Target Price P/E Ratio Last 1-Y Return Market Cap(bil) $17. please go HERE.49 $20. For more details on ValuEngine's Fair Value Model. We then apply the most advanced statistical/econometric techniques to ensure that our stock return forecasts are as reliable as possible.93.87 0. please go HERE. but UNATTRACTIVE market valuation and volatility.57% undervalued Industrial Products 28. A stock is rated Strong Buy. The breakdown for each rating is as follows: • Strong Buy: More than +12% 1YFR • Buy: Between +5% and +12% 1YFR • Hold: Between -5% and +5% 1YFR • Sell: Between -12% and -5% 1YFR • Strong Sell: Less than -12% 1YFR ValuEngine's Strong Buy-rated stocks have an averaged annual return of 19% since 2001. FL 32902 (800) 381-5576 (T) support@ValuEngine.42 10.83% 31.36% undervalued $21.VgluEngine TM DETAILED RESEARCH REPORT Oct.661584 10.02%.57. For more details on ValuEngine's Forecast Model. Intermediate-term momentum continuation. FORECAST ANALYSIS 1-Month 3-Month 6-Month 1-Year 2-Year 3-Year Target Price $21.com www. 10.65% FORECASTED TARGET PRICES The predictive variables used in Valuengine's forecast target price models include both proprietary and well-established forecasting variables derived from credible financial research studies and publications. Hold. Strong Sell based on the Forecast One Year Return.47 1. Buy. Based on the information we have gathered and our resulting research.42 $19.31 19.93% -4.20% n/a n/a 0.19 Exp. forecasted EPS for the next four quarters of $2. There are an additional 10 firm specific and interest rate related parameters.96.81 $20.01% $0. Fair Value indicates what we believe the stock should be trading at today if the stock market were perfectly efficient and everything traded at its true worth.83 8.06% overvalued Machinery-electrical 29.66 Rank btm 31% btm 4% btm 26% top 26% top 26% top 38% 5 2007 Close Price 2008 2009 2010 Volume Sell 2011 Hold Buy 0 Target Price VALUENGINE RECOMMENDATION ValuEngine has issued a HOLD recommendation for HARBIN ELEC INC on Oct. Return -0.com Copyright © 1998 .ValuEngine.72% -3. please click HERE. 10. The company exhibits ATTRACTIVE 5-year annualized return and risk.05 RECOMMENDATION OVERVIEW ValuEngine's stock recommendations are based on the proprietary ValuEngine one-year forecast return (1YFR) model output for each individual equity. Inc.2011 ValuEngine Inc 1 85 .25 0. among other things.34% -1. we believe that HRBN should be trading at $17. PO Box 399 Melbourne.83 9. Contact ValuEngine: ValuEngine. FAIR MARKET VALUATION PRICE Based on available data as of Oct.93 $20. This makes HRBN 18. Sell.53 $20.00% -3. BASIC INFORMATION Last Trade Trade Date Market Cap(bil) Trailing P/E Forward P/E PEG Ratio P/S Ratio M/B Ratio Sharpe Ratio 5-Y Avg Ann Return Volatility EPS Growth Annual Dividend Dividend Yield LT Debt/Equity Beta VALUATION ANALYSIS HRBN Industry Sector Today's Fair value: $17.35 1.17 10/07/11 $0. Our forecasting models capture. We use a distinct forecasting model for each time horizon and for every industry. several important tendencies that stock prices consistently exhibit: Short-term price reversals. and correlations to the 30year Treasury bond yield of 3. and Long-term price reversals.

designs. as well as.47.93 1. Let's take them one by one: • Valuation rank 4: 96% of stocks are more undervalued • Momentum rank 75: 25% of stocks have higher momentum • Sharpe Ratio rank 90: 10% of stocks have a higher Sharpe Ratio • 5-Year Average Annual Return 96: 4% of stocks have higher average annual return • Volatility rank 33: 67% of stocks have less volatility • EPS growth rank 62: 38% of stocks have greater projected EPS growth • Size rank 63: 37% of companies have higher market capitalization • P/E rank 75: 25% of stocks have lower P/E ratios • Price/Sales rank 43: 57% of stocks have lower price/sales ratios • Market/Book rank 45: 55% of stocks have lower market/book value ratios 2. HRBN earned $1. On this page.96 per share in its recent 4 quarters. as well as mass transportation systems. Valuation Based on HRBN's Past P/S Over the past 5 years.24 1. If its forecasted EPS growth is negative but its forward 4 quarter EPS is positive. In other words a high rank is always better. Fair Value Historical Average P/S P/S-Based Fair Value n/a $0.83% 31. to other industrial OEM customers overseas. we present such a valuation based on one of three market ratios: PEG (price to trailing 4 quarter earnings ratio. we resort to the P/S to assess its fair value. HEAT. Otherwise.00%). The analyst consensus estimate is $2. DATA SUMMARY & MARKET RATIO BASED VALUATION MARKET RATIO BASED VALUATION Portfolio managers and professionals traditionally rely on market ratios to gauge whether a stock is fair valued or overvalued. Valuation Based on Comparables' P/S HRBN's comparables are CPST. the best time to buy would be below $17. The current P/S average of these comparables is 2. HRBN earned $1. Each of these quantitative measurements is ranked on a scale of 1 to 100.96 per share in its recent 4 quarters. The best time to sell would be above $18.00 EVALUATION & RANKINGS SUMMARY Just as important as the percentages shown for our ten predictive variables for each stock is the way they are ranked against the 7000 plus stocks in our database.57 for its 4 quarter forward EPS. OPTIMAL BUY-SELL Based solely on the Historical Mispricing of HRBN.01% 19. conveyor systems. HRBN's average P/S is n/a. Among the three.65 (or valuation above 4.00%).07 7.2011 ValuEngine Inc 2 86 .VgluEngine BUSINESS SUMMARY TM DETAILED RESEARCH REPORT HARBIN ELEC INC(HRBN) BUSINESS SUMMARY. HRBN's current price sales ratio is 1. Industry applications for linear motors include oilfield services. PEG is the most informative as it reflects both the price/earnings ratio and expected future EPS growth.06% 9.47.47 1. The Company currently designs and supplies its motor products and systems to numerous end users throughout the Chinese domestic market.52. Generally the higher the ranking. EVALUATION & RANKINGS Valuation 12-Month Return 5-Y Avg Ann Rtn Volatility EPS Growth Market Cap(bill) Sharpe Ratio P/S Ratio M/B Ratio P/E Ratio Value 18. and P/S ratio (price to trailing 4 quarter sales).31 1. packaging equipment.14 0.22 Fair Value Comparable Stocks' Avg P/S Comparable P/S-Based Fair Value 2. divided by the consensus analyst forecasted next year EPS growth). the Company builds a wide array of customized linear motors and other special motor for a variety of applications and industries. we apply the P/E to give a fair value for the stock as of today.79% 64. develops and manufactures linear motors and special electric motors. PLUG and UQM. and (ii) the average market ratio today of five comparable stocks in the same sector and from companies of similar size. For each given stock. P/E (price to forward 4 quarter earnings ratio). FELE. The following assessment is based on multiplying the historical P/S with recent 4 quarter sales per share for HRBN.66 0. The Company is based in Harbin.39 (or valuation below 3.87 10.36 Copyright © 1998 . To establish a valuation standard. we apply the PEG to give a fair value assessment if both its trailing 4 quarter EPS and forecasted EPS growth rate are positive.52 $36. while P/E is better than P/S. This is sometimes confusing to newcomers to ValuEngine. These two alternative perspectives should give you a good idea about where this stock's valuation stands today. China along with its wholly owned subsidiaries. we use both (i) the average historical market ratio of the stock over the past 10 years (or however long there is data available for the stock). HRBN's current price sales ratio is 1. the more positive the influence each measurement has on the overall attractiveness of the stock. Comparables' P/S Comparables CPST FELE HEAT PLUG UQM Current P/S 2. Harbin Electric. With proprietary technology and core patents. Inc.20% 0. The analyst consensus estimate is $2.57 for its 4-quarterforward EPS. The following assessment is based on multiplying comparable stocks' average P/S today with HRBN's recent 4 quarter sales per share . factory automation.83 Rank 4 75 96 33 62 63 90 43 45 75 1.

18 53 same 5 years.97 n/a Rank 75 48 56 n/a The ValuEngine P/E Rank signifies the relative standing of a company on its P/E ratio. A high rank indicates a high growth rate expectation.83% 33 stock.76 65 ranked 1.72% 97 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- EPS Growth Rank The ValuEngine EPS Growth Rank indicates a stock's expected EPS HRBN 31. Stocks in the top P/E percentile are each assigned a rank of 1(highest P/E stocks) while those in the bottom P/E percentile are assigned a rank of 100 (traditional value stocks).34% 47 than the industry Rank of 54. HRBN is significantly higher than the industry.09 46 HRBN is in line with the industry. HRBN is significantly higher than the S&P 500 -0. Sector 2.66 63 market capitalization.52% 61 has a rank of 58.7 51 assigned a rank of 100 while stocks with the highest P/S ratio are Sector 1. With a P/E rank of 75.57% 55 the more undervalued the stock. 3 Copyright © 1998 . With a Valuation Rank of 4. Sector -11. In other words a high rank is always better.83 n/a 16.01 44 market book value. which is in line Sector 4.09% 54 stocks.79% 96 average annual return over the last 5 years.23 57 capitalization within ValuEngine's stock universe.2011 ValuEngine Inc 87 . Each of these quantitative measurements is ranked on a scale of 1 to 100.95% 50 With a 12-Month Return Rank of 75. which is moderately lower Sector 60. HRBN is Sector -28. Stocks with the lowest P/S ratio are Industry 1. Sector -1. -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Valuation Rank The ValuEngine Valuation Rank measures the relationship between a HRBN 18. which has a rank of 57.44% 56 has an EPS Growth Rank of 62. Generally the higher the ranking. A higher rank indicates a better return performance. relative to the universe. a higher 12-Month Return rank indicates a stronger performance. -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- P/S Ratio Rank The ValuEngine Price/Sales rank signifies the relative position of the HRBN 1. With a rank of 90. At a Price/Sales rank of 43. which has a rank of 58. With a Size rank of 63. S&P 500 n/a n/a -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Sharpe Ratio Rank The ValuEngine Sharpe Ratio Rank measures the risk return tradeoff HRBN 0.This is in line with the industry rank of Sector 53. HRBN is moderately higher than the industry P/E rank of 48.06% 4 company's stock price and its Fair Value.20% 62 growth rate. S&P 500 n/a n/a -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Market Cap(bill) Rank The ValuEngine Size rank signifies the company's size in terms of HRBN 0. The below data points show how the rank for each data point for HRBN relates to the overall industry. HRBN Industry 27. sector. -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 5-Y Avg Ann Rtn Rank The ValuEngine 5-Years Average Return Rank reflects a stock's HRBN 19. the more positive the influence each measurement has on the overall attractiveness of the stock. S&P 500 n/a n/a -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- P/E Ratio HRBN Industry Sector S&P 500 10. in comparison with the Industry -12.08 47 with the industry rank of 44.22% 61 the industry's rank score of 39. S&P 500 18. A higher rank corresponds to a lower Industry 3.19 50 industry. A higher rank denotes a larger market Industry 9. HRBN has a Volatility Rank of 33.47 43 company based on its P/S ratio.01% 75 performance of a stock over the recent 12 months. -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 12-Month Return Rank The ValuEngine 12-Month Return Rank reflects the relative stock HRBN 9. HRBN is significantly higher than S&P 500 -0.31 90 offered by a stock. -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Volatility Rank The ValuEngine Volatility Rank reflects the volatility associated with the HRBN 64.15 58 (over the last five years) divided by its annualized volatility over the Sector -0. A higher Volatility Rank indicates a lower volatile percentile of Industry 52. On a scale of 1 to Industry -23. HRBN is in line with the industry S&P 500 n/a n/a rank of 51. Sharpe ratio is the stock's average annual return Industry -0. which carries S&P 500 n/a n/a a Valuation Rank of 55.64% 58 coverage universe.87 45 relative to the stock universe.36% 55 substantially lower than the average of its industry group. HRBN has a Market/Book rank of 45. -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- M/B Ratio Rank The Market/Book Rank is a measure of a stock's market to book ratio HRBN 1. and S&P 500 averages.08% 54 With a rank of 96.VgluEngine TM DETAILED RESEARCH REPORT HARBIN ELEC INC(HRBN) VALUENGINE RANKINGS Just as important as the percentages shown for our ten predictive variables for each stock is the way they are ranked against the 7000 plus stocks in our database.72% 52 56. Industry -29.13% 39 100. The higher the Valuation rank. which S&P 500 -3.

75% 27.76% 43.72% -3.65% UQM 52.67% 96 53 48 74 5 One-Month Three-Month Six-Month One-Year Two-Year Three-Year CPST 52.10% -9.55% 39.53% -30.50% -41.51% 58.22 -0.95% FELE 45.54% 42.60% 13.47 1.42% 1.35% -78.61% 52.88% 62.47% 1.55% -7.56% 48.93 7.81% 46.50% 59.25% 51.22 0.42% 51.76% 40.14 2.45% 60.02 -0.50% 32.27% 47.19% 53.06% -88.77 -1.89% 49.2011 ValuEngine Inc 4 88 .39% 47.55% 1.06 0.66% -31.48% 3.70% EPS Growth HRBN FELE CPST UQM HEAT 0.83 14.02% -21.01% 48.39% FELE 1.30% Volatility HRBN FELE CPST UQM HEAT 64.55% 75 77 88 17 1 RISK ASSESSMENT: CHANCE OF GAIN 5-Y Avg Ann Rtn Rank HRBN FELE CPST UQM HEAT 19.85% 56.84% 6.05% -26.80% -1.54% 61. Sharpe Ratio HRBN FELE CPST UQM HEAT 0.04% 0.79% -7.50% 67.15% 43.VgluEngine Valuation HRBN FELE CPST UQM HEAT 18.13 0.96% 0.52 0.65% 51.46% 38.60% Rank 33 82 25 26 20 RISK ASSESSMENT: CHANCE OF LOSS CPST One-Month Three-Month Six-Month One-Year Two-Year Three-Year 47.70% -48.15% HEAT 54.24% 59.16% -1.73% 52.88 0.72 8.58% 48.12% 37.42% 2.75% 48.93% -4.96% HEAT 2.46% 57.05% FELE 54.42% 49.44% 51.18% 72.83% 31.62% -56.11% 50.13% HRBN 49.92% 49.62% 74.73% 52.44% 51.65% UQM -1.27% 47.43% 36.70% 0.87 4.99% 51.12% 52.85% HEAT 45.00% -3.03 Rank 63 67 48 25 16 * Comparables are companies in the same Sector and Industry and of approximately similar market capitalization value.24% 56.17% -0.14 0.21% 25.29 Rank 62 39 81 79 2 Market Cap(bill) HRBN FELE CPST UQM HEAT 0.09% HRBN -0.58% 50.50% 40.66 0.48% 47.92% -11.24 Rank 43 51 24 11 88 M/B Ratio HRBN FELE CPST UQM HEAT 1.17% -5.31 -0.74% 12-Month Return Rank HRBN FELE CPST UQM HEAT 9.49% 41.56% 48.29% 80.09% TM DETAILED RESEARCH REPORT HARBIN ELEC INC(HRBN) COMPARISON OF SIMILAR STOCKS* & RISk ASSESSMENT Rank 4 44 83 89 61 FORECAST COMPARISONS RETURN FORECAST: EXPECTED RETURN CPST One-Month Three-Month Six-Month One-Year Two-Year Three-Year 1.87% HRBN 50.98 n/a n/a n/a Rank 75 58 13 20 12 Copyright © 1998 .35% 48.88 0.22 Rank 45 18 9 53 97 P/E Ratio HRBN FELE CPST UQM HEAT 10.52% 52.01% 10.98 Rank 90 46 56 72 5 P/S Ratio HRBN FELE CPST UQM HEAT 1.34% -1.35% UQM 47.88% 47.76 1.26 0.71% 37.08% 50.31 0.06% -21.

9 0 0 12.8 0 48 0 0 45 41.5 1.1 0 0 0 81.1 44.9 94.VgluEngine BALANCE SHEET Cash Marketable Securities Receivables Inventory Raw Materials Work in Progress Finished Goods Notes Receivable Other Current Assets Total Current Assets Property.7 531 12.1 11.5 0 151.3 0 1 24. Plant & Equipment Investment & Advances Other non-current Assets Deferred Charges Intangibles Deposits & other assets TOTAL ASSETS Notes Payable Accounts Payable TM DETAILED RESEARCH REPORT HARBIN ELEC INC(HRBN) ANNUAL FINANCIALS (All items in Millions) 201012 99.2 136.9 0 0.8 1.5 2.7 1 5.5 0 17.6 132.3 0 8.7 16.9 0 0.5 0 60.6 0 47.4 97.3 2.6 235.9 29.2 47.1 26. Plant & Equipment Accumulated Depreciation Net Property.4 0 4.4 0 0 0 75.2 0 0 2.1 0 27.7 283.4 0 99.4 43.9 11.8 85.6 2.9 173.7 574.4 0 3.5 1 8.8 2.1 156.9 62.8 0 0.5 15.6 --9.1 0 1.8 350.3 1.5 0 23.8 35.9 11.2 0 0 11.8 0 0.6 235.4 100 0 0 0 50.8 8.6 0 180.9 200512 5.1 0 10.9 8.7 50.4 4.8 28.1 5 20.6 ---0 1.3 422.1 0 68.9 0.9 27.5 200712 45.6 200612 67.6 0 0 218.8 73.4 6.9 0 30.2 15.8 1.7 574.5 3.6 24.1 2.4 0 0 218.5 22 2.6 84.6 0 0.3 12.8 0.7 0 2 45 92.7 0 0 0 33.5 106.8 4.2 0 0 0 0 0 0 0 0.2 30.2011 ValuEngine Inc 5 89 .1 132.3 ---0 2.6 ---0 0.1 69.3 200912 96.3 0 0 2 0 1.5 531 200812 48.4 --23.6 0 6.7 8 11. Net Capital Surplus Retained Earnings Treasury Stock Other Equity Total Shareholders' Equity Total Liabilites & Shareholders Equity Copyright © 1998 .6 0 62.4 0 0 0 4.7 20.7 0 18.8 184.7 --7.6 13.8 0 0 0 28.6 0 16.7 2.2 74.1 0 0 0 33.8 0 0 0 0.3 162.8 Current Portion of Long-term Debt Current Portion of Capital Leases Accrued Expenses Income Taxes Payable Other Current Liabilities Total Current Liabilities Mortgages Deferred Charges (taxes/income) Convertible Debt Long Term Debt Non-Current Capital Leases Other Long-Term Liabilities Minority Interest (liabilities) Total Liabilities Preferred Stock Common Stock.7 92.2 56 171.2 0 0 1.4 268.3 0 -1.9 0 0 0 20.2 0 0 0 0 0 0.3 0 24.9 77.8 0 0 95 52.2 5.5 174.2 0 0 2.4 8.

2 1.8 23.7 0.Diluted.5 -11.6 12.7 39.7 25. Net Change in Cash & Cash Equivalents Copyright © 1998 .1 119.2 14 0 6.5 0 0 0 25.8 5.8 19.7 -0 0 200812 120.7 6.6 43. Acquisition/Disposition of Subsidiaires Increase (decrease) in Investments Other Cash inflow from Investment Act.6 -0 0 200912 223.9 0 2.1 -12.8 3..2 0 2.2 -2.3 -9.7 3.7 0.8 -0.9 0 16.9 0 -4.9 2.7 0 0 0 -1 0.7 -21.4 0 1.8 31.9 0.6 10 0.7 1.5 -22.5 0 47 0 0 0 47.1 0 19..1 -4 -4.2 6.6 0 1.4 0 18.6 25.5 0 0 0.4 -34. Net Cash from (used by) Invesment Act.5 -8 0 10.3 -2.3 0 20 62.9 -0 0 200612 40.4 -48.1 16.1 82.9 6.4 -81.9 2.8 1.7 55.3 -32.4 33 32.5 0 0 23.4 0 0 79.9 9.3 -57. & Equ.5 4. Increase/Decrease in Prop.3 0 0 -0.6 6.4 2.2 146.2 -0 0 200712 65.6 76.1 17 2.Acc & Pd Dividends (common) Dividend per share (common) CASH FLOW STATEMENT Net Income (Cash Flow) Depreciation. Non-Operating Income Interest Expense Pretax Income Provision for Income Taxes Minority Interest Investment Gains (Losses) Other Income Income Before Extraordinaries & Disc Extraordinary Items & Discontinued Net Income Average Shares used for Diluted EPS Average Shares used for Basic EPS Income Before Non-Recurring Items Income From Non-Recurring Items EPS . Amortization-CF Net Increase(decrease) in Cash from(used in) Discontinued Oper.3 47. Depreciation.6 94.1 7.2 4.2 -11 71.4 2 40.4 39.1 48.2 2. net EPS .3 31.9 0 0.2011 ValuEngine Inc 79.1 4.2 14.1 1 1 -0 0 200512 23.9 -2. Depl.1 18. Amort.7 0 -0.6 0 1.4 21.9 -1.3 16.5 290.9 7.1 0 0.5 25.2 44.5 18.5 6 90 .9 0 1 0.5 2.4 0 0 0 0 18.3 -27.6 10 0 0 0 10 0 0 0 0 10 0 10 15.4 18.3 -4 -4.7 -0 0 Research & Development Expense Selling.8 18.1 61.9 16.5 4.3 16.4 1.8 0 -12.2 -4.2 0 76. before non-recurring Preferred Dividends .3 -89.6 16.6 18.9 0 0 0 0 16. Other Adjustments .9 -72.4 20.2 11. net EPS . Expense Income Before Depr.2 -14.8 -24.4 0 25.5 1. Depletion.2 11.1 11.8 73.VgluEngine INCOME STATEMENT Net Sales or Revenues Cost of Goods Sold Gross Profit TM DETAILED RESEARCH REPORT HARBIN ELEC INC(HRBN) ANNUAL FINANCIALS (All items in Millions) 201012 426.2 0 -26.7 0 6.3 30.6 17.4 0 1.2 25.2 0.6 93.9 18. Amort.1 14.9 34.Diluted.3 0 -0.Basic.5 22.9 -111.Net Net Cash from (used by) Operating Act. Issuance (purchase) of Equity Shares Issuance (repayment) of Debt Securities Increase (decrease) in Bank & Other Payment of Dividends & Other Cash Other Cash from (used by) Financing Net Cash from (used by) Financing Act.9 4. General & Admin.9 10 0 0.4 7.8 135.8 0 0 0 -0.3 20.8 0.1 29.3 42.9 2.5 2. Depletion. Plant.9 -36 1.7 23.4 0 1.6 3.3 0 -0.7 -5.6 12.2 1.1 0 0 -23.6 2.6 92.

5 4 53.6 Current Portion of Long-term Debt Current Portion of Capital Leases Accrued Expenses Income Taxes Payable Other Current Liabilities Total Current Liabilities Mortgages Deferred Charges (taxes/income) Convertible Debt Long Term Debt Non-Current Capital Leases Other Long-Term Liabilities Minority Interest (liabilities) Total Liabilities Preferred Stock Common Stock.5 520 10.5 531 200909 155.6 9 9 4.9 80.1 615.7 531 12.7 20.6 15.5 0 17.6 3.7 13.1 342.2011 ValuEngine Inc 7 91 .8 0 0 0 0 0 4.3 0 32.4 0 0 0 4.1 0 0 213.3 49 50 0 10.4 650.7 283.7 574.2 0 7.5 10.4 0 3.1 0 0 0 73.8 3.3 11 278.7 9.9 371.6 104.3 87.8 52.2 201012 99.2 238.5 15.3 201009 58.2 15.9 0 36.8 200.4 55.7 26.2 61.7 0 18.4 0 0 218.3 162.7 0 0 0 99 1.3 13.7 25.4 18. Net Capital Surplus Retained Earnings Treasury Stock Other Equity Total Shareholders' Equity Total Liabilites & Shareholders Equity Copyright © 1998 .8 8.5 0 146 0 0 213.VgluEngine BALANCE SHEET Cash Marketable Securities Receivables Inventory Raw Materials Work in Progress Finished Goods Notes Receivable Other Current Assets Total Current Assets Property.2 110.8 0.1 156.2 47.9 9.6 0 0 218.1 544.5 0 0 0 0 0 3.9 144.2 0 148.5 0 72.6 1.9 56.9 36.9 13.2 9.4 201103 138.4 268.5 1.8 184.9 0 16.9 11.4 12.8 6.2 15.9 --201.9 0 0 0 105.6 0 0 218.2 14.9 0 0 0 0 0 3.7 75.3 0 80.2 138.4 8.2 0 36.8 0 47.4 8.4 6. Plant & Equipment Accumulated Depreciation Net Property.8 4.8 46.2 74.8 342.4 0 98.3 2.8 0 0 0 50.6 309.5 0.6 30.9 520 201003 80.1 182.8 650.4 0 56.6 4.5 0 151.2 136.1 49. Plant & Equipment Investment & Advances Other non-current Assets Deferred Charges Intangibles Deposits & other assets TOTAL ASSETS Notes Payable Accounts Payable TM DETAILED RESEARCH REPORT HARBIN ELEC INC(HRBN) QUARTERLY FINANCIALS (All items in Millions) 201106 105.6 27.5 0 1.9 29.6 373.5 0 92.7 13.6 460.5 544.4 28.9 45.4 0 4.9 24.5 0 0 0 75.3 422.7 191.8 85.2 56 171.3 615.1 12.3 145.3 7.7 0 0 0 22.4 0 99.4 0 81.6 0 62.1 26.4 43.8 ---9.5 201006 45.9 23.7 50.8 0 67.1 0 100.9 40.9 11.2 31 21.3 183.4 0 0 0 75.1 0 0 0 50.2 0 0 2.9 0 0 0 81.9 301.1 8.9 11 25.8 35.2 9 15.5 0 0 0 0 0 4.1 0 1.6 4 3.1 0 0 218.9 33.8 155.1 0 68.9 62.6 0 0 9.1 11.9 0 9.9 99.6 398.9 73.6 0 180.2 524.7 524.9 40.7 126.1 208.5 128.8 0 109.6 9.7 25.5 11.4 100 0 0 0 50.9 8.8 350.8 55.4 200912 96.4 0 190 0 0 218.7 212.4 145.8 0 150.6 243.9 173.8 28.7 309 198.1 44.8 4.1 20.8 0 0 216.2 0 2 0 179.4 160.4 36.8 1.1 0 0 0 81.1 69.4 142.6 29.3 436.4 163.8 46.7 574.

4 118.1 16.2 31.6 -5.1 0 0 12.9 -111.5 1.9 0 -0.2 10.5 -6.1 20.9 10.1 -40.7 0 25.5 0 0 18.1 -0.3 -9. General & Admin.1 -29. Issuance (purchase) of Equity Shares Issuance (repayment) of Debt Securities Increase (decrease) in Bank & Other Payment of Dividends & Other Cash Other Cash from (used by) Financing Net Cash from (used by) Financing Act.2 23.5 24.9 27.4 31.8 33.6 93.5 -8 0 10.5 8 92 .9 31.8 66.1 0 -8.7 35.4 -0 0 Research & Development Expense Selling.3 0 20 62.2 3.3 0 0 20.3 0 18.1 79.1 21..8 31.1 3.1 20.1 0.7 0.3 0.1 17 2.6 0.8 0.4 15.5 0 20.8 14.2 -2.1 -11.2 0 0 0 10. Net Change in Cash & Cash Equivalents Copyright © 1998 .8 0 0. Amort.7 0.3 14.6 1.1 0 3.1 3.6 0.9 3.9 1.7 0 12.3 -9.8 -0.6 30.5 8.9 0 -0.1 -15.8 21.2 0.6 17.3 27.2 4 0 4.Net Net Cash from (used by) Operating Act.1 3. & Equ.4 75.3 3.5 69.5 0 3 1 29.6 0.6 18.9 30.3 0 -3.4 -1 0.3 -0 0 0 17.9 15 4. Acquisition/Disposition of Subsidiaires Increase (decrease) in Investments Other Cash inflow from Investment Act.6 0.7 -0. before non-recurring Preferred Dividends .5 -95 0 -3.4 0 3.9 0 -26. Depletion. Depl.7 0 -9.9 14.5 78.1 21.8 -0 0 201003 105.2 0 -26.1 0.3 0.7 -0 0 200912 107. Amort.5 -7.Diluted.6 0.6 49.1 2.6 -0 0 201006 105.3 1.6 0.3 -89.9 13. Other Adjustments .5 -0 0 201009 109.7 0.3 9.6 0.8 -1. net EPS .8 73.3 -27. Amortization-CF Net Increase(decrease) in Cash from(used in) Discontinued Oper.9 0 -26.8 0 0 0 25.2 -27.2 75.9 0 -1.3 16.6 0.8 0.Basic.6 3.3 0.2 31.6 6.2 0 0.7 0 0.5 -22.2 -57. Increase/Decrease in Prop.9 -0.1 0 0 -2.6 22.5 -111.2 11.4 9.7 1.5 -11.6 0 -1.3 31 31 19.4 48.5 22.7 10. Depreciation.3 -57.9 0 0.2 16.7 31.5 31.9 -52.6 25.7 0.3 31.1 0.2 0.9 16.2 0.2 36.4 2 40.VgluEngine INCOME STATEMENT Net Sales or Revenues Cost of Goods Sold Gross Profit TM DETAILED RESEARCH REPORT HARBIN ELEC INC(HRBN) QUARTERLY FINANCIALS (All items in Millions) 201106 131.2 -11 71.8 0.6 0 0.6 -0 0 200909 46.6 0 0 29.9 0 -0.1 24 1.8 0.6 0 18.4 0.2 0 2.4 31.4 95.5 -0 0 201103 103.2011 ValuEngine Inc 28 6 -21.1 6 0 0 0 17.3 31.1 -4.7 28.8 2.5 12.8 -0.4 7.2 44.4 -17.3 -0 0 201012 106.4 31.8 0.9 0 17.5 -3.5 106.8 0.9 28.8 5.2 36.1 2.1 119.3 10.8 0.5 0 2 0 0 0 -1.1 23. net EPS .1 8. Non-Operating Income Interest Expense Pretax Income Provision for Income Taxes Minority Interest Investment Gains (Losses) Other Income Income Before Extraordinaries & Disc Extraordinary Items & Discontinued Net Income Average Shares used for Diluted EPS Average Shares used for Basic EPS Income Before Non-Recurring Items Income From Non-Recurring Items EPS .4 0 0.4 -1.3 0.1 35.2 0 0.9 -37.3 -1.7 0. Net Cash from (used by) Invesment Act.Diluted.1 79.2 71.7 1.2 -0.5 3. Expense Income Before Depr.4 0.9 -12.4 70.4 -34.5 0 3 1.2 0 17.9 -72.9 0 -14.9 -8.6 27 4.7 0 0 -23.9 0 -4.3 0 0 -0.8 0 10.6 0 1..3 10.6 -32.3 -27.4 37.3 35 0 -8.6 15.2 0 5.2 -2.4 1.4 27. Plant.Acc & Pd Dividends (common) Dividend per share (common) CASH FLOW STATEMENT Net Income (Cash Flow) Depreciation.5 27. Depletion.6 7.5 -27.6 26 0 -16.2 -40.

valuengine. Markets. VEI will dramatically increase your productivity. Whether you are a Fund Manager. ValuEngine's three models: Valuation Model.S. please visit our website at www. Below is a brief description of some of our additional products and services. financial advisors.com/nl/WeeklyNewsletter ValuEngine Premium Newsletters: ValuEngine offers a variety of premium newsletter products designed to meet every style of investment.valuengine. and commentary from ValuEngine Chief Market Strategist Richard Suttmeier and Senior Analyst Steve Hach. The ValuEngine Weekly Newsletter also includes tips and tricks for getting the most out of VE's quant-based investment tools. and ADR stocks which trade on U. sign up here: www. Forecast Model and Ratings Model are incorporated to give you a well-rounded analysis from three different perspectives. and U. an Independent Financial Advisor. VEI provides the finance professional with a fast. Earnings Estimates. stock universe as well as VE data points for hot stocks and industries.S.com/pub/main?p=33 The ValuEngine Weekly Newsletter: The ValuEngine Weekly Newsletter features market research. To receive this free newsletter every Friday. customization. and web-site owners. Copyright © 1998 . VE also offers long-only portfolio newsletter products as well as specialized industry and sector reports. objective. and consistent computerized research department whenever and wherever needed.com. please go to our website at www.com/rep/mainrep To find out more about ValuEngine's many independent and objective investment products and services.valuengine. newsletter publishers. You can sign up for a free 14 day no-risk trial period: www.S. ValuEngine Premium Web Site Stock Analysis Service: A subscription to our website allows access to ValuEngine's proprietary real-time quantitative analysis tools for more than 5. and strategy-implementation needs. indices. To view sample issues of our many newsletters or to subscribe. The software provides access to our proprietary market neutral portfolio strategies and the ability to extract the entire universe database of ValuEngine model outputs each day. Data Summary and much more. brokers. Risk Assessment.ValuEngine. foreign. Financials. ValuEngine Fair Valuation. The Weekly includes quantitative market and sector overviews of the entire ValuEngine U. ValuEngine has the research. accurate. forecast.500 U.com/nl/mainnl ValuEngine Institutional (VEI): VEI is a software package designed to meet the demanding requirements of Finance Professionals. More report information: www.com/pub/main?i=0 Consultancy Services: With ValuEngine's 10 years of experience to help you maximize your professional investment strategy. The most comprehensive and useful report available. detailed Company Profile.valuengine. portfolio creation/optimization. 1-3-6 month and 1-2-3 yr forecasts. ValuEngine 1-5 Engine Rating. or an Independent Broker/Dealer with hundreds of financial advisors. Chief Market Strategist Suttmeier provides technical levels for key commodities. high-performance research to your clients. VEI deploys the power of ValuEngine's quant-based valuation. call us at 1-800-381-5576. To download a free demo.000 individual stock reports--like this one--is included with every VEI subscription..com. Tell us your financial objectives and specify your universe constraints and ValuEngine can provide everything from back testing and strategy development to front and back-end automation services. analysis. a Research House.S. Please call (800) 381-5576 to speak with a sales representative or email support@valuEngine. and mathematical brainpower on staff to provide Funds and Institutions with complete solutions to their research. Full access to more than 4. Active traders should consider Chief Market Strategist Richard Suttmeier's ValuEngine Morning Briefing while those looking for a diversified portfolio of both long and short ideas should check out the ValuEngine Forecast 16 Market Neutral Strategy Newsletter. and database capabilities to your desktop. Also. go to the Newsletter portion of our website: www. development. you can differentiate your firm from the competition by offering of time-proven. Multi-stock comparison.valuengine. Treasuries.VgluEngine TM DETAILED RESEARCH REPORT HARBIN ELEC INC(HRBN) VALUENGINE SERVICE DESCRIPTIONS Thank you for your interest in ValuEngine! ValuEngine Detailed Valuation Report: Advanced academic research that brings you superior investment strategies in an actionable format. ValuEngine private-label products can be customized for funds managers.2011 ValuEngine Inc 9 93 . or send us an email at support@ValuEngine. Consensus EPS trend and Earnings Surprise statistics provide additional insights.com. IT.

Sell: Expected to underperform the SP500 producing below-average returns. represented by the model price. but this can vary depending upon market conditions. or particular needs of any specific recipient. Buy: Expected to outperform the SP500 producing above average returns. 3. 2. intermediate-term momentum continuation. in whole or in part. to buy or sell any securities or related financial instruments. officers. 3 rated to roughly match market performance. financial situation. For additional information about ValuEngine's financial research and financial modeling on over 5.2011 ValuEngine Inc 10 94 . the analysts involved. or will be.valuengine. It is based on the one year forecast target price. Inc. ValuEngine's stock valuation employs a sophisticated. The opinions of ValuEngine are subject to change at any time without notice and without obligation of notification. distribution.com Engine Rating and Average Annual Return (Jan 2001 . please click www. nor a member of the research analyst's household serves as an officer. only 2 percent of ValuEngine's 5. such as a company's trailing 12-month Earnings-Per-Share (EPS). Advanced statistical/econometric techniques are used to run thousands of simulations estimating the probability of a double in stock price. The VE Engine Rating is an assessment of a stock's overall attractiveness. ValuEngine does not receive any compensation from companies mentioned in this report. neutral ratings are holds and the categories unfavorable and most unfavorable are sells.500 companies. as well as the probability of meeting and exceeding any given portfolio or stock investment target. Inc. or an offer. or reproduction is strictly prohibited. ValuEngine. according to VE. the analyst consensus estimate of the company's future 12-month EPS. Copyright © 1998 . Each research analyst primarily responsible for the content of this research report. 5. Together with eleven additional variables. DISCLAIMERS This report is intended for informational purposes only and does not constitute a recommendation. has not received compensation from the companies discussed above in the last 12 months. and 2 and 1 rated are expected to underperform. It uses a three-class Buy-Hold-Sell rating system. shortterm price reversals.Sep 2011) Avg Return (%) 25 20 15 10 5 0 1 2 3 4 5 Engine Rating DISCLOSURES ValuEngine offers equity recommendations and related return estimates to investors and their advisors. This is a consolidated version of the firm's five class rating system: most favorable and favorable ratings are buys. 6. is. On average. all of the views expressed accurately reflect his or her personal views about those securities or issuers. and long-term price reversals over six time horizons for every industry to ensure forecasts are established relative to a stock's proper peer groups. ValuEngine does not provide investment banking or consulting services to the companies mentioned in this report. does not make a market in this security. which is the final evolution of VE's equity modeling. ValuEngine does not offer brokerage or investment banking services. ValuEngine adheres to professional standards and abides by formal codes of ethics that put the interests of clients ahead of their own.500 stocks under coverage achieve a 5 rating. ValuEngine. ValuEngine paints a detailed picture of a company's fair value. no part of his or her compensation was. 2. directly or indirectly. No warranty is made as to the accuracy of the information contained herein. ValuEngine. Fundamental variables. The research analyst over this company or members of his/her household do not have a financial interest in these companies discussed in this report. Quotes provided by Zacks. 3. are all used to create a more accurate reflection of a company's fair value. The result is state-of-the-art fair market valuation and price forecasting technologies. among other things. 7. ValuEngine's stock forecasts examine. Inc. and the 30-year Treasury yield. This information is intended for the sole use of clients of ValuEngine. certifies that with respect to each security or issuer that the analyst covered in this report: a). The report has no regard to the specific investment objectives. three-factor approach. or affiliates of ValuEngine do not hold positions in the securities of the companies mentioned in this report. The author. Inc. director or advisory board member of the companies discussed in this report. 5 and 4 rated stocks are expected to outperform the overall markets. The information contained herein accurately reflects the opinion of ValuEngine at the time the report was released. and b). STOCK RATINGS: The terms below are used to rate a stock's 12-month performance: 1.VgluEngine TM DETAILED RESEARCH REPORT HARBIN ELEC INC(HRBN) VALUENGINE'S METHODOLOGY ValuEngine's research combines the most advanced academic concepts with real world Wall Street practice. Any other use. related to the specific recommendations or views expressed by that research analyst in the research report. or its affiliates do not beneficially own 1% or more of any class of common equity securities of the subject companies. None of ValuEngine's management. 4. Hold: Expected to perform in line with the SP500 with average returns. ValuEngine has not managed or co-managed a public offering for any companies in the above report in the past twelve months. The following are specific disclosures made by ValuEngine with regards to this research report: 1.

is an above average quality company with a neutral outlook.Profile . The trend in Harbin Electric. Harbin Electric. StockMarks Ratings Total Quality Classical Business Management Price Volability Outperformance SMT SMC SMB SMM SMP SMV SMO Summary StockMarks Ratings for Harbin Electric. Inc.Pairs Quality Drivers Pages 5 to 7 .Competitors .Rating determinants Benchmarks Pages 3 to 5 .Harbin Electric. Inc.Price Valuation Pages 7 to 8 . 95 . Inc.Highlights . shows similar undervaluation and is more likely to outperform the market. 1 © 2009 Marques Mendes & Associados Lda (MM&A).Nominal Rates . using a scale from 0 (worst) to 100 (best).Peers .Management .Business . Inc.Attractiveness . American Superconductor Corporation. were calculated in relation to the entire population of 4206 United States-listed companies rated today. fair value exchange rate against its closest rated-competitor.Risk . Please read disclaimer in page 10. Harbin Electric.Sentiment Summary Due Diligence Report Highlights Conclusions Page 9 Harbin Electric. has been appreciating over the past 2 weeks. Inc. All Rights Reserved. Report Date 2011-10-06 Basics Pages 1 to 3 . Hydrogenics Corporation (USA).Sector . has medium business growth and is run by efficient management. For an explanation of each rating. Inc. When compared to its closest peer. see page 10.Fair value rates Market Pages 8 to 9 .StockMarks .

82 . is driven by price attractiveness.8710 Data as of Market Close: 2011-10-06 Harbin Electric. Summary Due Diligence Report Company Profile Ticker Company Sector Industry Exchange HRBN Harbin Electric.25.'s share price has risen strongly in the last quarter. What determines Harbin Electric. depicted in the chart below. The chart below shows the movements of the Total Quality StockMark (SMT) and share price expressed as indexes since we began rating the company.63 times earnings.05 Market Capitalization (M): 684. While Harbin Electric.Harbin Electric.0080 EPS: 1. It is a mid-cap stock currently trading at a multiple of 11. Inc. Inc. The table above gives a profile of the company. Industrials Electrical Components & Equipment NASDAQ Current Stock Price: 21. Inc. Inc. 96 . the company's long-term investment rating (chart above) remained unchanged over the same period. All Rights Reserved. Inc. Please read disclaimer in page 10.’s Quality StockMarks? Harbin Electric. 2 © 2009 Marques Mendes & Associados Lda (MM&A).'s registered activity is in the Electrical Components & Equipment industry. Inc.760 52-Week Range: 5.’s long-term investment attractiveness rating (Total StockMark or SMT).

third when compared to ten of its closest peers. currently has an overall long-term investment attractiveness rating (Total StockMark or SMT) of 68. Inc. we compare the company’s trend for each rating. Business. 3 © 2009 Marques Mendes & Associados Lda (MM&A). selected because of similarity of business. Although the scale from 0 to 100 is in itself meaningful.'s ratings rank among selected benchmark groups? StockMarks™ ratings were calculated in relation to the total of 4206 United States-listed companies rated today. currently has an overall quality rating significantly above the average of its sector. First. financial and market-positioning factors such as size (see page 5). placing Harbin Electric. Ratings showing a negative trend: Price. Inc. Recent rating trends: Harbin Electric. followed by a comparison of the company’s overall long-term investment attractiveness rating (Total StockMark or SMT) in relation to its sector (chart below). Please read disclaimer in page 10. Summary Due Diligence Report An important question to ask is whether Harbin Electric. above the SMT average of 50. This rating ranks Harbin Electric. Inc. Inc. We can examine this issue using the StockMarks framework.Harbin Electric. Inc. Inc. Management. Ratings showing a positive trend: Total. Inc. Harbin Electric. How do the Harbin Electric. Volatility.’s underlying long-term fundamentals justify the steep rise in the company's share price. in the chart on the right.89 for United Stateslisted companies. 97 . All Rights Reserved. correlated stocks and value investing peers. Outperformance. namely competitors. Classic. for benchmarking purposes we need to define a few relevant reference groups.

However. Manitowoc Company. Competitor 2 Competitor 3 Competitor 4 Competitor 5 Competitor 6 Competitor 7 Competitor 8 Competitor 9 Competitor 10 HYGS NJ Hydrogenics Corporation (USA) Nidec Corporation (ADR) FELE Franklin Electric Co.0 75. American Superconductor Corporation has a similarity index of 83.01 4. Inc.2% compared to Harbin Electric.16 68 24 36 65 50 73 50 68 65 25 57 49 44 64 49 27 70 27 75 49 40 26 65 12 17 60 58 54 60 51 61 14 72 SMP 68 74 72 68 67 67 68 53 67 75 67 HRBN Harbin Electric. TEX Terex Corporation GTLS Chart Industries. O. Inc.’s relative position the following tables show the ratings of similar companies for these benchmark groups. Investors can evaluate this possibility by comparing the StockMarks quality ratings shown in the second table below.0 57 32 54 78 44 73 49 65 68 58 49 39 20 37 79 25 53 38 67 33 49 65 59 43 53 54 49 69 44 43 78 49 68 66 68 70 68 69 68 69 68 67 69 HRBN Harbin Electric.’s worst ranking. In general.. American Superconductor Competitor 1 AMSC Cor.’s best rank among competitors is second for the Management Efficiency (SMM) rating. to assess pair trading convergence it is also important to consider Harbin Electric. The success of pair trading strategies depends on the investor’s ability to forecast the convergence path. GNK TXT GTI MTW Genco Shipping & Trading Li. CRTP China Ritar Power Corp. All Rights Reserved.95 0. AOS A. Smith Corporation AZZ BEZ AZZ Incorporated Baldor Electric Company JELC Johnson Electric Holdings Y (.0 75. Summary Due Diligence Report To quickly assess Harbin Electric. Harbin Electric.19 0. China Ritar Power Corp. Harbin Electric. Inc.’s market share of 0. Inc.03 0.0 75.’s competitors were selected based on the registration industry. Benchmark group: Pair Trading Ticker Company Pair 1 Pair 2 Pair 3 Pair 4 Pair 5 Pair 6 Pair 7 Pair 8 Pair 9 Pair 10 Company Name Similarity SMT SMB SMM SMP % 68 75. Inc. is the closest stock for pair trading with a similarity index of 75%. readers should use a chart to compare the prices of the chosen pair. Please read disclaimer in page 10.0 75.0 75. The closest competitor.20 83. total revenue and market capitalization among rated companies. In relation to its highest correlated stocks (for pair trading) Harbin Electric... we calculated the industry market share only in relation to rated companies.0 75.86 0.15 0. which may be more significant. Inc. HEV Ener1. Inc. Inc. SADIF subscribers may draw such chart by choosing option 3 in the Due Diligence Section. PLNR Planar Systems. a 100% market share does not mean that the company has no competitors in the industry.. Inc. defined on the basis of market correlation.3 75.’s best rank is third for the Management Efficiency (SMM) rating. Inc. Inc.18 0.36 1.0 75. 4 © 2009 Marques Mendes & Associados Lda (MM&A).0 75. 98 .2% (See table on the right). which is fourth for the Price Attractiveness (SMP) rating. However....0 75.0 75.0 75. Inc. These do not include non-listed companies and foreign competitors... MIC Macquarie Infrastructure Co. Textron Inc.7 0. Similarly. Therefore.3% and a market share of 0. Benchmark group: Industry Competitors Ticker Company Company Name Similarity Industry SMT SMB SMM % Share % 0. convergence itself may only happen if the two companies are not diverging in a fundamental way. To assess the recent convergence/divergence trend. Inc.11 0. GrafTech International Ltd...0 75. pair trading requires degrees of similarity above 70%. sector and trading volumes. Inc. AEIS Advanced Energy Industries.Harbin Electric.0 75.7 66. PWER Power-One.0 66.0 75.0 75.

Peer Analysis Ticker Company Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 HRBN HYGS AMSC FELE NJ AOS BEZ JELCY HEV MIC GLW At this stage. we should note the lastmonth price divergence. Smith Corporation Baldor Electric Company Johnson Electric Holdings (ADR) Ener1. The radar chart above provides a synopsis of all of Harbin Electric. Inc. Please read disclaimer in page 10.0 43. which was 0. Among this group shown in the table above on the right.7 Similarity % SMT SMB SMM SMP 68 36 24 50 65 73 68 65 25 58 68 49 64 44 27 49 70 75 49 40 49 42 65 17 12 58 60 54 51 61 14 49 72 68 72 74 67 68 67 53 67 75 69 67 The overall conclusion is that Harbin Electric. How good is the Harbin Electric. Inc. Harbin Electric. We selected also a group of investment peers in terms of longterm operational and financial similarities. All Rights Reserved. O.0 50.0 50.’s ratings in comparison to its top two peers. Inc. Inc.8 42. Inc. Hydrogenics Corporation (USA) American Superconductor Corporation Franklin Electric Co. we need to look further into its determinants by examining each quality rating separately. Nidec Corporation (ADR) A.’s business? Benchmark group: Investment Peers Company Name Harbin Electric.0 51. Macquarie Infrastructure Company LLC Corning Incorporated 56. not all companies have a degree of similarity greater than the minimum of 50% recommended for reliable benchmarking. 5 © 2009 Marques Mendes & Associados Lda (MM&A). some investors may find it useful to read the Due Diligence Reports for these peers or competitors. currently has a Business StockMark (SMB) of 49. Nevertheless. 99 . Inc.3 51. Harbin Electric. Inc. has medium business quality growth.0 50.Harbin Electric. Summary Due Diligence Report Likewise. indicating that the company's longterm business growth rates are similar to the sector average of United States-listed companies.0 50.’s best rank is second for the Management Efficiency (SMM) rating. Inc. Harbin Electric. is an above average quality company with a neutral outlook. Because of the stringency of the criteria used. Inc.922 in relation to its closest pair.7 41.

the second highest of its quality sub-ratings. Please read disclaimer in page 10. in place as it takes a few quarters before its impact is shown in the company financials.Harbin Electric. Based on its fundamentals. 6 © 2009 Marques Mendes & Associados Lda (MM&A). All Rights Reserved. Inc. Finally. the possibility of the company's shares being overbought increases. Also. which are beyond the scope of this report. Is Harbin Electric. is in fact overvalued by looking at the company's Price Attractiveness StockMark (SMP).’s rating is 5. Inc. has efficient management The Management StockMark (SMM) measures the ability of a company's management to transform gross margins into earnings per share. Summary Due Diligence Report This rating places Harbin Electric. currently has a SMM of 65. American Superconductor Corporation.14 times higher than that of its closest competitor.42 times higher. Inc.Harbin Electric. Inc. American Superconductor Corporation. Management Classification Grid For a descriptive classification of management efficiency based on an interval scale. reveals that Harbin Electric. Inc. we use the following five categories: Category First Class Efficient Average Mediocre Inefficient SMM Rating 90-100 55-89 40-54 20-39 0-19 The assessment of the management efficiency trend needs to be qualified by taking into account how long the incumbent management has been The chart above shows the movements of the SMM and the rating's three determinants. Inc. Harbin Electric. Comparing the management efficiency of Harbin Electric. Inc. Inc. correctly priced? With the recent steep rise in Harbin Electric. Inc. Harbin Electric. We can assess whether the Harbin Electric. with that of its closest competitor. despite the importance of management efficiency. suggesting that Harbin Electric. fourth in terms of growth in relation to its ten closest peers. The previous chart shows the movements in the SMB and the ratings of the three indicators used in the calculation of the business rating. is growing at a slower pace than its industry. sometimes a small temporary decline or rise may not be attributed to a change in efficiency but are instead the result of large shifts in investment/disinvestment. The decline in the sales elasticity pushed this indicator below the average. Inc.’s business rating is 1. The sales elasticity indicator compares the long-term revenue growth of the company to other companies in its industry. investors should not neglect other more subjective management attributes such as integrity and business savvy. 100 .’s share price. Inc. The SMB's recent rise was not primarily due to a decline in the rating of the company's sales elasticity.

’s long-term fundamentals. we can check the exchange rate at which the stock is trading in relation to its top competitors and peers. To see if this situation is unique to the company. A chart of the SMP and the ratings of some of the company's key price valuation multiples is shown above. Harbin Electric.’s stock in relation to its closest competitor American Superconductor Corporation is appreciating. The nominal stock exchange rate as given by current market prices (shown in the chart below) may be misleading if markets.Harbin Electric. Inc. The fair value exchange rate of Harbin Electric. Inc. Inc. 101 . Please read disclaimer in page 10. All Rights Reserved. Second. as they often do. to verify if the stock is caught at a stationary level. 7 © 2009 Marques Mendes & Associados Lda (MM&A). The valuation of stock-for-stock offers in M&A transactions is quite complex when shareholders of the acquirer and the target company hold significantly different views on the intrinsic value of their companies. investors should assess if it is diverging or converging in relation to a fair valuation (SMP between 4555). Summary Due Diligence Report The SMP takes into account both fundamental and technical indicators to arrive at a rating of the attractiveness of a company's stock to long term investors at its current price. is already undervalued and with a trend towards more undervaluation. indicating that the market is undervaluing Harbin Electric. Investors need to consider the most recent absolute value of the SMP and its determinants together with the SMP trend. over-estimate or underestimate the premium/discount relative to intrinsic value. Inc. indicating that it may remain undervalued or overvalued for long periods. First. On this count. Inc. we can observe that Harbin Electric. currently has a Price StockMark of 68.

Unfortunately. Inc. Inc. For instance. the estimation of intrinsic values is a very challenging task. with its closest competitor. we may minimize the problem and bypass the need to estimate intrinsic values by adjusting the nominal stock exchange rates with our Price Attractiveness StockMark (SMP). Inc. is appreciating (depreciating). However. Comparing the volatility rating of the Harbin Electric.83 times lower. in relation to some of its benchmark stocks. which is currently at 66.. we can observe that in relation to the first competitor the trend during the last quarter has been towards appreciation. The chart on the left shows the evolution of the fair value exchange rates for Harbin Electric. Inc. Therefore. Please read disclaimer in page 10.. This rating combines the previous year price variance and price level with longterm market correlation in a way that we can interpret it in the usual scale of 0 (worst) to 100 (best). we see that it is 0. American Superconductor Corporation. Summary Due Diligence Report Warren Buffett popularized the idea that many air-for-assets risky acquisitions take place during bull markets because overvalued acquirer’s can afford to overpay because they are in effect using stock as if it was counterfeit money. Current nominal rates vs. which estimates the degree of over or undervaluation at any level of the market premium or discount. Inc. Inc. fair value stock exchange rates are shown in the previous page: The trend in the fair value exchange rates shown above is relevant not only to adjust valuations but also to assess the price outlook for Harbin Electric. 102 . an increase (decrease) in the rate of exchange means that Harbin Electric. measured in index form.. By adjusting the nominal rates by the relative SMPs we obtain the fair value exchange rate. The rates quoted give us the number of benchmark shares that we could buy with one share of Harbin Electric. All Rights Reserved.Harbin Electric. The market risk The analysis of market risk is done through the Volatility StockMark (SMV) rating. 8 © 2009 Marques Mendes & Associados Lda (MM&A).

Harbin Electric. American Superconductor Corporation. We can observe that Harbin Electric. Inc. For this. When compared to its closest peer. if compared to its first competitor.’s SMO is currently at 75. Inc. It is also important to observe the trend in the volatility of SMV because this provides a good indication about the stickiness of short term price movements. 103 . we use the Outperformance StockMark (SMO).’s market risk outlook is mixed. The market sentiment in relation to Harbin Electric. Inc. Inc. stock to outperform the market – as measured by the Outperformance StockMark (SMO) – is well above average with a rating of 75 / 100.Harbin Electric. Inc. to be a good long-term investment. While. but we believe that its underlying fundamentals will determine the stocks long-term performance. The chart on the previous page shows both in an index form. Harbin Electric. Looking at its trend in the chart on the left. Hydrogenics Corporation (USA). Inc. All Rights Reserved. the rating is more useful when we compare its evolution to the trend in stock price. The likelihood of Harbin Electric. Inc. Summary Due Diligence Report Although relevant in itself. Overall. The risk associated with holding the shares – as measured by the Volatility StockMark (SMV) – is below average with a rating of 66 /100. Harbin Electric. reveals a company with an above average quality and medium long-term business growth. A StockMarks analysis of Harbin Electric.. shows less undervaluation and is equally likely to outperform the market. we believe Harbin Electric. Inc. This rating combines the company's past quarter price dynamics with its market risk and total quality. Please read disclaimer in page 10. in a scale from 0 (worst) to 100 (best). is positive and is deteriorating No due diligence is complete without considering the market sentiment in relation to Harbin Electric. because this is paramount in determining the stock’ s performance in the short to medium-term. Inc. 9 © 2009 Marques Mendes & Associados Lda (MM&A). shows similar undervaluation and is more likely to outperform the market. which measures the likelihood of the company to outperform the market in the near term. Conclusions The company's share price in the past year has been declining. we can see that it is deteriorating. Inc.

com 10 104 . Volatility StockMark (SMV) Risk of the stock based on numerous historical analyses of stock price and market correlation. Ph: (+ 351)234 322 037 Email: research@sadifanalytics. sales elasticity and sales growth rate. All Rights Reserved. price to sales per share and price to earnings per share. This report is only intended as a summary of SADIF's stock ratings and not a recommendation for stock purchase or sale. All logos are the copyright property of their respective companies and are used here only to aid the reader in identification of the subject of the article. Total Quality StockMark (SMT) The overall long-term investment-attractiveness of a company based on a combined three dimensional analysis of three sub-ratings: Business. The data contained within this report is not warranted to be accurate or complete. Management and Price. Marques Mendes & Associados Lda. the SMV and the SMT. Price StockMark (SMP) A company's price quality rating in terms of undervaluation reflected by valuation measures such as price to book. The author of this article does not hold a position in any of the companies featured within this report. © 2009 Marques Mendes & Associados Lda (MM&A). Business StockMark (SMB) A company's business quality based on variables including: operating margin. Outperformance StockMark (SMO) The likelihood of a stock to outperform the market based on the valuation of the company.Harbin Electric. Redistribution of this report without explicit permission is strictly prohibited. earnings per employee and the earnings growth rate. 17 – 3830-176 Ilhavo. Portugal. Summary Due Diligence Report The StockMarks™ Ratings Classical StockMark (SMC) Short-medium term attractiveness rating combining SMT and SMP. Management StockMark (SMM) A company's management quality based on the following key indicators: return on assets. Inc. Pinto Basto. Rua Domingos F. This report is for information purposes only and is not a solicitation or advice to buy or sell any security.

Believe Issues are Fixable.Sales (800) 933-6830. Merchandise Strategies Working. I also certify that no part of my compensation was. The (WTSLA) BEBE: Q1 Comps Beat. (DEST) DEST: September Comps Beat. Maintain Neutral Rating Company Comments bebe stores. (BEBE) Unigene Labs Inc.. Maintain Neutral Rating Estimate Changes Destination Maternity Corp. Inc. Roth Capital Partners. LLC | 888 San Clemente Drive | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC 105 . Trading (800) 933-6820 ROTHSales@roth. directly or indirectly. related to the specific recommendations or views expressed in this report. (HRBN) HRBN: Privatization Appears On-Track. Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. Economic Headwinds Persist. 2011 Rating Changes Harbin Electric. Downgrading to Neutral Price Target Changes The Buckle Inc. inc. is or will be. Inc. (UGNE) Wet Seal. Raising Estimates.com MORNING CALL SUMMARY | EQUITY RESEARCH | October 7. (BKE) BKE: September Comps Beat. Reiterate Buy Industry Comments Retail & Consumer Products Medical Technology September Comp Recap 3Q 2011: Quarterly Medical Technology Trading & Acquisition Valuation Update Refer to important disclosure information and rating System Definition on page 10 of this report. RT Buy UGNE: Continuing To Execute On Strategy With Nordic Deal – Reiterate Buy WTSLA: September Comps Miss.

0 12. on September 29 HRBN filed its definitive proxy materials and scheduled its shareholder vote for October 29. (NASDAQ: HRBN) Mark Tobin (949) 720-5775 Price: $21.72 2. Based on timelines from previous transactions. 2010A 2011E 2012E EPS 2. Given the ~10% upside from current levels. Funtalk in 3 business days.0 20. Cap.05 2. we are downgrading shares to Neutral (from Buy). We consider the remaining steps in the transaction to be largely formalities. in our view. These announcement signified that HRBN had completed the final meaningful hurdle associated with its privatization.0 16. We believe the deal financing remains firmly in place. 2011 Rating Changes Harbin Electric. In comparison.0 Feb-11 Nov-10 Dec-10 Mar-11 Jan-11 Apr-11 Aug-11 Sep-11 Jun-11 Jul-11 Price Recall. and China Security and Surveillance in 2 business days.64 P/E 8. The company has settled the class action lawsuits in 2 of 3 jurisdictions and we expect the final jurisdiction to also be settled in the near-term. there is no Chinese regulatory approval required to complete the transaction. Since there is no change in majority ownership.00 HRBN: Privatization Appears On-Track.(mil): $684.0 4. Downgrading to Neutral With the filing of its definitive proxy materials last week and the shareholder vote scheduled for October 29.0x 10.2x Page 2 of 10 106 . we believe HRBN's buy-out is well on its way to completion and expect shares to continue to trend toward the $24 buy-out price.6x 8.0 May-11 Downgrading to Neutral | Target: $24. we project the HRBN deal will close in early November.MORNING SUMMARY | EQUITY RESEARCH | October 7. 30 25 20 15 10 5 Oct-11 HRBN One-Year Price and Volume History 0.76 Mkt. Chemspec closed 4 business days after its successful shareholder vote. Inc.0 8.

5% of sales.5% from last year and represented 62.981.25 1.03 from $0.86 3.22 Oct-11 Jul-11 P/E 14. • Based on the results of the past 2 months.9x Page 3 of 10 107 . Strong categories included denim. However.46 3:20pm ET.7 3. outerwear.77 and $3. the compares become more difficult starting in Q4 and thus we believe the stock has limited upside from current levels.75 and $3. we are raising our Q3 and FY2011 earnings estimate to $0.01 3.00 BKE: September Comps Beat.62 2. we maintain our Neutral stance on the stock as we believe the one-time special dividend of $2.5%. 3.3%. outerwear and footwear.25/share (payable October 27th) is already priced in the stock and organic growth is limited. We are also raising our price target to $39 from $35. we maintain our Neutral rating.8x 12.85 Mkt. Maintain Neutral Rating September comps increased 10. price points were up 7. accessories and footwear sales were up 6% and 10. woven and knit shirts. Moreover. footwear and accessories.38 0.5% respectively of net sales. with men's sales up 12% and representing 37.4 million. we continue to believe that long-term growth is limited and therefore.5%. Intraday price: $43. Raising Estimates. • UPT’s were up slightly while the average transaction value was up 6%.75 0. Cap. sweaters.12 0. Average accessory prices were down slightly while average footwear prices were up 6. beating our/consensus estimate of a MSD increase and up over last year’s comp of 3%.5 1.6x 13.24↑ Prev. Strong categories included denim.MORNING SUMMARY Price Target Changes The Buckle Inc.88 1. CFA (949) 720-7130 Price: $41. Women’s sales were up 13. • Net sales increased 13% to $98.5% of sales. 10/6/11 BKE One-Year Price and Volume History May-11 Nov-10 Dec-10 Aug-11 Sep-11 60 55 50 45 40 35 30 25 20 Price Feb-11 Mar-11 Jan-11 Jun-11 Apr-11 2010A 2011E 2012E EPS 2.0 2. That said.0 | EQUITY RESEARCH | October 7. This is the second month that results exceeded expectations and given that sequential compares got tougher speaks to the product offering and compelling value. woven and knit shirts. 2011 Neutral | Target: Raising to $39.5% respectively and accounted for 8% and 5. implying units were up 8%.5%.(mil): $1. • Within the men’s and women’s categories combined.01 respectively.03↑ 3. (NYSE: BKE) Elizabeth Pierce. price points up 5.5% implying units were up 4. implying volume or transactions were up about 4%.

76 1. we expect the stock to remain range bound. comparable retail sales were +0. which hurt margins.2% versus -2. as consumers remain cautious about spending. While we are encouraged by September sales as we believe it more fully reflects the product. By segment. DEST One-Year Price and Volume History 30 25 20 15 0.6% increase last year. we believe these catalysts are not likely to have a materially impact on results until the 2H of FY2012.6% to $44.0 Feb-11 Nov-10 Dec-10 Mar-11 Jan-11 Apr-11 Aug-11 Sep-11 10 Oct-11 Jun-11 Jul-11 Price 2010A 2011E 2012E EPS 1. However.74 from $0.4 million with comparable retail sales up 0.3 0.76. management updated is Q4 earnings guidance to be at or slight higher than the low end of its previously issued guidance of $0.4% and Internet sales up 22%. accordingly.2% to $129.38 0.4%. total sales increased 2. above our/consensus estimate of negative LSD. leased/licensed opportunities with domestic and international partners and a growing e-commerce platform. We believe the catalog and consumers buying closer to need had a positive impact on September sales. based on the slower than expected Macy’s ramp.2% last year while Internet sales were up 35.1%.7% to $545.74 1.25 0.1% while Internet net sales were up 34. both toward the lower end of guidance.12 May-11 | EQUITY RESEARCH | October 7.6% respectively. merchandise issues and ongoing economic pressures.8% versus a negative 1. comparable retail sales increased 1.MORNING SUMMARY Estimate Changes Destination Maternity Corp. (NASDAQ: DEST) Elizabeth Pierce. DEST increased its promotional activity and its markdowns in order to drive conversion. • Q4 total sales were up 4. • September total sales increased 6. Cap. • On an adjusted basis due to calendar shifts. • We are lowering our GAAP Q4 and FY2011 estimate to $0.(mil): $188.5% versus a 20. comparable store sales down 1.5% while comparable stores decreased 0.28. we remain cautious about business near-term given the various macro headwinds.24 Mkt. Economic Headwinds Persist.1x Page 4 of 10 108 . Furthermore. For the year. Maintain Neutral Rating Comparable retail sales were +2.7%.78 P/E 10. • Although we believe DEST has several longer-term earnings catalysts including real estate rationalization.19 and $1. 1.7x 8. 2011 Neutral | Target: $15. • Based on the margin impact stemming from the additional markdown and promotional activity.00 DEST: September Comps Beat.76↓ Prev.5 0. we are maintaining our Neutral rating and $15 price target.4 million with comparable retail sales down 1. CFA (949) 720-7130 Price: $14.18 to $0.3% and negative 2.2 million driven by the Macy’s expansion and higher online sales offset by the ongoing closure of underperforming stores.33 1. Comparable stores sales were down 4.2x 8.9%.21 and $1.

provides significant downside cushion to the stock and therefore.18 0. the online business was not meaningful last year. Cap. we believe there are still additional opportunities for product improvement in key categories such as outerwear. all months positive with July and September being better than August.01. Intraday price: $6. • Total retail sales were up 7. September being better than August is an encouraging incoming trend and bodes well for Q2. wovens. which now include direct. which we believe is better than the industry average.01 and expects to report Q1 earnings on November 3rd after market close.4 1. UPT’s up 6% while AUR was down 6% due to a mix shift. knit tops.0x Page 5 of 10 109 . we are maintaining our Buy rating and our $10 price target. 2011 Buy | Target: $10. beating our estimate/consensus estimate of MSD increase as well as exceeding guidance of a MSD increase.0 4.99 Mkt. ~$3 cash & investments/share. inc. RT Buy BEBE reported a Q1 comp of 7% (includes direct). That said. in addition. • The ongoing improvement in comps reinforces our belief that the merchandise changes are resonating with shoppers. we believe fashion trends are in BEBE’s favor right now and therefore. (NASDAQ: BEBE) Elizabeth Pierce.28 P/E NM 38. It is important to note that last year’s comp does not include direct. 2b bebe also continues to perform well.6 0. Based on recent channel checks.(mil): $588.0 3.MORNING SUMMARY Company Comments bebe stores. shoes and logo. We are maintaining our Q4 estimate of $0. and therefore would not have moved the needle.8 May-11 | EQUITY RESEARCH | October 7.1% to $116 million and comps. which we attribute to the product. we see ongoing merchandise progress that we believe is resonating with shoppers. conversion up 7%. • Metrics for the 77 stores that have traffic counters were: traffic up flat. were up 7% versus -4. tubular and accessories were the better performing categories while woven tops and bottoms remain challenging. Dresses. we expect the momentum to continue. CFA (949) 720-7130 Price: $6. but according to management.0 Feb-11 Nov-10 Dec-10 Mar-11 Jan-11 Apr-11 Aug-11 Sep-11 Jun-11 Oct-11 Jul-11 Price 2011A 2012E 2013E EPS 0.2 2. • Management indicated Q1 earnings are expected to be at the high end of guidance of -$0.05 0. well below the current comp run rate.77 2:40pm ET. • Inventory remains tightly managed with average finished goods inventory/square foot from continuing operations were flat. we believe the solid balance sheet.01 to $0. denim. • All regions were positive. Moreover.00 BEBE: Q1 Comps Beat. with the Midwest being the weakest and the Southeast being the strongest. Merchandise Strategies Working. Moreover.7% last year. 10/6/11 BEBE One-Year Price and Volume History 9 8 7 6 5 4 0.8x 25.

50 Price Target. We then add $0.0 Buy | Target: $2.27. Nordic will fully fund and conduct all preclinical and clinical development for the Type II diabetes indication through Phase II proof-of-concept. Cash Infusion by Nordic’s Chairman Provides Validation. we believe the investment serves as a validation of UGNE’s technology.50 price target is based on a P/E multiple of 30x our 2018 EPS estimate of $0. 2011 Unigene Labs Inc. In exchange. The foundation took an option to purchase an additional $1. Mid and late-stage assets that could increase shareholder value near-term include an oral calcitonin candidate for osteoporosis with Tarsa Therapeutics (NDA filing by year-end).30) (0. also for osteoporosis. and a second option to purchase up to $3M of UGNE common stock in 1H’12.33 1.70 per share. Our $2. and a separate oral calcitonin product being developed by Novartis (Phase III results by year-end). discounted back 6 years at 30% to arrive at $1. In conjunction with the JV news. UGNE and Nordic Bioscience established a joint venture to advance up to 3 of the company’s proprietary calcitonin analogs through Phase II proof-of-concept for the treatment of Type II diabetes. Christiansen and his scientific team has had an opportunity to conduct substantial due diligence on the platform and its promise for making oral peptide delivery a reality. purchased $1. Reiterate Buy. Claus Christiansen. and federal NOLs. Nordic Bioscience JV Adds Pipeline Assets. Chairman of Nordic Bioscience.67 0. The companies will negotiate financial and development resources for the osteoarthritis and osteoporosis indications should they advance. its FDA-approved peptide manufacturing facility.50 UGNE: Continuing To Execute On Strategy With Nordic Deal – Reiterate Buy We believe UGNE has a unique asset base and several products in development to drive share value higher. $2.(mil): $96. UGNE has a patented manufacturing process that enables the cost-effective production of peptides. given that Dr. with GlaxoSmithKline (Phase II results by year-end).0 1.30 per share for UGNE’s technology platform. As Well As Capital. UGNE One-Year Price and Volume History May-11 Nov-10 Dec-10 Aug-11 Sep-11 2 1 1 1 1 1 0 Price Feb-11 Mar-11 Jan-11 Jun-11 Apr-11 2010A 2011E 2012E EPS (0. and osteoporosis. with the company contributing the compounds and their manufacture for preclinical and clinical trials.67 1. an oral PTH candidate.5M of UGNE common stock through his Danish foundation.04 Mkt.5M of stock before year end.7 2. (646) 358-1906 Price: $1. Cap. In addition to providing operating capital to the company.33 0.50/share for UGNE’s 20% ownership in Tarsa plus $0.MORNING SUMMARY | EQUITY RESEARCH | October 7. (OTC: UGNE) David Moskowitz. UGNE announced that Dr. RPh.21) Oct-11 Jul-11 P/E NM NM NM Page 6 of 10 110 .0 0. intellectual property. evidenced by the recent Nordic Bioscience announcement. osteoarthritis. Several Exciting Catalysts Anticipated in 4Q.27) (0. UGNE continues to be active in its BD efforts. UGNE and Nordic will each own 50% of the JV. plus proprietary technologies that allow for oral and nasal delivery of peptides.

Based on recent channel checks. The (NASDAQ: WTSLA) Elizabeth Pierce. it is premature to overreact to the comp shortfall. we reiterate our Buy rating. Reiterate Buy Comps declined 0.86 14. category balance is work-in-progress but we remain optimistic about Arden’s ability to take make share as its merchandise.3%.. WTSLA has taken a more disciplined approach to its pricing and promotional strategy in order to present a clearer value message to customers.6x 20. 10/6/11 WTSLA One-Year Price and Volume History May-11 6 6 5 4 4 4 3 2 Price Nov-10 Dec-10 Aug-11 Sep-11 Feb-11 Mar-11 Jan-11 Jun-11 Apr-11 2010A 2011E 2012E EPS 0. merchandise margins were up and earnings guidance maintained.63 Mkt. Specifically. which we attribute to a better promotional cadence. Nonetheless. earnings are still expected to be between $0. • Comps were still negative at Arden.1x 14. • While the denim assortment at Wet Seal is not quite fixed. but consistent with Wet Seal.06.57 0. these strategies still make sense. we are maintaining our Q3 estimate of $0.2% at Arden.00 WTSLA: September Comps Miss. flat at Wet Seal and -2. we believe the comp shortfall had more to do with a decline in mall traffic. Cap. That said.12 0. given effective expense management and higher merchandise margins. As previously discussed.9 25.5x Page 7 of 10 111 . we believe the site and stores should have a more unified voice • While comps are expected to fall below the initial guidance of a MSD increase. sales softened during the latter part of the month as the BTS selling period ended. We attribute the miss to a falloff in post-Labor Day traffic and the competitive environment.06. we believe that directionally.MORNING SUMMARY | EQUITY RESEARCH | October 7. this hurt results during the latter part of the month as the competitive landscape intensified. Intraday price: $4.0 21. however.0 Buy | Target: $7. However.43 17. 2011 Wet Seal. merchandise margins improved over last year’s levels. as the BTS shopping season wound down.71 7. accordingly.23 0. However. played a part in the miss. After several months of consecutive positive comps. CFA (949) 720-7130 Price: $4. Results were stronger in the first part of the month. accordingly. • E-commerce sales were down 22% due to the change and we expect online sales will remain under pressure at least until the end of the year given tougher compares. comps have been solidly positive for the last 8 months and merchandise margins continue to move up in spite of rising costs pressure and therefore. as cross channel shopping has become more of the norm. but improved over August on a 1-year and 2-year stacked basis. pricing and promotional strategy improve. below the LSD/MSD estimates. we also believe the promotional strategy. In our opinion. they have consolidated price points and pulled-back on the number of promotions running at one time.(mil): $418.29 10. Believe Issues are Fixable. which the company has been tweaking for the past several months.11 12:30pm ET.05 and $0.14 3. which was consistent with our channel checks.32 Oct-11 Jul-11 P/E 38. Inc.

October is traditionally a transitional. 2011 Promotional environment and late Back to School shopping fuel results. the consolidated comp for reporting retailers (excluding gasoline sales) was a 4. WTSLA and ZUMZ. higher gas and food prices. the NRF forecasts November and December retail sales will be up 2. . fiscal policy and sputtering job growth will impact spending this holiday season”. including BEBE. but is still up 11% in the last year. While retail stocks have been harder hit than the broader market in the past two months. CHS. and clean balance sheets. The NRF release stated that “continued consumer uncertainty over the stock market. the focus turns to the holiday shopping season. CFA (949) 720-7130 September Comp Recap | EQUITY RESEARCH | October 7. Companies mentioned: BEBE $6. As such.98 Buy DEST $14. Of the companies tracked by Retail Metrics. The National Retail Federation released its 2011 holiday season forecast today.05 Buy ZUMZ $21. driven by a late Back to School push and a fairly promotional environment. with expectations it termed “average”. legitimate organic growth. According to Retail Metrics. we believe investors with a long-term view should continue to focus on names that have strong franchises. URBN.8% this year.86 Neutral CHS $12.29 Buy CMRG $3.2% increase in 2010. we continue to be cautious regarding the sector as a whole. In our universe. ZUMZ). four of the companies reporting comps were better than expected (BEBE.06 Buy WTSLA $4.8% gain.24 Neutral URBN $24.06 Buy Page 8 of 10 112 . low-volume month.71 Buy BKE $43. so most retailers have a good read on third quarter results. better than the consensus of 4. CMRG. September same store sales results were generally better than expected. The RLX retail index is down 9% from its peak in July. Overall. versus a 5. DEST. With September and the Back to School period behind us. BKE. Specifically. while only WTSLA reported comps that were below expectations.24 Neutral PSUN $1. 63% of the reporting companies beat expectations.MORNING SUMMARY Industry Comments Retail & Consumer Products Elizabeth Pierce.0%. with 37% below Street forecasts. we believe macroeconomic headwinds and conservative merchandising plans are likely to limit the upside for retail stocks as we head into the holiday season.

155 small-cap Medical Technology stocks were trading with an EV to sales multiple of 2. • As of the end of 3Q11.73 Neutral RTIX $3.23 Neutral ATRC $10.6%.92 Buy UPI $5. with the prior historic low of roughly 2.14x. See Summary for discussion of individual stocks. we provide our update on trading and acquisition valuations in the Medical Technology industry and our universe.32 Buy VRML $1. • With this background. Provided these valuation levels are sustained. and the historic low of 1.48x at 2Q11 but still well off the lows of 1Q09 of below 2x. respectively.10 Buy ATEC $2.0x EV to FTM sales. The companies in these two groups are demonstrating average 2-year sales growth and gross margins of 10% and 52% (all market cap) and 10% and 51% (<$2B market cap).58 Buy CRY $4. P/E multiples stand at around 19x 2011 earnings for small cap stocks and 18x for all market caps. historical averages for the industry have garnered a FTM high of around 3x. • The average price to revenue multiple for acquisitions over the past 18 months is at roughly 3. • The industry's EV to FTM sales multiple currently stands at 2.94 Buy INFU $0.43 Buy ICUI $37. although the environment appears to be more stable sequentially. down from 2.43 Neutral SFE $15.3x TTM sales this period. staying consistent with 2Q11. a more normalized market environment should shift focus from concerns over the availability of capital and patient volumes toward specific growth opportunities in the med tech industry.95 Buy Page 9 of 10 113 .6% and the gross margin was 65. we continue to believe the Medical Technology space offers select opportunities with attractive growth and profitability characteristics. The current multiple now sits in the lower quarter of the historic range (over the past 10 years) of between 2.94 Buy BEAT $3. 206 Medical Technology stocks were trading with an average EV to sales multiple of 2.65 Buy MDCI $4.MORNING SUMMARY | EQUITY RESEARCH | October 7. respectively.8x was set in 1Q09 (lowest level in our 12-year historical analysis).0x and 1. versus 9.2% and 63.7% for deals in 2Q11.7x CY11 and CY12 consensus estimates.99 Buy MASI $22.01 Buy SYNO $17.0x-3. • For reference. Challenges to hospital spending will likely persist for the next few years (see our Sep 12 note).2x in 2002.9x CY12 consensus revenue estimates.11 Buy CPTS $10.55 Buy TRIB $8.49 Buy BABY $8. 2011 Medical Technology Matt Dolan (949) 720-5796 3Q 2011: Quarterly Medical Technology Trading & Acquisition Valuation Update In today's note.60 Neutral VOLC $30.37 Neutral DCTH $3. Top line growth and margins were 9. respectively. Companies mentioned: ALGN $16.2x CY11 and 1. a healthy sign in our opinion.

9 0. please contact: The Director of Research at (800) 678-9147 or write to: ROTH Capital Partners. This is not. LLC and its affiliates.9 23. bebe stores. Shares of Unigene Labs Inc. which at the time it is instituted and or reiterated. price target and estimates for the security.4 4. Prior rating. which at the time it is instituted and or reiterated. Additional information is available upon request. Not Covered [NC]: ROTH does not publish research or have an opinion about this security. that indicates an expectation that the price will depreciate by more than 10% over the next 12 months. Sell: A rating. an investment in the stock may involve a high degree of risk and may not be suitable for all investors. 2011. 888 San Clemente Drive.7 Rating Buy [B] Neutral [N] Sell [S] Under Review [UR] Count 190 64 1 12 Percent 70. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. LLC. Neutral: A rating. On May 26. This report should not be used as a complete analysis of the company. price target and estimates should no longer be relied upon for UR-rated securities. that indicates an expectation of a total return of at least 10% over the next 12 months. ROTH changed its rating system in order to replace the Hold rating with Neutral. inc. Any opinions or estimates in this report are subject to change without notice. that indicates an expectation of a total return between negative 10% and 10% over the next 12 months. The material. buys and sells from customers on a principal basis. our investment rating on a stock and its implied price movement may not correspond to the stated 12-month price target. On September 28. are from sources believed to be reliable.. Consequently. LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. Inc. an offer or solicitation of the securities discussed. CA 92660 ROTH Capital Partners. information and facts discussed in this report other than the information regarding ROTH Capital Partners. Copyright 2011.. as of 10/07/11 Count Percent 51 26. 2011 Disclosures ROTH makes a market in shares of Harbin Electric.5 Our rating system attempts to incorporate industry.MORNING SUMMARY | EQUITY RESEARCH | October 7. For important disclosure information regarding the companies in this summary report. Wet Seal. Inc. Ratings System Definitions . Attention: Director of Research. indicates the temporary removal of the prior rating. Distribution of IB Services Firmwide IB Serv. Member: FINRA/SIPC. No part of this report may be reproduced in any form without the express written permission of ROTH. Under Review [UR]: A rating. industry or security discussed in the report. may not be eligible for sale in one or more states. at any given point in time. Page 10 of 10 114 .ROTH employs a rating system based on the following: Buy: A rating. company and/or overall market risk and volatility. which at the time it is instituted and or reiterated. which at the time it is instituted and or reiterated./Past 12 Mos. which may set forth sales practice requirements for certain low-priced securities. and Unigene Labs Inc. 2010.8 9 14. but are in no way guaranteed to be complete or accurate.1 0 0 2 16. Newport Beach. may be subject to the Securities and Exchange Commission's Penny Stock Rules. however. Additionally. ROTH changed its rating system in order to incorporate coverage that is Under Review. and as such. The. Shares of Unigene Labs Inc.

6 $87.54E 0.325 $24.4A 125.$25.0x —2011E— Curr 0.2A 426.0 16. Chemspec closed 4 business days after its successful shareholder vote. (mil) Mkt. 3Yr.781.53A 0. We believe the deal financing remains firmly in place.0 0.5A 105.Price Target Cash (mil) Tot.0 HRBN One-Year Price and Volume History 30 25 20 15 10 5 May-11 Nov-10 Dec-10 Aug-11 Sep-11 Feb-11 Mar-11 Jan-11 Jun-11 Apr-11 Oct-11 Jul-11 Price Important Disclosures & Regulation AC Certification(s) are located on page 4 to 5 of this report.4A 109.05E 10.5A —2011E— Curr 103.0 8. Given the ~10% upside from current levels.79A 0.57E 2. and China Security and Surveillance in 2 business days. CFA.Mark Tobin.(mil) 3-Mo.0 1. These announcement signified that HRBN had completed the final meaningful hurdle associated with its privatization. (949) 720-5775 mtobin@roth.0 12.62A 2.6x | HRBN .2x Pro-forma EPS for all periods Revenue ($ millions) Yr Dec 1Q 2Q 3Q 4Q YEAR —2010— 105.64E 8. In comparison. —2012E— Curr 2. Downgrading to Neutral With the filing of its definitive proxy materials last week and the shareholder vote scheduled for October 29.com Sales (800) 933-6830.65A 0. LLC | 888 San Clemente Drive | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC 115 .9E 20.com Emma Jia Zhao. We consider the remaining steps in the transaction to be largely formalities.41A 0.00 $87.8A 131.4 15% HRBN: Privatization Appears On-Track.72A 8. on September 29 HRBN filed its definitive proxy materials and scheduled its shareholder vote for October 29. we believe HRBN's buy-out is well on its way to completion and expect shares to continue to trend toward the $24 buy-out price. Funtalk in 3 business days. 12-Mo. Company Update Rating Changed Stock Data 52-Week Low . Debt (mil) Est. Trading (800) 933-6820 COMPANY NOTE | CHINA RESEARCH | October 6. ezhao@roth.2E 490.NASDAQ | Neutral $5. we are downgrading shares to Neutral (from Buy). in our view.76 .82 .0 4.5E —2012E— Curr 568. Avg.43 $684. Based on timelines from previous transactions. Inc.1E 130. Since there is no change in majority ownership. 2011 Global Energy & Industrials: China Harbin Electric. we project the HRBN deal will close in early November.High Shares Out.4A 106.66A 0. Cap.$21. there is no Chinese regulatory approval required to complete the transaction.05 31. Recall. The company has settled the class action lawsuits in 2 of 3 jurisdictions and we expect the final jurisdiction to also be settled in the near-term. Vol. EPS Growth Auditor: FRAZER FROST LLP EPS $ Yr Dec 1Q 2Q 3Q 4Q YEAR P/E —2010— 0. Roth Capital Partners.

develops. INC.. oil pump for oilfield and linear motors for urban metro lines. and other special motors. manufactures and sells an array of industrial electric motors. The development of urban railways can experience delays that out of control of HRBN. COMPANY DESCRIPTION Harbin Electric. The Company operates. Page 2 of 5 116 . through its indirect wholly owned subsidiary. customized linear motors. controller automation systems. 2011 VALUATION Our $24 price target is based on the offer price of the proposed buy-out. s A slow-down in China's economic growth and continued inflation could impact sales and compress margins.October 6. automobile specialty micro-motors. RISKS Change in macro policies in China. can be largely affected by central and local government policies. China Company Note . Two of HRBN's major catalysts. some of which could lead to delays in completing the transaction. engineers.HARBIN ELECTRIC. Harbin Tech Full Electric Co. Inc. Factors that may impede HRBN shares from reaching our price target include: s There are still numerous steps in the privatization process. and automobile specialty micro-motors. Ltd (HTFE). Volatile raw materials costs HRBN is subject to market fluctuations and volatility of two major raw materials. copper and steel respectively. The Company offers three key product lines: industrial electric motors. linear motors and their integrated application systems. such as delay in construction.

697 (1.796) 25.468 45.352) 20.903 (4.5% 45% (2.1% 25.363 60. Net Other Income/expense-net Loss on cross currency hedge settlement Gain on debt extinguishment Change in Fair Value of Warrants Loss from disposal of subdivision Earnings before Taxes Provision for Income Tax effective tax rate Minority Interest Net Income (Loss) net margin % yoy growth % Non GAAP Net Income* net margin % yoy growth % Diluted EPS yoy growth % Non GAAP EPS yoy growth % Diluted weighted average shares outstanding EBITDA 36.953 23.093) 0.862 55.214 208.9% (14) 10.0% 62% (7.8% (19.7% (91) 12.622) 76.6% (73.660) 11.037 (978) 0 0 1.0% 24.081 19.131 (3.000) 4.252 15.873 16.725 36.694 44.840 (1.408 20.2% 270% (18.198) 36.8% Q1'11A 19.987 14.com Page 3 of 5 117 .000 0 0 0 0 111.462 (9.5% -17% $0.932 130.467 76.662 18.9% -8% $0.448 1.0% 95% $2.1% (2.154 (5.155 (13.282 104.19 31% $1.6% 23.043) 10.756) 8.0% 50% 25.780) 33.063 (9.142) 31.0% (407.056) 7.4% -47% 12.240 20.954) 4209.083 26.593) 0 0 5.641) 161.4% (90.903 25.490 490.426 8.6% Q3'11E 22.2% (1.009 14.924 35.065 223.863 (6.267 5.899 22.1% 220% $0.613) 25.8% 93.7% (1.66 142% 31.791) 12.7% 16.423 19.6% FY09 60.046 13.2% (1.320 17.0% (352.523 243.101 (1.8% (2.07 -121% $0.204 29.5% Q3'10A 19.547 8.41 -38% 31.0% 34% (6.0% 16.924) 0 0 1.7% 21.162 13.64 29% 31.498 15.379) 1.918 0 38.304 0 0 (547) 0 16.445 26.461) 138.879) 3.458 16.788 19.020 5.466 (3.245 1.768) 135.0% Q4'11E 21.390 0 0 566 0 23.003 23.913) 9.3% 41% -$0.119 0 0 (234) 0 26.240 28.249 188.532 961 21.761 (6.259) 0 0 2.612 34.713 31.82 N/A $0.647) 0 0 1.959 28.64 32% $2.441 643 23.343 16.5% 85% $0.3% 69% (11.784 (1.53 -33% 31.199) 1.6% 27.806) 8.6% (71.403 62% (32.996) 25.044 27.853 20.647 8.245 (843) 0 0 2.8% 25.583 (6.62 1% 31.829 -1.376 17.5% 1% $0.8% (803) 0.9% (468) 1.183 2.66 68% $0.72 60% 31.453 (5.046 13.201 58.3% (69.313 29.234 84.19 31% 21.806 10.1% -187% 7.8% -23% 43.962 24.8% (146.165 97.3% Q1'10A 19.0% 34.251) 1.5% -38% $0.599 105.334 60.170) 1.0% 13.34 -47% $0.6% 73% $0.5% (5.249) 6.379 21.6% -33% $0.986) 25.1% -33% 16.777 72.2% (3.114 1.5% (409) 1.0% (75.767 7.364 19.0% 0 83.596 12. Roth Capital Partners estimates Mark Tobin (949) 720-5775 mtobin@roth.761 35.261 15.1% Q2'11A 24.491) 18.343 30.569 (3.731 26.1% -7% (3.765) 22.983 *Pro-forma net income excludes stock compensation.278) 8.5% -6% 16.066 (1.65 60% 31.934 (7.2% FY11E 87.153 (1.641 23.950 34.358 0 0 0 0 29.8% -18% 64.063) 15.688 (8.3% 28.683 (21.511 0 0 132 0 84.57 41% $0.57 N/A $0.1% 113.120 104.352 121. INC.2% 62% 6.573 0 9. 2011 HRBN .62 127% 31.2% (6.158 (3.059) 9.714 12.465 426.324 42.402 24.351 24.HARBIN ELECTRIC.8% 30% $2.1% 203% 19.Income Statement FY07 Revenue Linear Motors Automobile specialty micro-motors Controllers and other special motors Rotary industrial motors (Weihai Hengda) Simo Motor Total Revenue yoy growth % Cost of Sales Gross Profit gross margin% Operating Expenses Selling.8% 40% $0.371 18.000 0 0 0 0 24.037 28.7% -41% (13.050 1.2% (3.27 2% 22.511 48.41 -31% $0.91 -10% $0.305 103.777 127.October 6.296 23.839 13.799) 10.8% 24% (9.238 28.0% 22.481 91.9% 57% (45.7% Q4'09A 20.037) 0 25.866 (1.224 17.171) 16.879 16.320) 13.7% (823) 0.154 217.110) 34.603 18.030 1.561 18.54 -17% 31.101 0 0 (14.743) 35.4% -9% (41.613) 13.485 243.77 -36% $1.5% 137% 20.464 18.846 0 30.742 33.46 221% $2.4% 5% (10.477 39.635 29.138 15.208 18.555 1.491) 19.839 13.015 (4.198 22.313 0 0 65.069 14.0% -31% 19.55 -33% $0.528) 36.983 20.7% (3.908) -4.064 33.505) 8.711 36.71 43% 25.479) -37.6% (93.9% (1.468 23.9% 67% (10.554 19.0% 0 16.000 0 0 0 0 22.9% Q2'10A 20.1% FY12E 101.903 25.831 16.310 2.553) 0 0 1.296) 15.8% 15.204 27.2% (393) 1.436 174.40 20% 27.726 41.675 24.00 -19% $2.104) 35.9% (75.650 0 46.853 12.816 23.015) 0 (3.3% (7.932 18.378 25.341 10.3% 246% (6.327 0 0 1.2% FY10A 76.000) 0 0 4.8% (20) 62.33 7% 22.8% 8.133) 0 0 740 0 0 (302) 0 21.5% Q3'09A 16.490 0 0 574 (623) 94.210 1.150) 36.0% 68% (14. General and Administrative Expenses as % of revenue Research and Development Expenses as % of revenue Income From Operations operating margin yoy growth % Other Income(Expenses) Interest Income/expense-net Realized Gain/loss on Sale of Marketable Securities Non-operating Income/expense.974) 9.820 568.1% -125% 10.332 33.666 93.91 37% 18.0% 50% $1.7% Q4'10A 17.121 0 0 (434) 0 15.042 105. China Company Note .672) 8.968) 32.423) 0.663) 1.077 23.155 (737) 0 46 (1.432) 76.302) 1.321 57.558 4.863 33.6% (1.0% (594) 0.578 0 120.441) 0 0 539 0 0 2.670 28.512 44.987 14.24 -178% $0.163 (14.475 1.064 29.159 10.664 27.425 97.8% 14% $0.118 20.8% -8% 16.6% (95.943 (836) 0 0 2.953 18.061 (6.938 (4.315 21.8% (70.3% -1037% 20.195) 27.757 49.5% 85.524) 15.05 -25% 31.383 10.435 49. derivative valuation.813 19.1% (25.9% 55.097 (1.419) -14.1% (3.7% 242% $0.0% 291% 85.575 30.6% FY08 46.915) 15.941) (1.810) 25.316) 0 0 5.026 26.6% 11 17.9% 42% 18.379 21.355 133.759 0 0 (1.356 18.5% (948) 0.183) 0 0 5.59 114% $0.000) 4.3% 19% -$0.3% -24% (10.620) 0 (189) 0 0 0 0 0 16.3% (7.626 10.648 14.654 28.54 -6% $0.572 (1.073) 9.354 31.820 85% (73.939 12.6% 219% (10.8% 34% 83.393 28.356 15.5% (363) 0.500) 12.4% (2.343) 47.206 -0.468 27. and one-time items Source: Company reports.903 0 0.5% 21.478) 0 0 1.382 6.847 25.0% (290.417) 7.815 18.065 107.064) 1.79 137% 31.801) 10.109 44.639) 9.9% (1) 25.500) 0 0 1.1% 8.39 46% $0.3% (30.282 24.983 (27.881 109.7% -40% (38.016 131.0% 0 18.942 106.500) 0 0 1.421 13.626) 30.806 (12.969 (4.672 72.6% Q2'09A 11.770 46.3% 8.4% 232% $0.1% -24% $2.886) 6.426 22.434) 9.015) 25.236 125.657 (623) 29.9% (6) 17.0% 7% (3.4% -574% 24.628 11.3% (1.066) 0 218 1.540 27.3% Q1'09A 12.215) 0 30.57 -8% 31.

China Company Note .4 4.6 0. Not Covered [NC]: ROTH does not publish research or have an opinion about this security. as of 10/06/11 Count Percent 49 25. LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months.7 Rating Buy [B] Neutral [N] Sell [S] Under Review [UR] Count 190 63 1 12 Percent 71.ROTH employs a rating system based on the following: Buy: A rating. which at the time it is instituted and or reiterated. Sell: A rating. Distribution Ratings/IB Services shows the number of companies in each rating category from which Roth or an affiliate received compensation for investment banking services in the past 12 month./Past 12 Mos. Prior rating. buys and sells from customers on a principal basis. except for the first box. Neutral: A rating. Disclosures: ROTH makes a market in shares of Harbin Electric. price target and estimates should no longer be relied upon for UR-rated securities. which at the time it is instituted and or reiterated. I also certify that no part of my compensation was. which may only represent the first note written during the past three years. which at the time it is instituted and or reiterated. On May 26. Consequently. Ratings System Definitions .HARBIN ELECTRIC. at any given point in time. that indicates an expectation of a total return of at least 10% over the next 12 months. ROTH Capital Partners. price target and estimates for the security. 2011. Inc. that indicates an expectation of a total return between negative 10% and 10% over the next 12 months. is or will be. Distribution of IB Services Firmwide IB Serv. ROTH changed its rating system in order to replace the Hold rating with Neutral. related to the specific recommendations or views expressed in this report. INC. our investment rating on a stock and its implied price movement may not correspond to the stated 12month price target. Under Review [UR]: A rating.5 Our rating system attempts to incorporate industry.October 6. company and/or overall market risk and volatility. directly or indirectly. information and facts Page 4 of 5 118 . and as such. The material. indicates the temporary removal of the prior rating.3 0 0 2 16. that indicates an expectation that the price will depreciate by more than 10% over the next 12 months. which at the time it is instituted and or reiterated. ROTH changed its rating system in order to incorporate coverage that is Under Review. On September 28. 2011 Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. Each box on the Rating and Price Target History chart above represents a date on which an analyst made a change to a rating or price target.2 23. 2010.8 9 14.

industry or security discussed in the report. an investment in the stock may involve a high degree of risk and may not be suitable for all investors. Copyright 2011. China Company Note . This report should not be used as a complete analysis of the company. INC. LLC and its affiliates. Any opinions or estimates in this report are subject to change without notice. Additionally. an offer or solicitation of the securities discussed.October 6. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. are from sources believed to be reliable. This is not. but are in no way guaranteed to be complete or accurate. No part of this report may be reproduced in any form without the express written permission of ROTH. 2011 discussed in this report other than the information regarding ROTH Capital Partners. Additional information is available upon request.HARBIN ELECTRIC. Member: FINRA/SIPC. however. Page 5 of 5 119 .

36 vs.2% Valuation Price-to-EBV Ratio > 3. This report provides a detailed explanation of each diagnostic criterion and each rating for HRBN. Inc.® RED FLAG & VALUATION 09/30/2011 Closing Stock Price as of 09/30/2011: $20. Performance The value and success of our ratings are unrivaled. $2. Click here for proof.4 < 3.2 Growth Appreciation Period (yrs) > 50 20 < 50 10 < 20 3 < 10 0<3 < 1 year 22 years 53 years Source: New Constructs.5 or -1 < 0 2.80 2.65 Harbin Electric. Appendices highlight Red Flags and explain our Risk/Reward Rating system.46 Positive EE Neutral EE Return on Invested Capital (ROIC) Bottom Quintile 4th Quintile 3rd Quintile 2nd Quintile Top Quintile 21. Figure 1: New Constructs' Risk/Reward Rating Overall Risk/Reward Rating Very Dangerous Dangerous Neutral Attractive Very Attractive Actual Values S&P 500 Russell 2000 Quality of Earnings Economic vs Reported EPS Misleading Trend False Positive Neutral EE Positive EE Rising EE $1.5 or < -1 1. LLC.4% 8.6 0 < 1.0 4. The combination of positive economic EPS with a cheap stock valuation drives a Risk/Reward Rating of Attractive for HRBN.1% -1. The biggest adjustment that lowers economic EPS and is not captured in Reported EPS is Reported Net Assets. The recipient of this report is directed to read these disclosures.1 < 1. Each factor offers insights into the profitability and valuation of HRBN.6 < 2.7% FCF Yield <-5% -5%<-1% -1%<3% 3%<10% >10% 1. Our Risk/Reward Rating system identifies disconnects between the market's expectations for future cash flows and current cash flows.0% 18. Page 1 Important Disclosure Information is contained on the last (two) page(s) of this report. 120 .1 0.4 1. Figure 1 summarizes the five factors that drive our Overall Risk/Reward Rating for HRBN. More Reports Click here and enter a ticker to buy more of our reports. Positive EE means that economic EPS are positive because the company's ROIC is greater than WACC. HRBN has an Overall Risk/Reward Rating of Attractive because the stock offers more upside potential than downside risk.0% 2. (HRBN) Attractive Risk/Reward Rating Trust We deliver the whole truth by incorporating critical data from the Financial Footnotes and MD&A that other firms miss.

Pooling Goodwill . (HRBN) 121 . Investors should beware investing in companies that report profits meaningfully different than their economic earnings. Economic earnings and return on capital metrics are significantly more accurate when as-reported financial statements have been adjusted to reverse accounting distortions and Red Flags. Figure 2: Economic Earnings Per Share vs Reported EPS Source: New Constructs. . Our core competency is gathering and analyzing all relevant financial data (from Financial Statements and the Notes) so that we can deliver earnings analyses that best represent the true profitability of businesses.Capitalized Expenses Page 2: Economic vs Reported Earnings Harbin Electric.Employee Stock Options . the biggest driver of the difference between reported and economic EPS is Reported Net Assets.Excess Cash . LLC.Minority Interests Source: New Constructs.® RED FLAG & VALUATION 09/30/2011 Economic vs Reported Earnings Why Economic Earnings Matter Economic earnings are almost always meaningfully different than GAAP earnings. which we analyze rigorously. Figure 3: Accounting Issues and Red Flags that Distort GAAP . Figure 2 highlights the differences between the reported and economic earnings for HRBN. During the last Fiscal Year. See Figure 3 for a list of the Red Flag adjustments we make to a company's reported GAAP profits in order to reverse accounting distortions and arrive at a better measure of a firm's profits. Inc. New Constructs rectifies accounting distortions in GAAP financial statements.Pension Over/Under Funding . Positive EP reflects the improving economic performance of the business.Unrealized Gains/Losses . We believe economic earnings provide a truer measure of profitability and shareholder value creation than offered by GAAP earnings.LIFO Reserve . LLC.Off-Balance-Sheet Financing . The majority of the data required to reverse accounting distortions is available only in the Notes to the Financial Statements.Unconsolidated Subsidiaries .Restructuring charges .Goodwill Amortization .

We believe our measures of economic performance are substantially more accurate than accounting metrics because we make adjustments for all the issues listed in Figure 3. ROIC is not calculated. Inc. How We Measure Economic Earnings The metrics we use to measure the economic performance of companies are Economic Earnings Margin and Economic Earnings. The Economic Earnings Margin for a company equals its Return on Invested Capital (ROIC) minus its Weighted-Average Cost of Capital (WACC). Figure 4: Return on Invested Capital vs Weighted Average Cost of Capital Source: New Constructs. ROIC equals Net Operating Profit After Tax (NOPAT) divided by Invested Capital. (HRBN) 122 . Note: If average invested capital is negative. LLC.® RED FLAG & VALUATION 09/30/2011 Figure 4 compares HRBN's Return on Invested Capital (ROIC) to its Weighted-Average Cost of Capital (WACC). Appendix 3 provides a line item by line item reconciliation of Net Income to Economic Earnings. The Economic Earnings of a company equal its Economic Earnings Margin multiplied by its average Invested Capital. Page 3: Economic vs Reported Earnings Harbin Electric. This company's ROIC during its last fiscal year ranks in the Top Quintile. Economic Earnings per Share equal Economic Earnings divided by Basic Shares Outstanding.

For more detail on Free Cash Flow Yield and our backtesting. Zero FCF could mean that the company generates just enough cash to internally fund its growth opportunities. negative FCF can be an attractive indication that a company has more investment opportunities than it can fund with cash from operations. However. (HRBN) 123 . in our opinion." which was published November 30th. For example.® RED FLAG & VALUATION 09/30/2011 Free Cash Flow Yield Rigorous back-testing shows that stocks with a Free Cash Flow Yield of at least 10% significantly out-performed both the S&P 500 and a survivor-bias-adjusted index. 2004. our strategy yields superior results because we use a better measure of Free Cash Flow (FCF). Free Cash Flow Yield equals unlevered FCF divided by enterprise value. On the other hand. The level of FCF does not always reflect the health of a business or its prospects. our measure of FCF is better than traditional accounting-based FCF. Note: Dot on the line(s) in the chart marks the current value(s). We measure Free Cash Flow by subtracting the change in Invested Capital from NOPAT. limited growth prospects. hence. see our report "Cash Is King. LLC. Page 4: Free Cash Flow Yield Harbin Electric. Using Free-Cash-Flow Yields to pick stocks is not a new strategy.0%. Figure 5 shows HRBN's FCF Yield over the past several years. HRBN's current FCF Yield is 1. Inc. a large amount of FCF can be a sign that a company has limited investment opportunities and. Figure 5: Free Cash Flow Yield Source: New Constructs. In the same way our economic EPS are better measures of profitability than reported EPS.

It is also known as the "pre-strategy value" of the company because it ignores the value attributable to future cash flows. in theory.Under (Over) funded Pensions . These differences reflect the portion of the stock price that is entirely dependent on future cash flow growth. Figure 6: Economic Book Value Per Share vs Market Price Source: New Constructs. EBV per share equals EBV divided by shares outstanding. Page 5: Price-to-EBV Per Share Harbin Electric.Debt (incl. the market predicts the company's economic profitability will not change. (HRBN) 124 . Inc. If the stock price equals the EBV. the greater the potential risk of investing in the stock. The lower the stock price is versus EBV. the lower the potential risk of investing in the stock.® RED FLAG & VALUATION 09/30/2011 Price-to-EBV Per Share Figure 6 shows the differences between the stock market price and Economic Book Value (EBV) per share of HRBN. The higher the stock price is versus EBV. which are. Operating Leases) Value of Outstanding Stock Options . EBV measures the no-growth value of the company based on the current economic cash flows generated by the business. The Formula for EBV is: (NOPAT / WACC) + Excess Cash + Unconsolidated Subsidiary Assets + Net Assets from Discontinued Operations . the market predicts the economic profitability of the company will meaningfully decrease. the market predicts the economic profitability (as distinct from accounting profitability) of the company will meaningfully increase. LLC. what business strategies should aim to improve. Note: Dot on the line(s) in the chart marks the current value(s). When stock prices are much lower than EBVs.Preferred Capital Minority Interests. When stock prices are much higher than EBVs.

(i. GAP measures the number of years implied by the stock price over which the company must maintain an edge over its current and future competitors.65 implies that HRBN will not generate any growth in economic earnings. it is 23 years. Historically.9%.9% 10.e. See Appendix 4 for the forecasts that drive our DCF model for this company. Other criteria (per pages above) in our rating system also indicate HRBN is an Attractive investment. and 91. See the Price-toEBV Per Share analysis for more detail. GAP analysis comes from our dynamic discounted cash flow model. Page 6: Qualifying Market Expectations Harbin Electric. which is much less than the indices.65 < 1 year Source: New Constructs. Growth AppreciationPeriod .® RED FLAG & VALUATION 09/30/2011 Quantifying Market Expectations Stock prices reflect the market’s expectations for the present value of future cash promised to the owner.. HRBN has generated a Revenue CAGR of -. Inc. See Appendix 4 for the specific estimates used in this company's valuation model.7% over the past 5. and 11.0% 11. The law of competition dictates that a company can only grow its economic earnings for the finite period over which it can maintain a competitive advantage. HRBN has a GAP of < 1 year. Specifically. EBIT Margin with Adjustments*). 87. The Market-implied GAP of the S&P 500 is 20 years. The forecast drivers for our DCF model are: (1) Revenue Growth. assumes the company cannot grow profits beyond the GAP period. Subscribers to our services may create alternate forecast scenarios based on their own estimates. a multi-stage DCF model that values companies across multiple forecast horizons. (3) Cash Tax Rate. Stock Price Revenue CAGR Avg Economic Earnings Margin Growth Appreciation Period 3Yr $7. HRBN has a much greater chance of seeing price appreciation versus the indices.9% - Last FY $17. 3 and 1 year(s).GAP). Our model exclusively uses no-growth terminal value assumptions for calculating the value of the stock for each GAP. this scenario represents a likely financial performance path the company may follow to justify the current market price. Figure 7: Future Performance Required to Justify Valuation Performance Hurdles Historical Performance Market Expectations Default based on current price 5 Yr Comparing the required future performance to historical performance positions investors to asses the feasibility of market expectations and valuations. (4) Incremental Net Working and Fixed Capital needs. LLC Note: The Default Scenario is Based on the forecast set by the New Constructs analytical team. Figure 7 compares the future performance required to justify the company's stock market price to its historical performance. Each forecast horizon (i. GAP measures the number of years a company will earn returns on invested capital greater than its cost of capital on new investments.99 87. We believe this stock has an Attractive Risk/Reward Rating because there is a relatively small difference between the expected financial performance implied by its market price and the company's historical performance.0% and Economic Earnings Margins of -. Based on this criterion.7% - - $20. Specifically. (2) NOPBT Margin.35 91. (HRBN) 125 . 10.e. Figure 7 shows: the current stock price of $20. Appendix 2 details each Adjustment made to this company's reported financial results. For the Russell 1000. The market does not expect HRBN to achieve any future profit growth. Our Overall Rating is Attractive.9%.

i. with that free cash flow measured according to our economic (as distinct from conventional accounting) methodology. 2. 3.e. Economic Earnings Margin The Return On Invested Capital minus the weighted-average cost of capital. Revenue Growth Compounded over the indicated time frame. Inc. "How fast will the company grow?" 2.® RED FLAG & VALUATION 09/30/2011 Our Company Models value stocks based on the present value of expected free cash flows. Growth Appreciation Period Number of years the company can earn a positive Economic Earnings Margin on incremental investments. "For how many years will the company grow economic earnings or create incremental value?" Page 7: Qualifying Market Expectations Harbin Electric. (HRBN) 126 . Website subscribers forecast economic free cash flow by assigning estimates to three value drivers: 1. An alternative way to conceptualize the three value drivers is: 1. "How profitable will the company be?" 3. the number of years it can create economic value.

All criteria are equal-weighted in the average calculation.1 Growth Appreciation Period (yrs) Ranks stocks based on their Market-Implied Growth Appreciation Period.6 Very Attractive = greater than or equal to 0 but less than 1.4 1. (HRBN) Page 8: New Constructs' Risk/Reward Rating 127 . Our Risk/Reward analysis results in the 5 ratings described below. Values based on Latest Closing Stock price and Default Forecast Scenario. Very Dangerous Dangerous Neutral Attractive Very Attractive All criteria are equal-weighted in the average calculation except 2yr FCF Yield is excluded.1 Very Dangerous = greater than or equal to 3.6 < 2. Values based on Latest Fiscal Year.1 < 1.1 but less than 1. Each grade reflects the balance of potential risk and reward of buying that stock.6 0 < 1. Inc.5 and less than or equal to -1 Neutral = greater than or equal to 1. Overall Risk/Reward Rating The Overall Risk/Reward Rating provides a final rating based on the equal-weighted average rating of each criterion. and everything in-between corresponds to a "Hold" rating. Most Attractive corresponds to a "Buy" rating. < -5% Very Dangerous = less than or equal to -5% -5% < -1% -1% < 3% 3% < 10% > 10% Dangerous = more than -5% but less than or equal to -1% Neutral = more than -1% but less than or equal to +3% Attractive = more than +3% but less than or equal to +10% Very Attractive = more than +10% Price-to-EBV Ratio Ranks stocks based on their Price-to-Economic Book Value Ratio. > 3.5 or < -1 1.® RED FLAG & VALUATION 09/30/2011 Appendix 1: Explanation of New Constructs' Stock Ratings Scale Our Risk/Reward Rating (Figure 1) system grades every stock under our coverage according to what we believe are the 5 most important criteria for assessing the risk versus reward of a stock. All criteria are equal-weighted in the average calculation.5 or -1 < 0 2.6 but less than 2. Values based on Latest Closing Stock price and Latest Fiscal Year. Very Dangerous = negative and declining Economic Earnings despite positive and rising Reported Earnings Misleading Trend False Positive Neutral EE Positive EE Rising EE Dangerous = same as above except Reported EPS are not positive or are not rising Neutral = Negative Economic and Reported Earnings Attractive = Economic Earnings are positive Very Attractive = Economic Earnings are positive and rising Return on Invested Capital (ROIC) Ranks stocks based on their ROIC. > 50 20 < 50 10 < 20 3 < 10 0<3 Very Dangerous = greater than or equal to 50 years Dangerous = greater than or equal to 20 years but less than 50 Neutral = greater than or equal to 10 years but less than 20 Attractive = greater than or equal to 3 years but less than 10 Very Attractive = greater than or equal to 0 years but less than 3 Harbin Electric. Most Dangerous corresponds to a "Sell" rating. Economic vs Reported EPS Ranks stocks based on how their Economic Earnings compare their Reported Earnings. All criteria are equal-weighted in the average calculation. All criteria are equal-weighted in the average calculation except 2yr FCF Yield is excluded.4 but less than 3.4 < 3. Bottom Quintile 4th Quintile 3rd Quintile 2nd Quintile Top Quintile Very Dangerous = in the bottom 20% of all companies Dangerous = in the bottom 40% of all companies Neutral = in the middle 20% of all companies Attractive = in the top 40% of all companies Very Attractive = in the top 20% of all companies FCF Yield Ranks stocks based on their Free Cash Flow Yield. Values based on Latest Fiscal Year.5 or less than 0 but greater than -1 Dangerous = greater than or equal to 2.4 Attractive = greater than or equal to 1. Values based on Latest Closing Stock price and Latest Fiscal Year.

43 $75.00 $29. Page 9: Economic Adjustments Summary Harbin Electric.00 $0.Impact Analysis GAAP Net Income Net Non-Operating Items Pre-Tax Change in Total Reserves Goodwill Amortization ESO Expense (Employee Stock Options) Implied Interest for PV of Operating Leases Non-Operating Tax Adjustment Net After-Tax Non-Operating Items NOPAT (Net Operating Profit After Tax) Invested Capital Adjustments .00) $0.00 $2. (HRBN) 128 .51 $0.96 ($46.00 ($0.00 ($0.00 $0.91 $25.90 $0.35 ($18.00 $0.00 ($0.00 $0.49 $4.79 $0.00 $0.01 $0.38 $4.00) ($0.69 $0.00 ($0.32 $505.53) $1.92 ($90.00 $0.00) $0.00 ($0.00 ($5.00) $0.00 $0.00 ($6.42 Net Non-Operating Items Pre-tax .06) $1.® RED FLAG & VALUATION 09/30/2011 Appendix 2: Red Flag and Economic Adjustments Summary Values in millions except per share amounts - - 2008 $25.95) $161.65 $25.Impact Analysis Reported Net Assets Excess Cash Total Reserves Deferred Tax Liability Unconsolidated Subsidiary Assets (non-operating) Net Assets from Discontinued Operations Off-Balance-Sheet Operating Leases Accumulated Unrecorded Goodwill Accumulated Goodwill Amortization Accumulated Asset Write-Downs After-Tax Accumulated OCI (Other Comprehensive Income) Invested Capital $219.47) $3.00 $0.85) ($0.00 $24.00 $0.20 2009 $19.00) ($0.32 $0.68) $0.00) $0.30 ($12.00) $0.22) $2.77 ($32.00 ($0.13) $2.00 $0.00 $0.60 $0.Detail Non-Operating Items Hidden in Operating Items Asset Write-Downs Hidden in Operating Items Income from Recurring Net Periodic Benefit Costs Non-Recurring Net Periodic Benefit Costs in Operating Items Other Net Non-Operating Items Net Non-Operating Items Pre-Tax $0.82 ($0.51 ($0.36) $388.31 $0.00 ($0.69 $8.66 NOPAT Adjustments .00 $0.00 $4.15 ($88.90 $0.06) More information and detail on our adjustments is provided in our Company Valuation Models.00) $0.64) $319.49 $51.00 ($0.00) $0.00 $0.00 $1. Inc.44) $8.00) ($0.33 $416.25 2010 $76.

3% (6.00 0.48 $0.8 10.0% 0.6%) 0.2% $33.0) (0.0%) (0.7) (0.0 0.0% (5.6 13.2) (3.0%) 0.0% 0.6% $75.0% (1.0%) 1.5) (2.0%) 0.0% 0.0 0.0% (0.86 $1.0%) (0.® RED FLAG & VALUATION 09/30/2011 Appendix 3: Red Flag Impact: Reconciling Net Income to Economic Earnings Values in millions except per share amounts NOPAT = Net Income with Adjustments as per below GAAP Net Income Net Non-Operating Items Pre-Tax As a % of Revenue Change in Total Reserves As a % of Revenue Goodwill Amortization As a % of Revenue ESO Expense (Employee Stock Options) As a % of Revenue Implied Interest for PV of Operating Leases As a % of Revenue Non-Operating Tax Adjustment As a % of Revenue Net After-Tax Non-Operating Items As a % of Revenue NOPAT (Net Operating Profit After Tax) - - 2008 $25.0% (0.49 1.1 0.72 $1.25 2010 $76.0) (0.0) (0.5) (0.3) (1.0 0.5%) 0.0%) 0.6% $51.9%) 0.5% 8.0 0.0% (6.66 Capital Charge = WACC * Average Invested Capital as detailed below Capital Charge for Average Reported Net Assets As a % of Revenue Capital Charge for Average Excess Cash As a % of Revenue Capital Charge for Average Total Reserves As a % of Revenue Capital Charge for Average Deferred Tax Liability As a % of Revenue Capital Charge for Average Unconsol Sub Assets (non-operating) As a % of Revenue Capital Charge for Average Net Assets from Discontinued Operations As a % of Revenue Capital Charge for Average Off-Balance-Sheet Operating Leases As a % of Revenue Capital Charge for Average Unrecorded Goodwill As a % of Revenue Capital Charge for Average Accumulated Goodwill Amortization As a % of Revenue Capital Charge for Average Cumulative Asset Write-Offs After Tax As a % of Revenue Capital Charge for Average Accumulated OCI Capital Charge As a % of Revenue Mid-Year Acquisition Capital Charge Adjustment As a % of Revenue Capital Charge for Average Invested Capital 20.0) (0.73 29.0 0.0 0.0 0.0% (8.0 0.0% 0.5 3.77 $42.0% 0.6 0.0 0.0%) 0.0% 0.7 11.65 25.0 0.0) (0.1% 0.19 $1.0 0.0 0.0% (0.0% (0.0 0.0 0.0 0.0% $22.7% 0.0 0.4) (0.0% (0.6% (4.6%) $0.13 $0. (HRBN) 129 .0) (0.0% (1.1 16.1) (0.82 (0. Inc.0% 0.20 2009 $19.3) (2.9 4.5 0.7%) 0.0 0.36 $2.0% 0.6 0.47 Economic Earnings = NOPAT minus Capital Charge Economic Earnings Economic Earnings per Share Basic EPS $14.2% 0.0 0.0 0.2) (1.0% 0.2 0.9%) $3.0 0.4 0.0% $29.0%) 0.0) (0.4% 0.47 Page 10: Reconciling Net Income to Economic Earnings Harbin Electric.0%) 0.1) (1.0%) (0.39 42.38 4.43 0.0%) 0.0% (0.2%) $2.0% (0.0% 0.0% 0.25 $28.0 0.0) (0.0% (2.0% $14.8%) 0.0 0.0) (0.

0% 60.0% 25.0% 60.0% 12.4% 21.0% 10.0% 6.8% 21.8% 21.0% 111.8% 21.0% 60.1% 84.0% 22.3% 25.0% 25.0% 60.3% 11.5% 25.3% 25.6% 22.0% 25.5% 15.0% 16.4% 16. Inc.8% 21.0% NOPBT Margin Cash Tax Rate Net Working Capital Delta as % of Revenue Delta Fixed Adjusted Assets Delta as % of Revenue Delta Page 11: DCF Forecast Drivers Summary Harbin Electric.8% 21.0% 25.0% 60.0% 60.0% 8.0% 60.0% 7.5% 25.0% 6.2% 91.3% 25.8% 21.8% 25.® RED FLAG & VALUATION 09/30/2011 Appendix 4: DCF Forecast Drivers Summary Values in millions except per share amounts Historical 2008 2009 2010 EY 1 EY 2 EY 3 EY 4 DCF Forecast Drivers EY 6 EY 11 EY 16 EY 21 EY 26 EY 51 Total Operating Revenue Growth 28.3% 25.0% 60.2% 25.0% 6.3% 25.0% 25.0% 60.8% 21.3% 25.8% 21.8% 29.8% 21.3% 25.8% 21.3% 25.3% 25.0% 60.3% 25.5% 25.2% 43.0% 6.4% 25. (HRBN) 130 .

(HRBN) 131 . Page 12: New Constructs Profile Harbin Electric. See our track record in our stock-picking accolades and Proof Is In Performance reports. Company Models enable users to change them. Respected investors (e. 3. Our reports details all data and assumptions. 2. forensic accounting and discounted cash flow valuation analyses for all U. which are necessary to understand the true profitability and valuation of companies.We check the fine print in thousands of corporate filings so you don't have to. More Accurate Research . See our presentation to the Senate Banking Committee. See the Corporate Disclosure Transgressions report we provided to the SEC. As reported by Barron's. but for debt investors. Transparency . advisory and research services. We specialize in quality-of-earnings. 5. Accounting data must be translated into economic earnings to understand the profitability and valuation relevant to equity investors. Our Philosophy About Research Accounting data is not designed for equity investors. the SEC and many others in DC. Time Savings . Objectivity .g.e.Profile How New Constructs Creates Value for Clients 1.000 10-Ks. our expertise in analyzing SEC filings delivers Hidden Gems and Red Flags that drive long-term stock-picking success. i.Our stock picks consistently outperform. NOPAT. Based on the complete set of financial information available. and WACC. not tied to Wall Street or investment banking services. Inc. Our models are driven by comprehensive high-quality data not stories. 2. New Constructs is a BBB accredited business and a member of the Investorside Research Association. Economic earnings are what matter because they are: 1. A more accurate representation of the true underling cash flows of the business Additional Information Incorporated in July 2002. Superior Recommendations .® RED FLAG & VALUATION 09/30/2011 New Constructs® . 4. New Constructs is an independent publisher of investment research that provides clients with consulting. Adam Smith. Warren Buffett and Ben Graham) have repeatedly emphasized that accounting results should not be used to value stocks. 3. Standard for all companies. to create economic earnings models.Our patented Research Platform for reversing accounting distortions and discounted cash flow analysis leverages better data to deliver smarter research. public companies.New Constructs is an independent research firm.S. We translate accounting data from 10Ks into economic financial statements. Visit the Free Archive to download samples of our research.We are proud to share the results of our analysis of over 50. Invested Capital.

New Constructs may have issued. reliability. 'New Constructs') is an independent organization with no management ties to the companies it covers. LLC 2003 through the present date. New Constructs has not taken any steps to ensure that the securities referred to in this report are suitable for any particular investor and nothing in this report constitutes investment. the information presented in this report. Information and opinions contained in this report reflect a judgment at its original date of publication by New Constructs and are subject to change without notice. of New Constructs. Past performance should not be taken as an indication or guarantee of future performance. New Constructs' Stock Ownership Policy prevents any of its employees or managers from engaging in Insider Trading and restricts any trading whereby an employee may exploit inside information regarding our stock research. Recipients who are not professionals or institutional investor customers of New Constructs should seek the advice of their independent financial advisor prior to making any investment decision or for any necessary explanation of its contents. Information and opinions presented in this report have been obtained or derived from sources believed by New Constructs to be reliable. may be altered in any way. nor any copy of it. This report includes general information that does not take into account your individual circumstance. Page 13: Legal Disclaimers Harbin Electric. and reach different conclusions from. New Constructs has not reviewed the linked site and takes no responsibility for the content therein. timeliness or completeness. New Constructs' research recommendations may not coincide with the hedge fund's holdings. in no event will the hedge fund receive any research information or recommendations in advance of the information that New Constructs provides to its other clients. any person or entity who is a citizen or resident of or located in any locality.® RED FLAG & VALUATION 09/30/2011 DISCLOSURES New Constructs®. financial situation or needs. Accessing such websites or following such hyperlink through this report shall be at your own risk. availability or use would be contrary to law or regulation or which would be subject New Constructs to any registration or licensing requirement within such jurisdiction. other reports that are inconsistent with. nor does it represent a personal recommendation to you. usefulness. and no representation or warranty. New Constructs is affiliated with Novo Capital Management. DISCLAIMERS The information and opinions presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or solicitation of an offer to buy or sell securities or other financial instruments. Such address or hyperlink (including addresses or hyperlinks to New Constructs own website material) is provided solely for your convenience and the information and content of the linked site do not in any way form part of this report. and under copyright. LLC. New Constructs' reports are intended for distribution to its professional and institutional investor customers. All trademarks. None of the members of New Constructs' management team or the management team of any New Constructs' affiliate holds a seat on the Board of Directors of any of the companies New Constructs covers. country or jurisdiction where such distribution. legal. express or implied. is made regarding future performance. copied. views and analytical methods of the analysts who prepared them and New Constructs is under no obligation to insure that such other reports are brought to the attention of any recipient of this report. This report is not directed to. New Constructs accepts no liability for loss arising from the use of the information presented in this report. authority. employees and managers of the company are bound by a code of ethics that restricts them from purchasing or selling a security that they know or should have known was under consideration for inclusion in a New Constructs report nor may they purchase or sell a security for the first 15 days after New Constructs issues a report on that security. New Constructs does not perform any investment or merchant banking functions and does not operate a trading desk. All material in this report is the property of. This report may provide the addresses of websites. the general partner of a hedge fund. LLC (together with any subsidiaries and/or affiliates. or distributed or transmitted to any other party without the prior express written consent of New Constructs. publication. or intended for distribution to or use by. The investments or services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about any such investments or investment services. In addition. (HRBN) 132 . All rights reserved. Copyright New Constructs. However. service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of New Constructs. and may in the future issue. None of the contents. and New Constructs makes no warranty as to results that may be obtained from the information presented in this report. accounting or tax advice. Inc. but New Constructs makes no representation as to their accuracy. state. At any particular time. Except to the extent to which the report refers to New Constructs own website material. Those reports reflect the different assumptions.

(mil) 3-Mo.41A 0.66A 0.20 . $5.com Emma Jia Zhao. Vol.9E 20.797.$25.4A 125.00 $87.64E 7.6 $87. Thursday. 2011 Global Energy & Industrials: China Harbin Electric.Price Target Cash (mil) Tot.05E 9. (949) 720-5775 mtobin@roth.0 HRBN One-Year Price and Volume History 30 25 20 15 10 5 Price May-11 Nov-10 Dec-10 Important Disclosures & Regulation AC Certification(s) are located on page 3 to 4 of this report.825 $24.com Sales (800) 933-6830.54E 0.43 $603.79A 0.$19.4A 109.4A 106.82 .62A 2.5A 105. HRBN filed definitive proxy materials with the SEC.5 1. CFA. 12-Mo.0 8.05 31.0 0.NASDAQ | Buy HRBN: Sets Shareholder Vote. Debt (mil) Est.1E 130. Based on the timelines of previous privatization transactions.4x | HRBN . signifying that it has completed the SEC review process.High Shares Out.3x s s Pro-forma EPS for all periods Revenue ($ millions) Yr Dec 1Q 2Q 3Q 4Q YEAR —2010— 105. Cap.53A 0.2E 490. We expect shares will trade toward the $24 offer price as the Oct 29 vote date approaches. LLC | 888 San Clemente Drive | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC Aug-11 Sep-11 Feb-11 Mar-11 Jan-11 Oct-10 Jun-11 Apr-11 Jul-11 133 .0 4.1x —2011E— Curr 0.2A 426. Inc.65A 0. Avg. 3Yr.4 15% s —2012E— Curr 2.5E —2012E— Curr 568. we project the transaction will close within one week after a successful vote (est. Roth Capital Partners.Mark Tobin. Trading (800) 933-6820 CHINA FLASH NOTE | EQUITY RESEARCH | September 30. we believe HRBN's privatization deal is on-track for completion.5A —2011E— Curr 103. EPS Growth Auditor: FRAZER FROST LLP EPS $ Yr Dec 1Q 2Q 3Q 4Q YEAR P/E —2010— 0.57E 2.0 16. during which shareholders can vote on the proposal to adopt the merger agreement. (mil) Mkt. The company has scheduled a special meeting of shareholders for Oct 29. which we viewed as the final meaningful hurdle associated with the buy-out process. Company Update Stock Data 52-Week Low . Privatization Appears On-Track for Completion With Thursday afternoon's filing of its definitive proxy materials and the scheduling of the shareholder vote.8A 131.72A 7. after the market close. ezhao@roth.0 12. Nov 5). after which Harbin Electric will become a privately-held company and its common stock will no longer be listed on Nasdaq.

develops. some of which could lead to delays in completing the transaction. customized linear motors. RISKS Change in macro policies in China. The Company operates. and automobile specialty micro-motors. can be largely affected by central and local government policies.. 2011 VALUATION Our $24 PT is based on the offer price of the proposed buy-out. automobile specialty micro-motors. Harbin Tech Full Electric Co. COMPANY DESCRIPTION Harbin Electric. Ltd (HTFE). Factors that may impede HRBN shares from reaching our price target include: s There are still numerous steps in the privatization process. such as delay in construction. oil pump for oilfield and linear motors for urban metro lines. INC. The development of urban railways can experience delays that out of control of HRBN. Inc. s A slow-down in China''s economic growth and continued inflation could impact sales and compress margins. Two of HRBN's major catalysts. manufactures and sells an array of industrial electric motors. engineers. copper and steel respectively. through its indirect wholly owned subsidiary. Page 2 of 4 134 . Volatile raw materials costs HRBN is subject to market fluctuations and volatility of two major raw materials. linear motors and their integrated application systems.HARBIN ELECTRIC. September 30. The Company offers three key product lines: industrial electric motors. controller automation systems. and other special motors.

ROTH changed its rating system in order to incorporate coverage that is Under Review. Prior rating. and as such. related to the specific recommendations or views expressed in this report. Not Covered [NC]: ROTH does not publish research or have an opinion about this security. as of 09/29/11 Count Percent 49 26. except for the first box. 2011. ROTH Capital Partners.ROTH employs a rating system based on the following: Buy: A rating. On May 26. that indicates an expectation of a total return of at least 10% over the next 12 months. 2010. directly or indirectly. is or will be. Ratings System Definitions . that indicates an expectation that the price will depreciate by more than 10% over the next 12 months. Disclosures: ROTH makes a market in shares of Harbin Electric. LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. buys and sells from customers on a principal basis. Consequently.4 5. Inc. Distribution of IB Services Firmwide IB Serv./Past 12 Mos. our investment rating on a stock and its implied price movement may not correspond to the stated 12month price target. which at the time it is instituted and or reiterated. Each box on the Rating and Price Target History chart above represents a date on which an analyst made a change to a rating or price target. at any given point in time.8 0 0 2 14. Under Review [UR]: A rating. 2011 Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. company and/or overall market risk and volatility.1 9 14. Sell: A rating. which at the time it is instituted and or reiterated. which may only represent the first note written during the past three years. On September 28. that indicates an expectation of a total return between negative 10% and 10% over the next 12 months.3 Rating Buy [B] Neutral [N] Sell [S] Under Review [UR] Count 188 61 1 14 Percent 70. price target and estimates for the security. Distribution Ratings/IB Services shows the number of companies in each rating category from which Roth or an affiliate received compensation for investment banking services in the past 12 month.9 23. I also certify that no part of my compensation was. The material. price target and estimates should no longer be relied upon for UR-rated securities. ROTH changed its rating system in order to replace the Hold rating with Neutral. which at the time it is instituted and or reiterated. indicates the temporary removal of the prior rating. Neutral: A rating. which at the time it is instituted and or reiterated. information and facts Page 3 of 4 135 . INC.HARBIN ELECTRIC.0 0. September 30.3 Our rating system attempts to incorporate industry.

This report should not be used as a complete analysis of the company. September 30. Additionally. industry or security discussed in the report. 2011 discussed in this report other than the information regarding ROTH Capital Partners. INC. an offer or solicitation of the securities discussed. Member: FINRA/SIPC. No part of this report may be reproduced in any form without the express written permission of ROTH. however. LLC and its affiliates. but are in no way guaranteed to be complete or accurate. Additional information is available upon request. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Page 4 of 4 136 . an investment in the stock may involve a high degree of risk and may not be suitable for all investors. Copyright 2011. This is not. are from sources believed to be reliable.HARBIN ELECTRIC. Any opinions or estimates in this report are subject to change without notice.

20 $24 $5. However.57 (212) 895-3718 Maxim Group LLC 405 Lexington Avenue New York.70 $0.4 14. HRBN filed a definitive proxy statement with the SEC for a special shareholder meeting. realizing values of HRBN’s shares at $24/share.8A $122.maximgrp.5 8. Abax. We also recommend investors seek knowledgeable advice and make logical judgment.59 $0.34A $0. the annual financial statement.05 $2. and China Security and Surveillance Technology. public market (mainly due to concerns of depressed valuation). HRBN also filed an amended 2010 10-K. Vol.-listed Chinese companies that have already concluded a successful LBO are Chemspec International Limited. 2011 Closing Price (9/13/11): 12-Month Target Price: 52-Week Range: Market Cap (MM): Shares O/S (MM): Float (MM): Shares Short (MM): Avg.5 $153.67 $0.55A $0.1 $155. NY 10174 – www. In the cash flow statement.4 $136.46 7.7 10% .05 $602.$25. are buying out HRBN at $24/share.com SEE PAGES 4-6 FOR IMPORTANT DISCLOSURES AND DISCLAIMERS 137 .60 $2.9 $588.55A $0.8 $2.8 $505.9 31.49 7.57 $0.20) Buy Definitive proxy statement filed with a voting date set. and Provision for Account Receivable – but an increase in Provision for Inventory Reserve in 2009 and 2010. The three onceU. We believe the majority of HRBN’s voting shareholders are likely to vote for the merger transaction.57 Current 2012E $0. as well as HRBN. which now has been set up for October 29 at 9:00am EDT at 345 Park Avenue in New York.05 9.70 $0. (HRBN – Nasdaq – $19. the risk of high volatility on the name still exists in the month leading to the special meeting. Funtalk China Holdings Limited. there was a decrease in Change of Account Receivable.3 $134. and in which a small group of management led by Chairman Tianfu Yang and a Hong Kongbased private equity firm. PhD ehe@maximgrp.70 NA Medium Revenues ($M) 2011E 2012E $103. Regardless.S.EQUITY RESEARCH COMPANY UPDATE China September 30. That said. We recommend a Buy on HRBN at current levels. such volatility provides investors significant upside to the stock.77 24. Yesterday after the Market close.15% GAAP Quarterly EPS Current 2011E $0. Inc.57 $0.com $19. The filing symbolizes the SEC’s approval of HRBN’s LBO. Change of Inventories.S.4A $157.03 $2.60 Harbin Electric. These changes seem to be a result of reclassifications. It seems that the amended 10-K has served the purpose of satisfying the SEC for approval and the SEC did not find any material issues that could block HRBN’s LBO. Significant upside remains. $2. because of the persistent misinformation on Chinese companies in general. Shareholders on record as of the close of the market on September 13. MD.51 $0. Per our checks. Inc. Shareholders will vote on the merger agreement into which HRBN entered on June 19.6 Current Current EPS P/E $0.9 $2. there was no change in net cash flow and cash positions.1 $131. are entitled to vote at the special meeting. the fourth such transaction that is likely to be successful during the recent wave of Chinese companies leaving the U.34A $0.4 $2. all income statement and balance sheet line items remained unchanged.340 $20. Together with the definitive proxy statement.49 GAAP Quarterly EPS 2011E 2012E $0.82 . (000) Book Value/Share: Dividend/Yield: Risk Profile: Maxim Group FYE: December 1Q 2Q 3Q 4Q FY Maxim Group FYE: December 2009A: GAAP 2010A: GAAP 2011E: GAAP 2012E: GAAP LT Earnings Growth Maxim Group FYE: December 1Q 2Q 3Q 4Q FY Consensus-First Call FYE: December 1Q 2Q 3Q 4Q FY Echo He.67 $0. Reiterate Buy and $24 price target The SEC has approved HRBN’s LBO.51 $0. 2011.3 2. 2011.

33 $ 1.93 $ $ $ -$ $ 0.13 0.66 $ 4.01 Shanghai Electric Group 601727-SH $ 0.07 0.22 $ 1.61 $ 4.3x 1.29 18.95 $ 41.999 5.57 $ 82.9x 4.628 $ $ $ $ $ $ 0.04 0.2x 11.9x 7.5x 11.0x US/International Motor Companies Siemens SI $ 94.083 Magna International MGA $ 34.44 n/a $ 2.63 $ 5.4x -2.37 Jiangte Electric Motor 002176-SZ $ 3.2x 11.05 12E $ 2.7x Chinese Industrial Companies China Automotive CAAS FushiCopperweld FSIN Lihua International LIWA Wonder Auto WATG China Gerui Adv.86 1.03 2.15 $ $ $ $ $ 616 1.56 $ 3.35 $ 869 Average Source: Thomson One.1x 9.08 6.135 915 169 114 $ $ $ $ $ 0.45 $ 17.4x 5.1x 9.8x 23.1x 7.20 LAST $ $ $ $ $ $ 4.04 $ 1.86 1.9x 6.53 1.2x China Mainland Listed China Motor Companies Xiangtan Electric 600416-SH $ 1.15 $ 2.0x 2.8x 10.6x 4.4x 8.1x 3.7x 3.86 4.88 $ 4.29 $ 5.3x 21. $ 10.7x 11.044 Franklin Electric FELE $ 37.1x 4.0x 9.12 0.04 0.9x 3.38 Average $ $ $ $ $ $ 873 245 1.24 $ 3.130 326 8.48 1.79 $ 32.27 0. Materia CHOP SORL Auto Parts SORL Average HK Listed China Motor Companies Harbin Power Equipment 1133-HK Shanghai Electric Group 2727-HK Dongfang Electric Group 1072-HK Chongqing Machinery & E2722-HK Shanghai Prime Machine 2345-HK Average $ $ $ $ $ $ 136 177 135 35 174 65 $ $ $ -$ $ 0.1x 8.2x 22.4x 12.192 Lear Corporation LEA $ 44.62 4.Harbin Electric.12 0.9x 3.04 0.17 0.03 $ 3.1x -15.03 7.837 Rockwell Automation ROK $ 57.9x 10.15 0.888 Smith AO AOS $ 34.0x 9.9x 13.24 $ $ $ $ -$ 0.4x 12E 7.38 2.5x 12.24 0.93 $ 3.05 0.11 0.74 n/a -$ 2.91 0.91 Dongfang Electric Group 600875-SH $ 3.74 1.97 $ 5.26 BroadOcean 002249-SZ $ 2.4x 9.54 $ 1.9x 11.08 9.6x 3. Bloomberg and Maxim Group estimates.156 ABB ABB $ 17.12 $ 4.45 $ 8.8x 19.058 Regal Beloit RBC $ 49.2x 60.29 $ 10.02 $ $ $ $ $ 0.7x 7.15 0.7x 12.9x 5.43 Zhejiang Founder Motor 002196-SZ $ 2.08 $ 2.8x 11.4x 15.3x 13.4x 12.93 3.20 $ 21.5x 6.707 Cummins CMI $ 86.8x 41. (HRBN) Exhibit 1.3x -13.2x $ $ $ $ $ 0.69 0.05 0.68 $ 10.8x Maxim Group LLC 2 138 .57 -1.39 2.03 0.0x 10.49 P/E 11E 9.79 $ 8.16 1.04 0.106 Emerson Electric EMR $ 43.36 MktCap (mm) $ 602 EPS 11E $ 2.3x 9.08 0.91 $ 3. Inc.7x 1.5x 13.4x 8.981 Illinois Tool Works ITW $ 43. HRBN – Comparable Companies 9/29 Company Harbin Electric TKR HRBN Price $ 19.8x 41.9x 7.02 0.

1) 16.4 0.3 47.2) 8.1 6.3% 1.9% (18.1) (365.6% (7.80 31.4% 2.4% 1.6 86.5 (12.6) 13.7%) 14.0 (2.5% 18.4 0.1 42.3 -12% 16.2 2% 27.9% (0.8) 0.4 48.7 23.8% 7.3 76.7) 23.5 46% 39.5) 21.6 137% 19.7 110.9 6.05 $ 31% -16% 2.1 40.4 $ 120.4 6.8) 0.2 6.4% (1.8 (0.9 11.7 36.4 (1.3% 6.6 (23%) 8.6) (69.44 $ 2.8% (5.0) 27.9% 17.66 $ 0.2 6.5 17% 27.0% 9.0 76.6% (1.5) 4.2% (11.9 0.1 31.0 0.0 131.44 $ 2.57 $ 0.1 (3.4 36.4%) (33.4) 0.4) 2.6% 17.3 27.3 (1.5) 3.5 11.6) (6.5% 1.0 60.30 1.8% (0.0% 25.2) 15.0) 0.2 (2.2 24.6%) 25% 25% 27% 19% 16% (33.3% (6. HRBN-Income Statement (In millions except per shr) Revenue Drivers: Linear Motors Y/Y Growth % of Total Rev Specialty Micro-Motors Y/Y Growth % of Total Rev Rotary Motors .46 $ 0.8) (75.0% 13.7 1.1% 0.9 13% 26.4) 8.59 $ 0.4) 0.6 4% 16.2 13.7% 12.36 60.4 48.1 89.7% 64.7%) 7.84 18.2%) 3.6% (1.4 0.4 $ 106.4 37.9 NM 16.4 $ 136.7 19.2 18.9 75.2 104.83 $ 0.9 (2.4 0.2%) 13.3) 2.2 (3.5 31.7% (1.0 19.1% 17.9) 9.3 0.8) 16.7) 1.0) 25.5 140.5) 10.6) 10.3 116.5% (7.28 $ 23.8 15.Xi'an Y/Y Growth % of Total Rev Revenues Y/Y Growth Cost of sales Gross profit Y/Y Growth Gross Margin R&D As % of Rev G&A As % of Rev Total operating expenses Income from operations Y/Y Growth Operating Margin Other income (expenses).1 31.9 13% 6% 11% 12% 11% 3% 30% 30% 30% 24% 18% 0% 0% 20% 43% 42% 45% 47% 44% 45% 44% 47% 48% 46% 47% 65.1 (1.1 33.7) 4.0) (73.2 15.3% 5.2 15.6% (7.9) 10.3 67% 21.9% (52.0 34.7) 21.1% (57.1 (1.0 10.58 $ 2.8% (39.3 43.7 NM 24.3 11% 27.8) 25.2) 100.9 (2.0% 78.5 -16% 12.4 31.8 1.3) (24.1) 25.0) 0. Inc.8) 19.1 0.54 0.2% (0.4 84% 45.5% (14.1% (3.1 0.7% (4.9 (26.4% 78.4 24.6% 2.7 19.2 (14.84 33.6) (0.3) 5.0% 64.3 22% 27% 40.2 29.8) 27.0 24.7) 21.9% (0.5 16.8) 10.0) 0.8% (13.5 $ 103.5 35% 41% 33.9 1.6% 0.8) (73.0 333% 42.7 22% 17.3 100.8 (47.8) 55.3 6.4 50% 21.5 23.0 42.4 $ 109.5 31.7 246% 26.57 $ 2.6% 8.67 $ 0.7) 32.Harbin Electric.6 350% 48.9 0.8 166% 78% 81% -18% 51% -4% 20% 20% 20% 13% 10% 28% 15% 14% 14% 13% 14% 15% 14% 13% 13% 14% 13% 22.6 2.4 0.9 16.3 6.6) 0.6 23.2 6.9) 6.6 25.9 (5.2 43.7 35.4 29. Maxim Group LLC 3 139 .7) 21.49 2.9) 0.0 107% 39% 14% 3% 31% -3% 24% 25% 25% 18% 19% 0% 21% 22% 21% 22% 22% 21% 22% 22% 22% 22% 22% 45.3 31.9 40% 16.4 31.5% (10.6 6.8) 12.0 0.3) (146.1) 0.2 (33.66 $ 82% 0.9% (13.8) (98.6 22% 13.2 19% 18% 71.6% 1.6 52.7% 64.0 63.8 291% 18.2 3% 27.1% (42.0% 18.5) 29.6% 2.1% 22.3 17.0 (4.1) 34.4 0.8 24.7) (70.7% 8.5) 15.0) 1.0% (8.1 31.9) 3.0) 4.0% 18.3) 2.1 14.9% 5.2) (6.5 2.6 $ 387% (12.3) 2.7% (8.5 (4.8 29.3 47.7 23.36 0.3 0.1% 6.8 85% 28% 27.3 19.3 16.5 (3.59 $ 3% 2.4 0.7% (14.0) 25.3 175% 33.3 31.4% (50.7) 22.9% (0.4) 25.01 $ 0.1 219% 26.9 24.6 47.5 $ 105.5 23.6% 1.3 (0.6 31.4% 12.3% 2.4 45% 28.3) 15.0 20.9) 82.1) 0.8% (14.4 $ 71% (20.7) (430.1 42% 13.9 $ 588.1 31.5 0.8% (3.4 10.3% (5.84 35.6% (0.1) 1.Weihai Y/Y Growth % of Total Rev Rotary Motors .9 0.2 21.66 $ 68% 3.6) 0.8 62% 25.47 $ 0.1) 1.4%) 10.6 17.8 0.1) 9.3 31.9 232.4 29.3% (0.2) 10.8 2009 Full Yr 1Q10 31-Mar 2Q10 30-Jun 3Q10 30-Sep 4Q10 31-Dec 2010 Full Yr 1Q11 31-Mar 2Q11 30-Jun 3Q11E 30-Sep 4Q11E 31-Dec 2011E Full Yr 2012E Full Yr $ 4.3 135.0% 0.6 (6.0% (14.6 (39.1 20.4% 18.6 62% 85% 85% 243% 175% 133% -1% 91% (1.7% (10.3 18.2 1.0 0.55 $ 0.3% (1.8 94.5 31.0 (4.0 0.3 24.0% (11.11 $ 0.0 (5.8 (0.3) 1.35 $ 0.0% 78.7 90.1 18.8 68.48 94.8 36.0 2.0% 17.2 17.9 (22.2 6.0% 5.9 (0.6 (3.9% 10.77 $ 1.4 3% 13.5) 11.0% 2.8% 6.0% 6.7 17.0) 0.1) 15.2) 3.9 (7.1) (4.1 $ 134.8) 22.0% 18.5 (0.2% 6.1 2.5 (24%) 16.4 157.4 13.4% (20.1 25.7) 11.19 $ 0.3 58.2) 28.5 40.7 93.9 (8%) 25.9 2.4 65% 49.0% 10.1) 9.3 31.1 (6.7% 1.0 0.1% (1.4% (1.7 77% 31.5 $ 505.51 36.7% (13.3% 7.7 (1.8 275.5 $ $ 0.9 15.1 31.3 19.9 188.3 31.0) 0.2 (6.6 31.6% 76.1) (290.99 $ 1.0% 16.3 31.3 0.1) 0.1% 10.5 18.0) 0.1 31.0% 10.9 (1.3% 0.8% 79.1 0.3% 2.0% 2.3 31.9) (1.2 0.1 2.07 1.2 $ 105.55 $ NM -25% 221% (47.82 $ NM 2.06 $ 0.3% 19.8 $ 131.57 $ 0.3 11.9 (4.9 49.6) 10.3 (41%) 15.4) 7.25 $ 0.6) (95.8 $ 223.5 6.9% (57.7 70% 48.3% (1.36 0.77 $ 31% (35.3 14.9) 30.7% (7.8% 6.9 68% 20.57 24.0) 16.5 31.6 18.0% 18.6 100% 30.1) (75.2) 27.2) 1.5 46.1 -14% 29.6 23.9% 25.6 (6.0 31. net Interest expense.0% 25.2 (15%) 29.91 $ 53% (10%) 2.5 60% 74% 18% -14% 27% -3% 22% 20% 30% 17% 13% 56% 19% 19% 18% 16% 18% 19% 19% 17% 16% 18% 17% 18.7) 8.7) 14.1% 0.0) 1. (HRBN) Exhibit 2.48 Source: Company reports and Maxim Group estimates.9 0.1) 0.34 $ 0.4 16.2 21. net Total other income (expense) Income before income taxes Provision for income taxes Tax Rate Net income before noncontrolling intere Minority interests As % of net income Net income Y/Y Growth Net Margin Foreign currency translation adjustmen Comprehensive income Weighted average shares outstanding Basic Diluted EPS (to controlling interest) Basic Diluted Y/Y Growth D&A Share-based compensation EBITDA EBITDA margin Exchange Rate (RMB/US$) $ $ 2004 Full Yr 2005 Full Yr 2006 Full Yr 2007 Full Yr 36.0 1.5% (0.9% (0.3) 1.2 31.2% 23.5% 0.3 0.49 21% 14.8% (13.0% 16.8% (0.3% (2.7 227% 33.7% 20.3 30.1 25.6 0.0% 18.83 74.0% (14.7% 2.1 19.4) 15.76 19.6 2008 Full Yr 49.8% (15.6 48.4 18.9) 15.2) 25.3 31.2) (98.84 0.2 $ 426.1) 11.0) 9.8 20.7 -31% 12.1% 7.2 (0.4 31.1) (0.3 25.6 64.4) 93.6 61% 34.6% 6.7 (0.6 (1.3% 9.60 105.4 157% 23% 32% $ 44.2 22.0% 18.1% 7.3 0.1% 25.0 44.3) 1.

0% 0.Harbin Electric. It is also supported by our comparable company analysis and discount cash flow method.0% Expected Performance* Buy Hold Sell Expected total return of 15% or more over next 12 months Expected total return of plus or minus 14% over next 12 months Expected total negative return of at least 15% over next 12 months with Rating 67. no part of my compensation was. Price Target and Investment Risks: Aside from general market and other economic risks. or will be directly or indirectly related to the specific recommendation or views expressed in this research report. a portion of which is generated by investment banking activities. attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer. (2) Slowdown of Maxim Group LLC 4 140 . The research analyst(s) primarily responsible for the preparation of this research report have received compensation based upon various factors. An Under Review (UR) rating represents a stock that the Firm has temporarily placed under review due to a material change. Inc. Maxim Group makes a market in Harbin Electric. Inc. risks particular to our Harbin Electric. Inc. is. rating include: (1) Failure of the proposed LBO to be completed.5% * Relative to Nasdaq Composite. valuation is based on the announced $24 per share price in the leverage buyout proposal. including the firm’s total revenues.com Maxim Group LLC Stock Rating System As of: % of Coverage Universe 9/30/2011 % of Ratings for which Firm provided Banking Services in the last 12 months 39. Valuation Methods: Our Harbin Electric. (HRBN) DISCLOSURES Source: Investars. Furthermore. Maxim Group expects to receive or intends to seek compensation for investment banking services from Harbin Electric.3% 0. I. Inc. Echo He.5% 5. Inc.0% 27. in the next 3 months.

RISK RATINGS Risk ratings take into account both fundamental criteria and price volatility. and is fairly liquid. both price volatility and fundamental risk are expected to be below the industry. (5) Difficulties of developing linear motor market. the price volatility is expected to be significant with the possibility that the investment could eventually be worthless. fundamental risk is expected to be significantly above the industry. Medium – Fundamental Criteria: This is a risk rating assigned to companies that may have average revenue and earnings visibility. based on their specific investment objectives. financial status and risk tolerance.Harbin Electric. DISCLAIMERS Some companies that Maxim Group LLC follows are emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. Accordingly. fundamental risk is expected to be above the industry. negative cash flow. Low – Fundamental Criteria: This is a risk rating assigned to companies that may have above-average revenue and earnings visibility. High-risk stocks may not be suitable for a significant class of individual investors. High – Fundamental Criteria: This is a risk rating assigned to companies having below-average revenue and earnings visibility. Speculative stocks may not be suitable for a significant class of individual investors. positive cash flow. Accordingly. Accordingly. (4) High competition in industrial motor market. Price volatility: The price volatility of companies falling within this category is expected to be above the industry. Price Volatility: Because of the inherent fundamental criteria of the companies falling within this risk category. balance sheet concerns. both price volatility and fundamental risk are expected to approximate the industry average. and (6) Potential equity issuance. The securities discussed in Maxim Group LLC research reports may not be suitable for some investors. (HRBN) Chinese economy. Speculative – Fundamental Criteria: This is a risk rating assigned to early-stage companies with minimal to no revenues. and is fairly liquid. (3) Raw material price increases. Inc. and low market cap or public float. Maxim Group LLC 5 141 . lack of earnings. Accordingly. Investors must make their own determination as to the appropriateness of an investment in any securities referred to herein. and/or a short operating history. positive cash flow.

(2) are not deposits or other obligations of any insured depository institution. in such circumstances. ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST Maxim Group LLC 6 142 . Inc. Information and opinions presented in this report have been obtained or derived from sources believed by Maxim to be reliable. Investors in securities such as ADRs. The price. you may be required to pay more money to support these losses. Past performance should not be taken as an indication or guarantee of future performance. Maxim may have issued. (HRBN) This communication is neither an offer to sell nor a solicitation of an offer to buy any securities mentioned herein. The value of securities is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities. Maxim accepts no liability for loss arising from the use of the material presented in this report. offered or sold by Maxim: (1) are not insured by the Federal Deposit Insurance Company. Information.Harbin Electric. including the possible loss of principal invested. Securities recommended. the information presented in this report. other reports that are inconsistent with. in the case of some investments. the potential losses may exceed the amount of initial investment and. or disclosed to another party. and 3) are subject to investment risks. value of and income from any of the securities mentioned in this report can fall as well as rise. This publication is confidential for the information of the addressee only and may not be reproduced in whole or in part. The aforementioned sentence does not apply to the disclosures required by NASD Rule 2711. but Maxim makes no representation as to their accuracy or completeness. effectively assume this risk. LLC (“Maxim”). is made regarding future performance. Those reports reflect the different assumptions. without the prior written consent of Maxim Group. and reach different conclusions from. Indeed. the values of which are influenced by currency volatility. and no representation or warranty. except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to Maxim. express or implied. views and analytical methods of the analysts who prepared them and Maxim is under no obligation to ensure that such other reports are brought to the attention of any recipient of this report. This report is not to be relied upon in substitution for the exercise of independent judgment. opinions and estimates contained in this report reflect a judgment at its original date of publication by Maxim and are subject to change without notice. and may in the future issue. copies circulated.

L. re-listing. Since our initiation of this research series in March. Important Disclosures & Regulation AC Certification(s) are located on page 6 to 8 of this report. The restructuring of business and "homecoming" listing offered a ~5 times expansion of company value. FTLK. we now have a good reference case on post-privatization activities. Sep 02 .CADC announced that Special Committee retained William Blair & Company. and duallisting. Meaningful progress in transactions continue to serves as major catalyst for price appreciation (or stability) under volatile market environment. Two going-private deals (FTLK and CSR) were successfully completed. s s s s s s Aug 25 . a manufacturer and retailer of female footwear in China. a Shenzhen-based and OTCBB-listed battery manufacturer.CISG announced withdrawal of going-private proposal. Roth Capital Partners. citing unfavorable market conditions.com Sales (800) 933-6830.4 million) in its Hongkong IPO.Mark Tobin.S.CHNG's Chairman & CEO announced the termination of exclusive agreement with private equity consortium while the goingprivate discussions continued. LLC | 888 San Clemente Drive | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC 143 . CISG announced the withdrawal of going-private proposal. CSR. as its financial advisor. Citi and DBS acted as joint bookrunner. deal closed on Sep 16.S.L. six deals have successfully completed (TCM.CFSG shareholders approved privatization. PE Investment. With the successful transactions. 2011). PE investment. we believe interest among companies has increased and expect additional privatization announcements. . SOKF TBV.6 billion (~US$589. China TMK Battery Systems Inc. raised HK$1. there are six active privatization transactions within the U. Trading (800) 933-6820 INDUSTRY NOTE | CHINA MACRO | September 26. CFA. The company.FTLK announced completion of its going-private transaction (shareholder meeting approved the deal on Aug 22).15 billion (~US$147. Below are some major updates. 2011 China U.C. ezhao@roth. CPC).-Listed China . Sep 15 . the company filed an 8-K announcing non-reliance on previously issued financials due to findings of unauthorized related party loans. and two deals have been abandoned or withdrawn (QXM. On Sep 21. Sep 22 .-listed China sector. Sep 14 . Currently. Aug 29 .S. It includes a table with details for each company pursuing privatization. (949) 720-7149 ktao@roth. and CHNG's deal also hit a snag on funding issues and a stock halt. PRIVATIZATION UPDATE Activity has been mixed since our last edition (dated August 23. Meanwhile. Stock has been halted by NASDAQ since. likely paced by eventual loosening of China's credit markets. CFA.7 million). completed a $16 million preferred stock equity financing agreement with China Development Industrial Bank (headquartered in Taiwan) and ZTE Energy Limited. & Dual-Listing (7th Edition) This report provides an update on the activity within the U. PRIVATE EQUITY INVESTMENT In mid August. POST-PRIVATIZATION RE-LISTING ACTIVITIES With Hongguo International's Hongkong IPO completed on Sep 23. (949) 720-5775 mtobin@roth. previously listed on Singapore Stock Exchange.CSR shareholders approved the privatization. was taken private by its directors in May last year at the price of approximately US$130 million. Hongguo International.com Kun Tao.com Emma Jia Zhao.Privatization.-listed China sector related to privatization. plus CFSG's merger was approved by its shareholders. which valued the company at HK$4. CISG)..

Abax Global Capital Oct-11-2010 40.6% $24.7M.6x $1. 2011 Jun-20-2011 Jul-13-2011 >50% total & >50% of disinterested shares $750. HSBC US$ 60M 75.65 (1) China Macro . 2011 Pending N/A N/A $360.3M Source of funding N/A N/A (1) Debt: $60M.4x $8.60 on Sept 21. Citi.60 (95. or Bloomberg if otherwise.6% $12.3M N/A N/A Debt Financing Detail Post-deal Private Equity Ownership Board Financial Advisor Board Legal Advisor (1) N/A N/A N/A Skadden.5% $2. 2011 Buyers (as announced) China Natural Gas (4) CHNG Chairman & CEO China Fire & Security CFSG Bain Capital (Management's 59.4% --8.0M (1) Debt: CDB-$400M.2x $1.8% --17.3x $20. Arps. Expected to close in Q4' 2011 Board Approval / Definitive Agreement Initial Filing of SC 13E3 Voting Requirement Implied Equity Value (3) Pending N/A N/A $47.8%) Fushi Copperweld FSIN Chariman & CEO.1% $9.00 20.9%) Harbin Electric HRBN Chairman & CEO. Vice Chairman & COO Jul-26-2011 49.1M. NA indicates not available.September 26. LLC Puda Coal PUDA Chairman Announcement Date Pre-deal Buyer/mgmt Ownership % Bid Price per Share or ADS Premium over previous day close Price Revision Date Revised Price P/E (TTM) P/E (NTM) (2) Jun-30-2011 14. Mgmt rollover-$51. 2011.3%) Board approved. Meagher & Flom.2% --8. 2011 Source: Company Filings.0% --10.81 (31.60 (62. Dunn & Crutcher LLP Gibson.8M. / Lazard Freres & Co. pending shareholder vote.2% --2.1M Pending N/A N/A $91.0%) Under board review. Dunn & Crutcher LLP Premium of bid price above the closing price on previous trading day before announcement (2) Valuation multiples are based on bid price over TTM and NTM EPS as of deal announcement date.8% --5. (exclusive partnership with Theme Investment terminated on Sept 2) Apr-29-2011 31. ROTH Capital Partners Page 2 of 8 144 .50 26.7x 3.8% Barclays Capital Shearman & Sterling LLP N/A N/A BofA Merrill Lynch N/A N/A Cowen and Company.2% $11. Abax Global Capital Nov-03-2010 29.6M China Development Bank: US$ 400M Abax: US$25M 23. Mgmt rollover-$264. 2011. later delisted from NYSE Amex and moved to OTC on August 18.75 (2.00 100. data sourced from ROTH research if companies are covered. Shares halted starting Apr 11.2x $5.1% stake already agreed to vote for the agreement) Mar-07-2011 59.4%) Board informed. Abax rollover-$40. Slate.8x 8.8M Pending N/A N/A $439.2M May-20-2011 Jun-10-2011 >75% total & >50% of disinterested shares $257.8x 5. Abax note-$25M.32 (15.3x 16.65 (50. LLP N/A N/A N/A N/A BofA. Shareholder record date was set as Sept 13. Expected to close in Q4' 2011. (2) Equity: Bain-$160.0M 15.0% $4. (2) Equity: Abax cash-$38.CHINA Summary of On-going Deals China Advanced Construction Materials CADC Chairman & CEO.2% Morgan Stanley & Co.00 43.8x 7.7%) Under board review (2) Current Price (09/22/2011) Current Discount to Bid Price Status Shareholder meeting Under board review approved deal on Sept 22.9x 10. LLC / Morgan Joseph TriArtisan LLC Not disclosed Gibson.1x $0.25 22. NM indicates not meaningful (3) Implied Equity Value is calculated based on latest available bid price and shares outstanding number as disclosed (4) NASDAQ halted trading of CHNG stocks at a last price of $1. Bloomberg.

2011 19.2x Mar-08-2011 20.8x 5.7x Sep-09-2010 61.4% May-31-2011 $7.00 $6. Mullin. Arps.September 26. Primavera China Security & Surveillance Technology Funtalk China CSR FTLK Chairman & CEO Chairman & CEO (key mgmt). Capital Ally.0x Mar-10-2008 39.0% $4.1% $1. LLC 27.28 48% --NM NA SOKO Fitness & Spa Group SOKF Chairman & CEO (key mgmt) together with several existing institutional investors Jul-25-2011 90.78 19% --NM 18. Slate.32 27% Mar-21-2011 $8.72 $1.55 10% --NM NA Oct-12-2009 39.00 $13.10 9.00 $7.2% $10. ROTH Capital Partners Page 3 of 8 145 . Not involved N/A Not involved N/A Not involved Morgan Stanley Asia Limited Sheppard. 2011. Inc.66 31% --125.9x Tiens Biotech Group Tongjitang Chinese Medicines TCM TBV TIENS (USA) Hanmax (controlled CEO & Director Investment (owned by CEO) / Fosun by Chairman & CEO) Jun-27-2011 95.9 shares of XING common stock plus $0.50 $4.20 $6.10 $6. 2011 May-16-2011 34.8% $4. 2011 25. NM indicates not meaningful Source: Company Filings.20 8.03 67% --28.60 55% --NM 11. 2011 Summary of Completed or Abandoned Deals BMP Sunstone BJGP Sanofi-Aventis CNinsure CISG TPG Asia.10 58. or Bloomberg if otherwise.2% Houlihan Lokey Shearman & Sterling LLP / Maples and Calder Not involved Imperial Capital.50 $3. 2011 form merger.92 $3.7% Bank of America Merrill Lynch Skadden.5% --6.0x 90. 2010 27. ARCH.1% $7. N/A Duff & Phelps.3x Nov-11-2010 55. (owned by (Nasdaq: XING) management) (2) Buyers (as announced) Announcement Date Pre-deal Buyer/mgmt Ownership % Bid Price per Share or ADS Price 1-Day Prior to Announcement Premium over previous day close (1) Price Revision Date Revised Price P/E (TTM) (3) P/E (NTM) Status (3) Oct-28-2010 23. Bloomberg. 2011 lack of quorum on Apr 7.1% $1. data sourced from ROTH research if companies are covered.7x NA Apr-08-2010 83. Short15.3x 7.0% $10.15 15. Richter & Hampton LLP / Thorp Alberga N/A Morgan Stanley Asia Limited Board Legal Advisor Morgan. 2011.3x Withdrawn on Jun 27. GM Investment Qiao Xing Mobile Sinoenergy QXM SNEN Parent Company Skywide Capital Qiao Xing Universal Management Resources.0x 8. Chairman & CEO. Meagher & Flom LLP / Maples and Calder Not involved Brean Murray.4% --15. LLC Shearman & Sterling LLP 77. Carret & Co.90 $1. form merger.3% $19. 2011 Not involved Standard Chartered US$ 70M Mar-21-2011 May-03-2011 China Development Bank US$ 500M Apr-20-2011 May-31-2011 Not involved Not involved Completed on Sep Completed on July Completed on Aug Completed on Apr 29.16 44.70 22% --8.50 $3.4x 8.0% $3.8 in cash. NA indicates not available. 2008 Withdrawn on Sept Completed on Aug Completed on Sept Completed on Aug Abandoned due to 15.9% $6.0x 13. 16. CDH Inservice Chemspec International CPC Chairman & CEO.9x Mar-25-2011 77. we convert to dollar value using XING's closing price on Sept-8-2010 Valuation multiples are based on bid price over TTM and NTM EPS as of deal announcement date. Short11.CHINA China Macro . 2011.9x Completed on Feb 24. Lewis & Bockius LLP O'Melveny & Myers LLP and Walkers Not disclosed Arent Fox LLP N/A N/A NA (1) (2) (3) Premium of bid price above the closing price on previous trading day before announcement The offer price is 1.8% $8. Not involved Not involved Not involved CITIC Bank US$ 25M Nov-01-2010 Nov-26-2010 Debt Financing Detail Board Approval/Definitive Agreement Initial Filing of SC 13E3 Not involved N/A Oct-28-2010 N/A N/A N/A May-31-2011 Jun-14-2011 Jan-03-2011 Oct-22-2010 >50% of disinterested voting shareholders representing >75% of voting disinterested shares Not involved Not disclosed Oct-12-2009 Nov-13-2009 N/A N/A N/A Jun-27-2011 N/A N/A Voting Requirement >50% of toal shares N/A >50% of disinterested shares >50% total & >50% of disinterested shares >2/3 of voting shares at EGM >50% of total shares N/A N/A >50% of shareholders representing >75% of voting shares N/A Post-deal Private Equity Ownership Board Financial Advisor Not involved Stephens Inc.

Beijing. Inc. Expansion failure due to lack of additional capital: The company may be unable to obtain the financing necessary to undertake and complete additional plant constructions or acquisitions. From time to time. RISKS Change in macro policies. The company's revenue recognition and profit generation is currently highly relied upon its recently signed $92M total solution contract with Wuhan Iron and Steel.5x/3. Government policy changes to affect industry consolidation: The company''s ability to operate successfully in China depends on acquisitions and new plants associated with construction projects. have placed the industry under close monitoring by the central government. based on the company''s involvement in producing high-tech products.2x of our FY11/FY12 EPS estimates. Concentration risk. Any unexpected changes or progress delay in project execution will significantly impact CFSG's financial performance. the government may enact new laws or issue administrative regulations to encourage or discourage the development of a particular industry. In addition. China Fire & Security Group. the company could face increased competition in its principal market.September 26. VALUATION Our $9. accompanied with imposed tariffs on steel exports. Changes to these current tax policies could negative impact the company''s cash flow and earnings. Depressed steel prices and continuous market consolidation have caused many steel makers facing challenging market conditions. any government policy change in consolidation requirement that discourages private companies'' expansion in construction material segment could negatively impacts the company''s survivability and growth strategy. RISKS Competition and oversupply in Beijing area: As a result of the strong economic growth and higher demand for construction in other areas of China. This could result in an oversupply of concrete in the company''s principal market. Factors that may impede CFSG shares from reaching price target include a buyout process does not materialize or substantial weakness in the company's fundamentals.65 bid represents 3.CHINA China Macro . and governmental control of important natural resources.00 and downgrade CADC from BUY to NEUTRAL. Page 4 of 8 146 . the company''s effective tax rate has been reduced from 25% to 15%.00 price target is based on the going private offer price. accounting for more than half of quarterly revenue. which could result in reduced revenues and profitability. 2011 China Advanced Construction Materials VALUATION The $2. Extended customer payment period. Accordingly. Factors that may impede share prices from reaching the target include the buyout process does not materializes for various reasons and substantial weakness in the company’s fundamentals. Concerns on over-capacity. horizontal consolidations. As a result of this certification. extended customer payment period may have led to recent CFSG decrease in cash and increasing A/R balance. General country risks. the company has been awarded the Enterprise High-Tech Certificate. international trade restrictions.65 from $4. foreign currency control. co-existence of state-owned and private companies. CFSG's major revenues come from the iron and steel industry. its research and development and technical services. While it''s highly unlikely. the State Administration of Taxation granted the company VAT (6%) exemption from August 2009 until August 2011. Elimination of tax benefits: As a result of the company''s use of recycled raw materials to manufacture its products. Some of the general risks related to doing business in China include governmental interference with the economy. As we do not anticipate a competing bid and therefore lower our price target to $2. and significant changes in the steel industry can impact the company business prospect.

Execution/integration risk. A slow-down in China''s economic growth and continued inflation could impact sales and compress margins. aluminum and steel prices. The company's current CFO. VALUATION Our $10.CHINA China Macro . FSIN's Board of Directors received a going private proposal from its Chairman (Mr.0x multiple applied to our 2011 EPS estimate of $1. We note that our target is slightly below the proposed Fu/Abax going private bid price of $11.50 per share. VALUATION Our $24 PT is based on the offer price of the proposed buy-out. This lawsuit could consume financial and management resources. RISKS Volatile raw material prices. Factors that may impede HRBN shares from reaching our price target include: • • There are still numerous steps in the privatization process. Fu) and Abax Global Capital to acquire all of the outstanding shares of common stock for $11. While we view Mr. Going private transaction risk. The inability to complete this transaction could negatively impact share performance. Its overall global expansion strategy faces execution risk due to a variety of factors. Inc. Studwell as highly experienced and capable. Craig Studwell. Harbin Electric. can be largely affected by central and local government policies. Factors that may impede FSIN shares from reaching price target include failure of completion of the going private buy-out.September 26. FSIN continues to integrate its acquired operations. In November 2010. and Dalian Jinchuan. Volatile raw materials costs. Litigation risk. Inc. some of which could lead to delays in completing the transaction. Changes in these prices may adversely impact demand for FSIN's bi-metallic products and its operational results. Two of HRBN's major catalysts. Shanghai Hongtai. unsuccessful ramping up of CCS facilities in China. including Copperweld.50 price target is based on a 6. presenting financial and business risk. such as delay in construction. Management turnover. copper and steel respectively. oil pump for oilfield and linear motors for urban metro lines.13 and adding back $3.50. we note that his tenure with FSIN is limited and he has yet to oversee the filing of an audited annual report for the company.70/share in cash. Page 5 of 8 147 . a shareholder class action lawsuit was filed against the Company and certain officers and directors. was appointed in October 2010. Associated with its going private proposal. Fushi's selling prices are highly dependent on copper. and rapid decline in copper prices. The development of urban railways can experience delays that out of control of HRBN. RISKS Change in macro policies in China. HRBN is subject to market fluctuations and volatility of two major raw materials. 2011 Fushi Copperweld.

CA 92660 Disclosures: ROTH and/or its employees. and as such. ROTH changed its rating system in order to incorporate coverage that is Under Review. directors and owners own options. 888 San Clemente Drive. LLC. Inc. officers. ROTH makes a market in shares of China Advanced Construction Materials. On September 28. 2010. 2011. Newport Beach. is or will be. Page 6 of 8 148 . buys and sells from customers on a principal basis. stock. 2011 Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. For important disclosure information regarding the companies in this summary report. Fushi Copperweld. related to the specific recommendations or views expressed in this report.September 26. and Harbin Electric.CHINA China Macro . On May 26. ROTH changed its rating system in order to replace the Hold rating with Neutral. Inc.. I also certify that no part of my compensation was. China Fire & Security Group. Inc. Inc. Attention: Director of Research. directly or indirectly. rights or warrants to purchase shares of Fushi Copperweld. please contact: The Director of Research at (800) 678-9147 or write to: ROTH Capital Partners.

2011 Each box on the Rating and Price Target History chart above represents a date on which an analyst made a change to a rating or price target. company and/or overall market risk and volatility.ROTH employs a rating system based on the following: Buy: A rating.5 Rating Buy [B] Neutral [N] Sell [S] Under Review [UR] Count 186 62 1 16 Percent 69.3 0.3 9 14. Ratings System Definitions . that indicates an expectation of a total return between negative 10% and 10% over the next 12 months.4 6. which may only represent the first note written during the past three years.9 23. except for the first box. Neutral: A rating.5 0 0 2 12. that indicates an expectation of a total return of at least 10% over the next 12 months. which at the time it is instituted and or reiterated. which at the time it is instituted and or reiterated.0 Our rating system attempts to incorporate industry. at any given point in time.CHINA China Macro . our investment rating on a stock and its implied price movement may not correspond to the stated 12month price target./Past 12 Mos.September 26. Distribution Ratings/IB Services shows the number of companies in each rating category from which Roth or an affiliate received compensation for investment banking services in the past 12 month. Page 7 of 8 149 . Distribution of IB Services Firmwide IB Serv. as of 09/26/11 Count Percent 49 26. Consequently.

Any opinions or estimates in this report are subject to change without notice. Under Review [UR]: A rating. are from sources believed to be reliable. No part of this report may be reproduced in any form without the express written permission of ROTH. This report should not be used as a complete analysis of the company. LLC and its affiliates. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. which at the time it is instituted and or reiterated. Page 8 of 8 150 . industry or security discussed in the report. LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. which at the time it is instituted and or reiterated. ROTH Capital Partners. Member: FINRA/SIPC. price target and estimates for the security. an offer or solicitation of the securities discussed. 2011 Sell: A rating. an investment in the stock may involve a high degree of risk and may not be suitable for all investors. indicates the temporary removal of the prior rating. that indicates an expectation that the price will depreciate by more than 10% over the next 12 months. but are in no way guaranteed to be complete or accurate. Additionally.September 26. Copyright 2011. however. Prior rating. Additional information is available upon request. information and facts discussed in this report other than the information regarding ROTH Capital Partners. price target and estimates should no longer be relied upon for UR-rated securities.CHINA China Macro . The material. This is not. Not Covered [NC]: ROTH does not publish research or have an opinion about this security.

70 NA Medium Revenues ($M) 2011E 2012E $103.6 31.6 Current Current EPS P/E $0.59 $0.4A $157.03 $2.6 $2.S.4 $136.maximgrp.55A $0. Reiterate Buy and $24 price target The company is likely very close to receiving the SEC approval of the LBO.70 $0. HRBN’s going private transaction is not materially different from those of other Chinese companies.com $19. Another U.8 $505. we are increasingly leaning to a successful outcome of the company’s going private transaction. 2011 Closing Price (9/13/11): 12-Month Target Price: 52-Week Range: Market Cap (MM): Shares O/S (MM): Float (MM): Shares Short (MM): Avg.57 $0.82 .67 $0.$25. We reiterate our Buy rating and $24 price target.S.1 $155.3%) of its shareholders voted in favor of the definitive agreement to go private it entered on May 3.57 $0. respectively.60 $2. Meanwhile.0 $2.34A $0. listed Chinese company becomes private. yesterday was also HRBN’s record date for stockholders entitled to vote for the Merger Agreement in the special shareholder meeting.com SEE PAGES 4-6 FOR IMPORTANT DISCLOSURES AND DISCLAIMERS 151 .05 $618. (000) Book Value/Share: Dividend/Yield: Risk Profile: Maxim Group FYE: December 1Q 2Q 3Q 4Q FY Maxim Group FYE: December 2009A: GAAP 2010A: GAAP 2011E: GAAP 2012E: GAAP LT Earnings Growth Maxim Group FYE: December 1Q 2Q 3Q 4Q FY Consensus-First Call FYE: December 1Q 2Q 3Q 4Q FY Echo He. respectively. However. meanwhile.5 $153. (HRBN – Nasdaq – $19.55A $0.49 GAAP Quarterly EPS 2011E 2012E $0. investors could still take advantage of the market inefficiency.67 $0. HRBN filed the first and second amendment on August 15 and 29. NY 10174 – www.05 $2.70 $24 $5.77 25.57 (212) 895-3718 Maxim Group LLC 405 Lexington Avenue New York. Vol.60 Harbin Electric.5 8. 2011.EQUITY RESEARCH COMPANY UPDATE China September 14.1 $131. Today. 2011. it could announce it together with a definitive filing of 13E-3.34A $0.70) Buy There is still money to make after the record date. (CSR – NR) announced that a majority (69.6 $2. As the SEC approval process is moving forward.340 $20. A voting date announcement is within reach. Inc.9 $588.3 $134. 2011. The company has not yet announced the date of the special shareholder meeting. Yesterday HRBN filed its third amendment of 13E-3 with the SEC.70 $0. This is another successful example of a going private transaction among U. $2.51 $0. Inc. except that HRBN is perhaps the company that has received the most public attention.46 8. It is possible that the overflow of information has resulted in considerable misjudgment on HRBN’s case.57 Current 2012E $0. MD. In our view.8A $122.3 2. There is still money to make out of the trading gap between HRBN’s current price and its LBO offer price of $24/share.51 $0. PhD ehe@maximgrp.4 14.05 9. listed Chinese companies.15% GAAP Quarterly EPS Current 2011E $0. which already closed their going private transactions on August 19 and September 1. following Chemspec International Limited and Funtalk China Holdings Limited.9 10% . China Security and Surveillance Technology. Since its original 13E-3 filed on July 13. We believe the definitive proxy statement could be filed in the near future.49 7. together with another revised version of the preliminary proxy statement for a special shareholder meeting.

5x 5.289 Emerson Electric EMR $ 44.35 $ 2.49 8.9x 16.03 9.08 0.6x 7.79 $ 8.996 Regal Beloit RBC $ 57. Materia CHOP SORL Auto Parts SORL Average HK Listed China Motor Companies Harbin Power Equipment 1133-HK Shanghai Electric Group 2727-HK Dongfang Electric Group 1072-HK Chongqing Machinery & E2722-HK Shanghai Prime Machine 2345-HK Average $ $ $ $ $ $ 139 257 169 63 214 71 $ $ $ $ $ $ 1.24 $ $ $ $ -$ 0.56 $ 897 Average Source: Thomson One.0x -3.0x 8.29 22.7x -12.05 $ 5.16 1.0x 10.4x 9.9x 4.39 2.47 n/a $ 2.9x -3.87 0.02 $ $ $ $ $ 0.4x 12. Bloomberg and Maxim Group estimates.75 $ 1.12 0.25 $ 2.69 $ 4.4x 17.41 $ 21.65 $ 4.5x 10.4x 16.09 $ 1.20 $ 18.6x 10.5x 8.94 $ 10. (HRBN) Exhibit 1.34 BroadOcean 002249-SZ $ 2.8x 34.6x 14.6x 15.09 0.8x 2.60 3.67 MktCap (mm) $ 618 EPS P/E __________________________________________________ 10A 11E 12E 10A 11E 12E $ 2.69 $ 3.8x 11.7x 7.2x 4.0x 6.6x 4.7x $ $ $ $ $ 1.09 $ 4.9x 5.1x 26.93 $ $ $ -$ $ 0.5x 9.36 $ 5.08 0.208 Smith AO AOS $ 36.03 0.02 0.4x 62.4x 38.1x China Mainland Listed China Motor Companies Xiangtan Electric 600416-SH $ 1.04 0.099 Franklin Electric FELE $ 38.13 0.24 0.5x 3.10 Shanghai Electric Group 601727-SH $ 0.8x 12.92 $ 3.20 $ $ $ $ $ $ 0.0x 9.595 5.36 $ 5.9x Chinese Industrial Companies China Automotive CAAS FushiCopperweld FSIN Lihua International LIWA Wonder Auto WATG China Gerui Adv.7x 61.34 $ 3.01 1.03 $ 41.18 $ 8.0x 9.83 1.186 ABB ABB $ 18.41 Average $ $ $ $ $ $ 818 254 1.4x 11.11 0.8x 5.65 $ 33.05 0.03 0. $ 6.10 1.Harbin Electric.20 0.5x 3.08 $ 5.87 $ 1.678 $ $ $ $ $ $ 0.74 5.58 $ 3.40 0.8x 43.87 Dongfang Electric Group 600875-SH $ 3.8x -16.1x 10.02 $ $ $ $ $ 0.070 Rockwell Automation ROK $ 58.16 0.62 1.7x 8.17 $ 4.07 0.63 $ 5.116 976 230 125 $ $ $ $ $ 0.3x 19.27 0.05 $ 2.04 0.17 $ $ $ $ $ 734 1.53 1.8x 14.8x 14.08 14.11 0.15 $ 2. Inc.34 Zhejiang Founder Motor 002196-SZ $ 2.03 0.38 2.24 $ 3.1x 21.6x 11.4x 3.88 1.93 $ 3.15 0.0x 8.05 $ 4.6x 11.86 1.00 $ 78.8x 7.06 0.4x 13.42 n/a $ 2.0x 11.57 1.8x 3.4x 3.311 336 8.12 0.46 $ 1.4x 5.9x 24.6x 3.75 Jiangte Electric Motor 002176-SZ $ 3.35 $ 10.0x 24.95 6.8x 8.03 0.01 $ 1.629 Illinois Tool Works ITW $ 43.296 Lear Corporation LEA $ 42.30 1.3x 17.9x 14.3x 14.9x US/International Motor Companies Siemens SI $ 90.2x 2.05 0.219 Magna International MGA $ 36.6x 42.1x 9.04 0.5x 6.96 1.0x 11.5x 19.05 0.3x -14.3x 8.9x 7.9x 6.6x 7.5x 8.68 $ 10.1x 17.3x 12. HRBN – Comparable Companies 9/14 Company Harbin Electric TKR HRBN Price $ 19.813 Cummins CMI $ 92.9x 19.68 $ 1.0x 1.3x 12.82 n/a -$ 2.9x Maxim Group LLC 2 152 .4x 7.3x 9.70 LAST $ $ $ $ $ $ 4.1x 11.3x 10.2x 68.6x 7.06 $ $ $ -$ $ 0.08 4.04 0.4x 9.46 $ 2.85 3.04 0.21 0.90 $ 4.1x 10.

3 18.8 2009 Full Yr 1Q10 31-Mar 2Q10 30-Jun 3Q10 30-Sep 4Q10 31-Dec 2010 Full Yr 1Q11 31-Mar 2Q11 30-Jun 3Q11E 30-Sep 4Q11E 31-Dec 2011E Full Yr 2012E Full Yr $ 19.8 $ 223.6 23.4 6.8% 6.9 75.9 0.3) 1.7% 1.0) 4.0 10.5 $ 505.0) 27.8) (33.7 77% 31.7 23.0) 0.0) 0.1 42% 13.8) (75.4% 1.4%) 10.9% 5.5 $ 105.6 (23%) 8.1 31.44 $ 2.8) 12.0% 78.5% (0.9% 10.4 0.25 $ 0.5 (3.1% 10.36 0.0 60.77 $ 31% (35.1) 9.4 0.6 387% 71% 62% 85% 85% 243% 175% 133% -1% 91% (1.9 0.2%) 13.6% (0.6) (0.6 23.48 94.0) 1.83 74.6% 6.0% (8.3 31.0 63.2) (98.3 116.2 19% 18% 71.8 29.4 $ 109.59 $ 0.9 13% 6% 11% 12% 11% 3% 30% 30% 30% 24% 18% 0% 0% 20% 43% 42% 45% 47% 44% 45% 44% 47% 48% 46% 47% 4.44 $ 2.6) 13.4 31.1) 1.7) 2.5 (24%) 16.4% (1.0 24.1) 25.1 20.3 (0.7) 21.8) 25.4) 7.3 22% 27% 40.3% (1.5 (12.5) 11.7% (13.1% 0.4 50% 21.Weihai Y/Y Growth % of Total Rev Rotary Motors .6 48.5) 3.0 (5.5 (4.8 20.05 $ 31% -16% 2.57 $ 0.3% (2.0 76.7% 12.5 23.1 (1.6 22% 13.1 25.6 31.7 23.8% (14.9 40% 16.7% 64.7 36.9) 9.0% 5.6 350% 48.8) 10.5 6.55 $ NM -25% 221% (47.4 29.1% 7.1) 34.49 2.4) 2.6) (69.0% 10.1 $ 134.7 (1.0% 16.4 84% 45.3 67% 21.0% 2.1) (290.6% 17.0 0.3 27.3% 1.9% (52.5 140.57 $ 0.1 18.9% (13.3 175% 33.4% (50.5 0.2%) 3.1% (57.2 18.4 0.5 31.0) 0.3 -12% 16.0 0.2 15.8% (0.4% (20.6 (3.6% 0.3 135.3 43.7 (0.2 43.Xi'an Y/Y Growth % of Total Rev Revenues Y/Y Growth Cost of sales Gross profit Y/Y Growth Gross Margin R&D As % of Rev G&A As % of Rev Total operating expenses Income from operations Y/Y Growth Operating Margin Other income (expenses).0) 0.6% (1.7 93.2% 6.3 0.4 36.2 17.46 $ 0.1) (4.4% (1.4 157% 23% 32% $ 44.5 31.84 0.57 $ 2.28 $ $ 11.8 24.9 232.6) 0.0 333% 42.0% (14.9 (22.80 31.2 (0.0 44.5 $ 103.6) (6.84 18.0) 1.2 $ 105.9 13% 26.9) 0.6% 8.9 (1.0 2.2 (14.2 $ 426.7 35.9 0. Maxim Group LLC 3 153 .3 58.8) 27.2 31.9 68% 20.7 22% 17.6 (6.8) 0.1) (365.4 0.0) 0.7) 8.9% (57.9% 17.3 0.1 25.2 (2.0% 0. HRBN-Income Statement (In millions except per shr) Revenue Drivers: Linear Motors Y/Y Growth % of Total Rev Specialty Micro-Motors Y/Y Growth % of Total Rev Rotary Motors .3 16.19 $ 0.4 10.5) 10.7 17.0 (2.58 $ 2.1) (0.3) 15.0) 9.6% (7.36 60.1 (1.0 (4.2) 1.3 0.6 31.3) (146.4 157.3 (41%) 15.7) 1.9 188.9 16.6 2.2 29.2% (0.9 (26.9 (2.2 2% 27.5 31.4) 15.1) 0.6 17.0% 18.9) 3.9 11.1% 17.3 31.7% (14.7%) 14.7 227% 33.4%) (33.9) 15.4 18.7% 8.3% 9.1 0.59 $ 3% 2.3 19.9 15.0 19.8 36.4 24.8 94.8% 6.34 $ 0.83 $ 0.4 37. net Interest expense.3) 2.5 60% 74% 18% -14% 27% -3% 22% 20% 30% 17% 13% 56% 19% 19% 18% 16% 18% 19% 19% 17% 16% 18% 17% 18.8 291% 18.2 (33.9) (1.3 47.8) (73. (HRBN) Exhibit 2.2 6.3% 19.9% (0.76 19.2 22.3 0.7% (7.60 105.0% 6.7 110.1 31.8% (39.6 86.0% 25.2 1.2) 28.0% 2.2 104.2 (15%) 29.5) 21.0 (4. net Total other income (expense) Income before income taxes Provision for income taxes Tax Rate Net income before noncontrolling intere Minority interests As % of net income Net income Y/Y Growth Net Margin Foreign currency translation adjustmen Comprehensive income Weighted average shares outstanding Basic Diluted EPS (to controlling interest) Basic Diluted Y/Y Growth D&A Share-based compensation EBITDA EBITDA margin Exchange Rate (RMB/US$) $ $ 2004 Full Yr 2005 Full Yr 2006 Full Yr 2007 Full Yr 36.4% 18.6 $ 40.8% 79.6 61% 34.0 20.1% (42.3% 0.30 1.47 $ 0.5% (10.9% 25.4) 0.5 1.0) 25.1) 15.0) 25.3 76.5 46.0% 18.5 18.7) 23.6 100% 30.9 (5.9) 10.4 13.0 42.8% (5.3 31.7) 11.7% (1.7 70% 48.5% 18.8% (0.3% (1.0% 9.5) 29.7% 20.0% 10.0 107% 39% 14% 3% 31% -3% 24% 25% 25% 18% 19% 0% 21% 22% 21% 22% 22% 21% 22% 22% 22% 22% 22% 45.6% 76.7) 4.2 (3.1) 0.0% 16.2) 15.54 0.3 31.8 (47.2 15.6 2008 Full Yr 49.0% 18.2) (6.2 13.9) 82.6%) 25% 25% 27% 19% 16% (2.2 6.4) 25.0% (14.3% (5.8% (3.1% (1.4 $ 120.0% 18.84 33.3 47.49 21% 14.1 2.6% 2.7) (430.7 -31% 12.1 0.1 6.0% 25.7% 2.1 14.0) (73.6 (1.51 36.8% (13.8% (13.8 15.4% 12.9 24.2 (6.48 Source: Company reports and Maxim Group estimates.9 6.4 (1.5 46% 39.1 89.7) 14.9 0.1) 1.2) 100.5 11.3 100.3) 2.99 $ 1.5% 0.6) 0.5 23.6 18.6 64.8 62% 25.3% 2.5) 4.3% 6.91 $ 53% (10%) 2.1) 0.1) (20.6 47.2) 27.6 137% 19.4) 0.0% 78.7) 22.6 4% 16.3 31.9 2.7) (70.0% (11.9 49.5% (7.8% 7.9 (0.7 19.3 6.1 31.1 219% 26.4 29.0 0.9 (4.4 16.0% 64.2 0.2% 23.3 14.6 (6.3% (6.9) 6.0 31.1 (3.7 90.5 35% 41% 33.6) 10.2 21.0 131.9% (0.2% (11.66 $ 82% 0.3% 5.9 (7.8 166% 78% 81% -18% 51% -4% 20% 20% 20% 13% 10% 28% 15% 14% 14% 13% 14% 15% 14% 13% 13% 14% 13% 22.36 0.8) (98.1% 0.1 31.7 1.7% (8.1 42.3) (24.0 1.3 11.8) 0.5 16.4 $ 65.1 -14% 29.1) 0.5 -16% 12.3 31.5% (14.3 0.1) 16.3 25.82 $ NM 2.1 19.11 $ 0.66 $ 0.1 0.8) 55.9 NM 16.0 0.1% 22.3% 7.6 25.7 NM 24.9% (0.8 0.6 0.3 (1.06 $ 0.1 31.8 (0.2) 10.4% 78.4 31.6% 2.2 21.8 (0.5 (0.9% (0.8% (15.1) (75.7 246% 26.6 6.1% 25.0% 18.4 0.55 $ 0.2 24.2) 8.5) 15.4 $ 136.8 275.2 6.1 33.01 $ 0.9 (8%) 25.2) 25.8) 16.1 2.4% 2.7% (4.0) 0.67 $ 0.1% 6.1 0.57 24.4 0.4 45% 28.35 $ 0.3 31.6 52.4 0.8 1.0% 17.6% 1.7%) 7.3 6.6% 1.3 32.6% (1.07 19.7% 64.5% 1.3) 1.4 65% 49.1% 7.2) 3.3% 2.9 $ 588.5 31.3 24.9% (18.0% 13.3) 5.5 40.9) 30.1% (3.1) 9.0 0.6 (39.6) 10.9 1.6% (7.3 30.3 17.2 6.3) (12.5 17% 27.4 $ 106.7% (10.2 3% 27.6) (95.8) 22.0 34.4 31.Harbin Electric.84 35. Inc.5 2.4 48.4) 8.0% 18.77 $ 1.7 19.1 31.3) 1.9 $ 23.4 48.4) 93.8 68.7) 21.4 3% 13.3 11% 27.3 31.3% (0.8 $ 131.1 (6.7) 21.8 85% 28% 27.0) 16.66 $ 68% 3.

I. Maxim Group LLC 4 154 . Echo He. and (6) Potential equity issuance.3% 29.3% 5.Harbin Electric. Furthermore. including the firm’s total revenues. risks particular to our Harbin Electric. rating include: (1) Failure of the proposed LBO to be completed. Maxim Group expects to receive or intends to seek compensation for investment banking services from Harbin Electric. no part of my compensation was. Inc.0% Expected Performance* Buy Hold Sell Expected total return of 15% or more over next 12 months Expected total return of plus or minus 14% over next 12 months Expected total negative return of at least 15% over next 12 months with Rating 65.com Maxim Group LLC Stock Rating System As of: % of Coverage Universe 9/14/2011 % of Ratings for which Firm provided Banking Services in the last 12 months 24. It is also supported by our comparable company analysis and discount cash flow method. or will be directly or indirectly related to the specific recommendation or views expressed in this research report. (5) Difficulties of developing linear motor market. Inc. Inc. The research analyst(s) primarily responsible for the preparation of this research report have received compensation based upon various factors.3% * Relative to Nasdaq Composite. in the next 3 months. a portion of which is generated by investment banking activities. (4) High competition in industrial motor market. Price Target and Investment Risks: Aside from general market and other economic risks. attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer. (2) Slowdown of Chinese economy. (3) Raw material price increases. Valuation Methods: Our Harbin Electric. Maxim Group makes a market in Harbin Electric. valuation is based on the announced $24 per share price in the leverage buyout proposal. is. An Under Review (UR) rating represents a stock that the Firm has temporarily placed under review due to a material change. (HRBN) DISCLOSURES Source: Investars.5% 0. Inc. Inc.0% 0.

and/or a short operating history. fundamental risk is expected to be significantly above the industry. The securities discussed in Maxim Group LLC research reports may not be suitable for some investors. fundamental risk is expected to be above the industry. Maxim Group LLC 5 155 . lack of earnings. or disclosed to another party. and is fairly liquid. Price Volatility: Because of the inherent fundamental criteria of the companies falling within this risk category. (HRBN) RISK RATINGS Risk ratings take into account both fundamental criteria and price volatility. High-risk stocks may not be suitable for a significant class of individual investors. Accordingly. Price volatility: The price volatility of companies falling within this category is expected to be above the industry. High – Fundamental Criteria: This is a risk rating assigned to companies having below-average revenue and earnings visibility. Accordingly. based on their specific investment objectives. Medium – Fundamental Criteria: This is a risk rating assigned to companies that may have average revenue and earnings visibility. without the prior written consent of Maxim Group. both price volatility and fundamental risk are expected to be below the industry. and low market cap or public float.Harbin Electric. LLC (“Maxim”). Inc. DISCLAIMERS Some companies that Maxim Group LLC follows are emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. Low – Fundamental Criteria: This is a risk rating assigned to companies that may have above-average revenue and earnings visibility. financial status and risk tolerance. This communication is neither an offer to sell nor a solicitation of an offer to buy any securities mentioned herein. and is fairly liquid. negative cash flow. Speculative stocks may not be suitable for a significant class of individual investors. This publication is confidential for the information of the addressee only and may not be reproduced in whole or in part. Investors must make their own determination as to the appropriateness of an investment in any securities referred to herein. Accordingly. the price volatility is expected to be significant with the possibility that the investment could eventually be worthless. positive cash flow. positive cash flow. Accordingly. copies circulated. balance sheet concerns. both price volatility and fundamental risk are expected to approximate the industry average. Speculative – Fundamental Criteria: This is a risk rating assigned to early-stage companies with minimal to no revenues.

but Maxim makes no representation as to their accuracy or completeness. Inc. other reports that are inconsistent with. The aforementioned sentence does not apply to the disclosures required by NASD Rule 2711. The value of securities is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities.Harbin Electric. value of and income from any of the securities mentioned in this report can fall as well as rise. the information presented in this report. Those reports reflect the different assumptions. This report is not to be relied upon in substitution for the exercise of independent judgment. Securities recommended. ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST Maxim Group LLC 6 156 . Past performance should not be taken as an indication or guarantee of future performance. in such circumstances. Information. express or implied. in the case of some investments. offered or sold by Maxim: (1) are not insured by the Federal Deposit Insurance Company. (HRBN) Information and opinions presented in this report have been obtained or derived from sources believed by Maxim to be reliable. (2) are not deposits or other obligations of any insured depository institution. Maxim may have issued. and 3) are subject to investment risks. the values of which are influenced by currency volatility. opinions and estimates contained in this report reflect a judgment at its original date of publication by Maxim and are subject to change without notice. views and analytical methods of the analysts who prepared them and Maxim is under no obligation to ensure that such other reports are brought to the attention of any recipient of this report. except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to Maxim. Maxim accepts no liability for loss arising from the use of the material presented in this report. The price. effectively assume this risk. Investors in securities such as ADRs. and no representation or warranty. you may be required to pay more money to support these losses. including the possible loss of principal invested. Indeed. and reach different conclusions from. the potential losses may exceed the amount of initial investment and. and may in the future issue. is made regarding future performance.

NY 10174 – www. respectively. On August 19. with more supporting documents from its advisors. Our Buy rating and $24 price target are mainly based on a favorable outcome of HRBN’s LBO.49 2012E $0.55A 3Q $0. 2011.6 Current Prior Current EPS EPS P/E $0.com SEE PAGES 4-6 FOR IMPORTANT DISCLOSURES AND DISCLAIMERS 157 . Vol.$25. the company filed an amended 13E-3 with the SEC.05 Consensus-First Call FYE: December 2011E 1Q $0.59 4Q $0.20 $24 $5.6 7. PhD ehe@maximgrp.maximgrp.67 $0. City Group and Bank of America Merrill Lynch served as the advisor for the buying consortium and independent committee.34A 2Q $0.82 . a Chinese company previously listed on NYSE. announced that a majority of its shareholders voted in favor of the definitive agreement of going private it entered on May 31.9 $588. another U. 2011.46 7. (000) Book Value/Share: Dividend/Yield: Risk Profile: Maxim Group FYE: December 1Q 2Q 3Q 4Q FY Maxim Group FYE: December 2009A: GAAP 2010A: GAAP 2011E: GAAP 2012E: GAAP LT Earnings Growth $17. already owning 77% of the outstanding shares. Other Chinese companies moved forward too. In addition. 2011. Chemspec International Limited. It took Chemspec three and a half months to close the transaction from the first filing of 13E-3.1 $155.03 FY Echo He.70 $0.EQUITY RESEARCH COMPANY UPDATE China August 25. which was towards the end of 2011. An example of a successful going private transaction.57 FY $2. Maxim Group Current FYE: December 2011E 1Q $0. Maxim Group LLC 405 Lexington Avenue New York. Currently CSR already passed its record date of August 5.05 8.70 $0.4A $157. Inc. MD.34A 2Q $0.60 $2. 2011.57 (212) 895-3718 Harbin Electric. 2011.77 22. HRBN set a record date for stockholders entitled to vote for the Merger Agreement at September 13. to grant an approval. on August 11.05 $540.5 $153. 2011 Closing Price (8/24/11): 12-Month Target Price: 52-Week Range: Market Cap (MM): Shares O/S (MM): Float (MM): Shares Short (MM): Avg. Morgan Stanley and Lazard.15% GAAP Quarterly EPS Current 2012E $0. (HRBN – Nasdaq – $17.55A 3Q $0. 2011.0 $2. 2011 and is scheduled to vote for the merger on September 14. HRBN’s going private transaction is not materially different from those of other Chinese companies. On August 22.1 $131.3 $2.51 $0.20) Buy The LBO process will likely close sooner than we expected. (CSR – NR) announced the filing of a definitive proxy statement in connection with its going private merger agreement.com In our view.70 NA Medium Revenues ($M) 2011E 2012E $103.4 17. currently ~28%. On the same day. Funtalk China Holdings Limited (FTLK – NR).60 $2.67 $0.-listed Chinese company. A month later on August 15.9 10% . which has an established offer price of $24/share. The swift move of FTLK’s process may be partially due to the buying parties.51 $0.2 2.4 $136.1 31.S. it took the SEC about a month and a half. with four rounds of questioning. HRBN filed its original 13E-3 together with a Preliminary Proxy Statement with the SEC. Reiterate Buy and $24 price target Where is HRBN on its regulatory approval process of going private transaction? On July 13. Inc. From FTLK’s first filing of 13E-3 on June 14. 2011.57 $2.49 6. announced the close of its going private transaction and it was subsequently delisted from the public exchange. Based on the speed of its progress.3 $134. China Security and Surveillance Technology. we believe the closing of the transaction could be sooner than we previously estimated.8 $505. HRBN has most likely fulfilled requirements for the transaction and is moving forward with the SEC approval process. 2011.8A $122. mainly top management. We believe the persistent gap. to the LBO offering price creates buying opportunities.4 $2.180 $20.57 4Q $0.

2x 11.0x China Mainland Listed China Motor Companies Xiangtan Electric 600416-SH $ 1.03 0.6x $ $ $ $ $ 1.20 0.11 0.3x 3. Bloomberg and Maxim Group estimates.53 1.4x 10.1x 11.9x 78.13 0.85 $ 2.02 $ $ $ $ $ 0.5x 3.6x 4.57 1.39 $ 10.2x 21.40 0.42 n/a $ 2.04 0.10 1.70 $ 4.9x 49.39 2.3x 9.7x 8.88 1.0x -16.4x 5.2x 17.04 0.7x 21.02 0.488 Illinois Tool Works ITW $ 44.20 LAST $ $ $ $ $ $ 4.41 $ 4.96 1.106 Rockwell Automation ROK $ 58.93 $ $ $ $ $ $ 0.03 0.7x 8.9x 21.24 $ 89.53 Zhejiang Founder Motor 002196-SZ $ 2.7x 10.1x 11.849 6. Materia CHOP SORL Auto Parts SORL Average HK Listed China Motor Companies Harbin Power Equipment 1133-HK Shanghai Electric Group 2727-HK Dongfang Electric Group 1072-HK Chongqing Machinery & E2722-HK Shanghai Prime Machine 2345-HK Average $ $ $ $ $ $ 126 243 210 184 213 66 $ $ $ $ $ $ 1.4x 5.1x 25.5x 10.57 1.05 0.4x 19.688 ABB ABB $ 20.59 $ 47.4x 10.08 17.0x 8.79 $ 34.9x -12.6x 15.63 Average $ $ $ $ $ $ 929 272 1.53 $ 5.87 $ 1.9x -15.09 $ 1.3x 9.04 0.5x 12.7x 5.58 $ 17.2x 4.03 10.13 Jiangte Electric Motor 002176-SZ $ 3.28 25.2x 13.20 $ $ $ $ $ $ 0.2x 10.2x 38.0x 46.8x 9.15 0. Inc.9x US/International Motor Companies Siemens SI $ 103.39 0.58 $ 3.5x 13.151 Emerson Electric EMR $ 45.06 0.1x 4.2x 7.1x 16.08 0.5x 3.154 231 132 $ $ $ $ $ 0.7x 3.04 0.48 6.08 4.6x 13.492 386 8.8x 6.18 $ 2.8x 14.5x 12.58 3.1x 11.6x 3.9x 5.99 5.12 0.06 $ $ $ $ $ $ 0.05 0.8x 71.05 $ 4.1x 27.46 $ 1.1x 14.5x 16.42 3.0x 16.07 0.05 $ 2.05 0.12 0.83 1.64 $ 5.042 $ $ $ $ $ $ 0.37 6.73 $ 22.308 1.21 0.28 1.24 $ 3.5x 10.3x 5.30 1.18 0.1x 9.7x 9.047 Regal Beloit RBC $ 52. HRBN – Comparable Companies 8/24 Company Harbin Electric TKR HRBN Price $ 17.0x 5.46 $ 2.2x 3.94 $ 10.68 $ 10.66 $ 1.16 1.6x 7.02 $ $ $ $ $ 0.40 MktCap (mm) $ 539 EPS P/E __________________________________________________ 10A 11E 12E 10A 11E 12E $ 2.89 $ 4.46 n/a $ 2.0x 18. $ 6.0x 24.9x 13.2x 3.5x 17.4x 6.Harbin Electric.09 $ 5.9x Chinese Industrial Companies China Automotive CAAS FushiCopperweld FSIN Lihua International LIWA Wonder Auto WATG China Gerui Adv.86 1.108 Franklin Electric FELE $ 41.03 0.08 $ 5.31 $ 1.108 Magna International MGA $ 36.1x 4.83 n/a -$ 2.34 $ 3.37 $ 5.81 $ 8.25 $ 2.04 0.8x 66.6x 42.4x 20.17 $ $ $ $ $ 798 1.8x 12.5x 3.5x 2.5x 12.24 $ $ $ $ -$ 0.7x 7.8x 12.17 $ 4.0x 7.7x 6.0x 14.8x 4.90 Dongfang Electric Group 600875-SH $ 3.5x 11.69 $ 3.93 $ 8.91 $ 3.13 0.51 BroadOcean 002249-SZ $ 3.03 0.403 Lear Corporation LEA $ 43.23 0.037 Smith AO AOS $ 36.65 $ 4.19 0.44 3. (HRBN) Exhibit 1.3x Maxim Group LLC 2 158 .97 $ 3.01 1.49 7.9x 9.2x 8.6x 2.3x 9.56 Shanghai Electric Group 601727-SH $ 0.476 Cummins CMI $ 86.47 $ 965 Average Source: Thomson One.08 0.2x 7.4x 15.27 0.2x 17.90 $ 2.

1% 17.1 89.9 NM 16.6) 0.2 15.7% (7.6% 0.4 0.0) 0.9) 82. Inc.6) (95.6 23.6 64.3 11.4) 15.2) 15.1) 9.2 (33.4 29.1 0.6 350% 48.3 31.0% 25.99 $ 1.4% (1.8 (0.3 (1.36 60.8 94.6% 8.2 3% 27.0 0.5) 10.3% 2.0) 16.1) 34.5 1.9 40% 16.5 23.4% 12.57 $ 2.4 24.6 $ 40.7) 21.1) 0.8% (5.5 (24%) 16.54 0.7) 4.3% 2.2) (98.3% (1.3 31.0 131.2% 6.66 $ 68% 3.5% 0.5 $ 103.9 (22.9 232.7%) 14.8 68.5 46.3% (1.0% 16.7% 20.8 29.67 $ 0.6%) 25% 25% 27% 19% 16% (2.7% (8.6 52.5 31.1) (20.2) 8.7) 8.57 $ 0.4 $ 106.6 (6.2 22.7%) 7.5 16.11 $ 0.35 $ 0.3 14.1) (290.2) 100.7) (430.1) (4.6 (3.0% 18.4 45% 28.06 $ 0.2 6.58 $ 2.0% 2.7 1.84 35.0) 0.9% (18.2) 3.1 219% 26. net Interest expense.1 31.5 18.9 (0.5) 11.25 $ 0.0% 25.0 107% 39% 14% 3% 31% -3% 24% 25% 25% 18% 19% 0% 21% 22% 21% 22% 22% 21% 22% 22% 22% 22% 22% 45.55 $ 0.1 $ 134.3 (41%) 15.0 42.5) 3.9 (7.9 (26.6 23.2 24.3% 1.7% (14.4 $ 120.3 175% 33.7) 23.3 -12% 16.6% (7.3 16.3) (146.34 $ 0.4) 93.2 (2.6 61% 34.0) 27.8% (0.8) 22.3 31.1 0.8) 0.1 18.2 $ 426.1) (365.8) 55.4 0.5 40.49 2.8) 27.5 (3.0) 4.9% 25.8 24.30 1.9% (0.2) (6.7 22% 17.2%) 13.0% 18.1) 0.3% 19.01 $ 0.2) 10.1 31.3 6.9 0.57 $ 0.46 $ 0.1) 0.3 19.3% 6.60 105.4 36.7 90.8% (15.9 2.5) 15.2 1.3 30.0 63.8) 12.9 $ 588.8) 16.4% 2.0 10.48 Source: Company reports and Maxim Group estimates.1 (1.0% 64.4% (20.5 35% 41% 33.1% 0.7 23.7) 11.6 86.9% 5.57 24.8 2009 Full Yr 1Q10 31-Mar 2Q10 30-Jun 3Q10 30-Sep 4Q10 31-Dec 2010 Full Yr 1Q11 31-Mar 2Q11 30-Jun 3Q11E 30-Sep 4Q11E 31-Dec 2011E Full Yr 2012E Full Yr $ 19.1% (1.4% 1.0% 13.1) (75.7 246% 26.3 0.6 22% 13.3% 9.7 NM 24.0 0.7) 2.1 42.Weihai Y/Y Growth % of Total Rev Rotary Motors .55 $ NM -25% 221% (47.3 27.3 31.2 6.4 65% 49.2 104.3 25.3 100.8) 0.3 31.3) (24.1) 9.5 6.9 15.6% 2.9 16.8 62% 25.7 19.7 77% 31.4) 0.5 140.0% 9.6% (1.7 35.4 10.4 6.8) (73.84 18.7% 1.66 $ 82% 0.5% 18.8 (47.7) 22.2 6.8 85% 28% 27.4 $ 65.5 (12.0) 25.6% (1.3) 2.1 31.8% (13.3) (12.5 $ 505.0 2.9% (0.8 275.9 0.3 22% 27% 40.6% (0.8 $ 131.44 $ 2.0 0.2%) 3.7 36.3 11% 27.3 24.4 0.0) 9.3 17.3 67% 21.6% 76.1 (6.1) 1.1 6.2) 27.0% 2.2 (3.5 2.5 $ 105.83 74.8 1.9% (0.7) 14.5 -16% 12.4% 78.5 46% 39.4 157% 23% 32% $ 44.6 137% 19.8 36.9 6.1) 15.1% 6.9% 10.76 19.7 70% 48.3 0.8) 25.3) 2.4 (1.0) 1.9% 17.4%) (33.3 31.1% 7.3 18.9 11.7% 64.7) 1.6% (7.7 227% 33.0% 10.9 68% 20.47 $ 0.3 (0.4% (1.8 166% 78% 81% -18% 51% -4% 20% 20% 20% 13% 10% 28% 15% 14% 14% 13% 14% 15% 14% 13% 13% 14% 13% 22.4) 0.6) (0.5% (14.1% 10.44 $ 2.0% 16.2 (14.66 $ 0.5) 21.2% (0.0 (4.4 31.9 0.2 (6.8) (75.Xi'an Y/Y Growth % of Total Rev Revenues Y/Y Growth Cost of sales Gross profit Y/Y Growth Gross Margin R&D As % of Rev G&A As % of Rev Total operating expenses Income from operations Y/Y Growth Operating Margin Other income (expenses).2 (15%) 29.3 31.6 (23%) 8.5 23.4) 8.0% 17.1) (0.2) 1.6 (6.7 93.6 0.4 0.8% 7.84 33.4 50% 21.0 (5.8 20.2 (0.0% (14.9 75.5 31.1 31.9 24.2 31. (HRBN) Exhibit 2.0% 0.3% (6.91 $ 53% (10%) 2.4) 25.0% 18.9) 9.2 15.2 $ 105.3 116.1% (42.6% 6.6) 13.3) 1.2 21.4 $ 136.8% (14.3% 5.0% 78.0% 18.3 76.0% (14.0% 5.4 16.9) 0.6) 10.3 0.2 19% 18% 71.9 (4.2 18.5 31.6% 1.0) 25.1% 22.3% (2.1) 1.6 18.1% (57.3 0.2 17.0 1.0) (73.6 48.8% 6.2) 25.0% 18.4 3% 13. net Total other income (expense) Income before income taxes Provision for income taxes Tax Rate Net income before noncontrolling intere Minority interests As % of net income Net income Y/Y Growth Net Margin Foreign currency translation adjustmen Comprehensive income Weighted average shares outstanding Basic Diluted EPS (to controlling interest) Basic Diluted Y/Y Growth D&A Share-based compensation EBITDA EBITDA margin Exchange Rate (RMB/US$) $ $ 2004 Full Yr 2005 Full Yr 2006 Full Yr 2007 Full Yr 36.8) (98.1 31.0) 0.6 387% 71% 62% 85% 85% 243% 175% 133% -1% 91% (1.4 29.84 0.0 31.7% 2.0% 18.6 6.1% 25.5 (4.8% (3.6 4% 16.1) 16.3% (5.1) 25.9 188.7% (10.9) (1.5 11.6 47.8% (0.7 19.9% (52.4 31.9 (2.3 43.5) 29.1 19.8% 79.2% 23.5 60% 74% 18% -14% 27% -3% 22% 20% 30% 17% 13% 56% 19% 19% 18% 16% 18% 19% 19% 17% 16% 18% 17% 18.1 14.4% 18.0 44.0 60.5 17% 27.6) (69.1 42% 13.6 2008 Full Yr 49.8 15.6 31.6 (1.1 (3.9) 15.2 21.4 0.9 (8%) 25.4% (50.9) 30.Harbin Electric.2 0.5) 4.6 (39.1 33.5 0.3 6.2 6.4 48.3 0.28 $ $ 11.8% (39.6% 17.1 0.4 37.0% 10.1% 7.9) 6.8% 6.8) 10.9 (1.1 -14% 29.2 2% 27.3% (0.7 (0.1 25.3) 15.4 31.6 31.4 48.3% 7.4%) 10.1 20.83 $ 0.9% (0.1 0.3 31.48 94.5% 1.5% (0.6) 0.9 (5.0) 0.6 100% 30.8 $ 223.3 135.4 0.7% (1.6) (6.0 (2.9 1.3) 5.82 $ NM 2.0) 0.5 31.9) 3.3) 1.9 0.6) 10.0 24.3% 0.1 25.7) (70.8 0.51 36.0 34.7% 12. Maxim Group LLC 3 159 .3) 1.80 31. HRBN-Income Statement (In millions except per shr) Revenue Drivers: Linear Motors Y/Y Growth % of Total Rev Specialty Micro-Motors Y/Y Growth % of Total Rev Rotary Motors .1 (1.2 13.07 19.4 157.5% (7.4 $ 109.1 2.8) (33.5% (10.7 (1.36 0.7% (13.3 47.0) 1.0% (11.0 (4.4) 2.77 $ 31% (35.2) 28.7) 21.1) 0.4) 7.9% (57.6% 2.7% (4.3 47.7 -31% 12.36 0.05 $ 31% -16% 2.2 29.9 49.9 $ 23.4 18.0 0.7) 21.8 (0.0 76.7% 8.0% 78.6 2.3 32.4 0.0 19.1% 0.2% (11.77 $ 1.59 $ 0.0 0.6 25.1% (3.19 $ 0.0% (8.7 17.6% 1.0 333% 42.4 84% 45.2 43.9 13% 6% 11% 12% 11% 3% 30% 30% 30% 24% 18% 0% 0% 20% 43% 42% 45% 47% 44% 45% 44% 47% 48% 46% 47% 4.7 110.1 31.8 291% 18.8% (13.0% 6.4 13.59 $ 3% 2.49 21% 14.9 13% 26.9) 10.0) 0.0 20.9% (13.3 58.6 17.7 23.1 2.5 (0.7% 64.

It is also supported by our comparable company analysis and discount cash flow method. a portion of which is generated by investment banking activities. Maxim Group expects to receive or intends to seek compensation for investment banking services from Harbin Electric.Harbin Electric. no part of my compensation was. is. Inc.3% 29. Price Target and Investment Risks: Aside from general market and other economic risks. Inc. valuation is based on the announced $24 per share price in the leverage buyout proposal. or will be directly or indirectly related to the specific recommendation or views expressed in this research report. Inc.5% 0. including the firm’s total revenues. Echo He. The research analyst(s) primarily responsible for the preparation of this research report have received compensation based upon various factors. Inc. Inc. risks particular to our Harbin Electric.0% Expected Performance* Buy Hold Sell Expected total return of 15% or more over next 12 months Expected total return of plus or minus 14% over next 12 months Expected total negative return of at least 15% over next 12 months with Rating 65. Furthermore. (2) Slowdown of Maxim Group LLC 4 160 . An Under Review (UR) rating represents a stock that the Firm has temporarily placed under review due to a material change. (HRBN) DISCLOSURES Source: Investars. Maxim Group makes a market in Harbin Electric.com Maxim Group LLC Stock Rating System As of: % of Coverage Universe 8/25/2011 % of Ratings for which Firm provided Banking Services in the last 12 months 24. attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer. rating include: (1) Failure of the proposed LBO to be completed.3% * Relative to Nasdaq Composite.3% 5. I. in the next 3 months.0% 0. Valuation Methods: Our Harbin Electric.

(5) Difficulties of developing linear motor market. based on their specific investment objectives. (HRBN) Chinese economy. lack of earnings. Price Volatility: Because of the inherent fundamental criteria of the companies falling within this risk category. the price volatility is expected to be significant with the possibility that the investment could eventually be worthless. Accordingly. RISK RATINGS Risk ratings take into account both fundamental criteria and price volatility. and is fairly liquid. The securities discussed in Maxim Group LLC research reports may not be suitable for some investors. DISCLAIMERS Some companies that Maxim Group LLC follows are emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. and low market cap or public float. both price volatility and fundamental risk are expected to approximate the industry average. Speculative stocks may not be suitable for a significant class of individual investors. (4) High competition in industrial motor market. Investors must make their own determination as to the appropriateness of an investment in any securities referred to herein. negative cash flow. both price volatility and fundamental risk are expected to be below the industry. Medium – Fundamental Criteria: This is a risk rating assigned to companies that may have average revenue and earnings visibility. Maxim Group LLC 5 161 . Accordingly. positive cash flow.Harbin Electric. (3) Raw material price increases. fundamental risk is expected to be above the industry. High – Fundamental Criteria: This is a risk rating assigned to companies having below-average revenue and earnings visibility. balance sheet concerns. financial status and risk tolerance. fundamental risk is expected to be significantly above the industry. Price volatility: The price volatility of companies falling within this category is expected to be above the industry. Accordingly. and (6) Potential equity issuance. High-risk stocks may not be suitable for a significant class of individual investors. Inc. Accordingly. Low – Fundamental Criteria: This is a risk rating assigned to companies that may have above-average revenue and earnings visibility. and is fairly liquid. positive cash flow. and/or a short operating history. Speculative – Fundamental Criteria: This is a risk rating assigned to early-stage companies with minimal to no revenues.

but Maxim makes no representation as to their accuracy or completeness. in such circumstances. The value of securities is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities. LLC (“Maxim”). and reach different conclusions from. and no representation or warranty. the potential losses may exceed the amount of initial investment and. views and analytical methods of the analysts who prepared them and Maxim is under no obligation to ensure that such other reports are brought to the attention of any recipient of this report. (HRBN) This communication is neither an offer to sell nor a solicitation of an offer to buy any securities mentioned herein. express or implied. in the case of some investments. opinions and estimates contained in this report reflect a judgment at its original date of publication by Maxim and are subject to change without notice. including the possible loss of principal invested. and 3) are subject to investment risks. offered or sold by Maxim: (1) are not insured by the Federal Deposit Insurance Company. the values of which are influenced by currency volatility. Maxim accepts no liability for loss arising from the use of the material presented in this report. other reports that are inconsistent with. you may be required to pay more money to support these losses. Inc. Securities recommended. except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to Maxim. Information. effectively assume this risk. Those reports reflect the different assumptions. is made regarding future performance. and may in the future issue. without the prior written consent of Maxim Group. Information and opinions presented in this report have been obtained or derived from sources believed by Maxim to be reliable. ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST Maxim Group LLC 6 162 . Maxim may have issued. The price. the information presented in this report. This report is not to be relied upon in substitution for the exercise of independent judgment. The aforementioned sentence does not apply to the disclosures required by NASD Rule 2711.Harbin Electric. (2) are not deposits or other obligations of any insured depository institution. Investors in securities such as ADRs. Indeed. copies circulated. Past performance should not be taken as an indication or guarantee of future performance. or disclosed to another party. value of and income from any of the securities mentioned in this report can fall as well as rise. This publication is confidential for the information of the addressee only and may not be reproduced in whole or in part.

PRIVATE EQUITY INVESTMENT We continue to view PE investments in U. Aug 15 . have completed. ezhao@roth. board legal adviser has been retained. Currently there are nine active privatization transactions within the U. 2011 China U. This change will provide the company with the option to dual-list on HK exchange while continuing to trade its shares on Nasdaq. 2011). Performance of privatization stocks suggests that the official transaction kick-off (marked by signing of definitive agreement followed by initial filing of SC 13E3) serves as the most meaningful catalyst for price appreciation.FTLK shareholder meeting approved privatization. HONG KONG DUAL-LISTING On Aug 3. if not otherwise specified s s s s s s s July 25 .-listed China sector. China XD Plastics (CXDC) announced that Morgan Stanley Private Equity Asia (MSPEA) agreed to invest $100M for a significant minority stake in the company. (949) 720-5775 mtobin@roth. which we view as related to market volatility. in June 2011 MSPEA also made a $50M investment in YONG.Privatization. July 25 . Please refer to the attached tables for relevant details. PE investment.60 $6.CFSG filed definitive proxy statement. SOKF and TBV) .22 $7.50.com Sales (800) 933-6830. shareholder meeting scheduled for Sep 14.com Emma Jia Zhao. & Dual-Listing (6th Edition) This report provides an update on the activity within the U. CFA.00 $18.65 per share.76 $8.-Listed China . Aug 15 . deal closed on Aug 19.SOKF announced short-form merger at $4. Aug 18 . plus FTLK's merger was approved during its shareholder meeting. PE Investment. Aug 11 . COGO announced completion of its redomicile to Cayman Islands. Below are some major updates. It includes a table with details for each company pursuing privatization.-listed Chinese companies as positive catalysts for the space and believe there is still ample interest.S.S. s s Reason for Report: Industry Update Roth Covered Companies Mentioned in this Report: CADC CFSG COGO FSIN FTLK HRBN $1.HRBN set shareholder record date as Sep 13. deal closed on Jul 27. Aug 12 .28 Neutral Neutral Neutral Buy Neutral Buy Stock prices are as of previous day's close.-listed China sector related to privatization. Recall. MSPEA will take two seats (total of nine members) on the company's board. The average discounts to respective offer prices have widened slightly over the past month. One company (CADC) made a going-private announcement.TBV short-form merger completed. shareholder meeting scheduled for Sep 22.Mark Tobin.S. (949) 720-7149 ktao@roth.35 $2.com Kun Tao. the deal is currently under board review. Important Disclosures & Regulation AC Certification(s) are located on page 4 to 4 of this report. Trading (800) 933-6820 INDUSTRY NOTE | CHINA EQUITY RESEARCH | August 23. and dual-listing. three going-private deals (CPC. LLC | 888 San Clemente Drive | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC 163 . PRIVATIZATION UPDATE Since our last edition (dated July 19.CPC shareholder meeting approved privatization.CADC received privatization offer at $2. CFA.S. Roth Capital Partners.CSR filed definitive proxy statement. On Aug 15. in the form of redeemable convertible preferred shares. Aug 11 .PUDA shares were delisted from NYSE Amex and moved to trade on OTC. Aug 22 .

9%) Under board review Oct-11-2010 40. LLC Gibson.2% Morgan Stanley & Co. LLC Barclays Capital Imperial Capital. LLP N/A O'Melveny & Myers LLP and Walkers Shearman & Sterling LLP Skadden.7% Bank of America Merrill Lynch Source of funding N/A N/A The Acquisition will be funded by equity capital from buyer group (1) Debt: $60M. GM Investment Harbin Electric HRBN Chairman & CEO. 2011.7%) Board informed.8% --5. Shearman & Sterling Meagher & Flom LLP / LLP Maples and Calder Gibson. HSBC US$ 60M 75. data sourced from ROTH research if companies are covered.6% $24.00 100. / Lazard Freres & Co. Mgmt rollover-$51.5M .1M.5% $2.2% --8.22 (45. Abax rollover-$40. 2011 Buyers (as announced) China Security & China Fire & Surveillance Security Technology CFSG CSR Bain Capital Chairman & CEO (Management's 59.8%) Board approved.1M None 77. Citi. 2011 Board Approval / Definitive Agreement Initial Filing of SC 13E3 Voting Requirement Implied Equity Value (3) Pending N/A N/A $47.1% $9.8M.0M (1) Debt: CDB-$400M.2%) Mar-08-2011 20.8x 5. PE rollover-$223.00 44.CHINA Summary of On-going Deals China Advanced Construction Materials China Natural Gas CNinsure CADC CHNG CISG TPG Asia.1x $3.2% $11.1M May-20-2011 Jun-10-2011 Apr-20-2011 May-31-2011 May-31-2011 Jun-14-2011 Pending N/A N/A $439. 2011. NA indicates not available.2x $2.0% --10.8% --17. (2) Equity: Bain$160.7x 3. Abax note-$25M. Chairman & COO consortium backed by & CEO. Capital Abax Global Capital Ally.1% $7.6x $1.2x $6. Vice Chairman & CEO.4% May-31-2011 $7.3x $18.8M $583.8x 5.25 22.35 (7.2M Pending N/A N/A $953.9x 10. LLC BofA Merrill Lynch Board Legal Advisor (1) (2) (3) (4) Skadden.9x $5. 2011 Pending N/A N/A $360.9M (1) Debt: None.4% --15. mgmt). LLC / Morgan Joseph TriArtisan LLC Not disclosed Board Financial Advisor N/A N/A Duff & Phelps. 2011. (2) Equity: Abax cash$38.7x $7.50 26.7M.8x 8.8%) Approved by shareholder EGM on Aug 22.1M N/A N/A Debt Financing Detail Post-deal Private Equity Ownership N/A N/A N/A N/A None N/A BofA. Dunn & Crutcher LLP Premium of bid price above the closing price on previous trading day before announcement Valuation multiples are based on bid price over TTM and NTM EPS as of deal announcement date.5% --6. pending shareholder vote.3x 16.6% $12. scheduled on Sept 14. Arps.9% $6. or Bloomberg if otherwise. Slate.8x 7. ARCH.1%) Under board review. later delisted from NYSE Amex and moved to OTC on August 18.00 43.23 (73.2M $433.28 (23.1%) Under board review Mar-25-2011 77. Shares halted starting Apr 11.1%) Funtalk China Fushi Copperweld FTLK FSIN Chairman & CEO (key Chariman & CEO. Abax Global Capital Puda Coal PUDA Chairman Announcement Date Pre-deal Buyer/mgmt Ownership % Bid Price per Share or ADS Premium over previous day close Price Revision Date Revised Price P/E (TTM) (2) P/E (NTM) (2) Current Price (08/22/2011) Current Discount to Bid Price Status Jun-30-2011 14.3M >75% total & >50% total & >2/3 of voting shares >50% of disinterested >50% of disinterested at EGM shares shares $257.6M China Development Bank: US$ 400M Abax: US$25M 23.52 (34. (2) Equity: Mgmt rollover-$141.78 (11.0% $4.August 23.6%) Under board review Shareholder EGM Shareholder EGM scheduled on Sept 22. (2) Equity: PAG Asia Capital-$150M (4) .50 58.65 (1) China Industry Note . Arps.4% --8. Slate. 2011. 2011 Jun-20-2011 Jul-13-2011 >50% total & >50% of disinterested shares $750.8% China Development Bank US$ 500M PE not involved N/A N/A N/A N/A Cowen and Company.20 8. NM indicates not meaningful Implied Equity Value is calculated based on latest available bid price and shares outstanding number as disclosed US$ 150M investment in convertible preferred shares Source: Company Filings.00 20.3M (1) Debt: $500M. CDH Themes Investment Inservice Partners Jul-26-2011 49.3x $12. Mgmt rollover$111. Meagher & Flom. (buyers formulating proposal) May-16-2011 34. Dunn & Crutcher LLP Apr-29-2011 31. Mgmt rollover$264.2% --2.3% $19.00 (2. Expected to close by the end of Aug 2011 Nov-03-2010 29. Expected to close in Q4' 2011.1M Pending N/A N/A $91.4x $8.4x 8. Shareholder record date was set as Sept 13.35 (44. ROTH Capital Partners Page 2 of 4 164 . Bloomberg.10 15.76 (33.1% stake already agreed to vote for the agreement) Mar-07-2011 59.0x 13.0M 15. Chairman Chairman & CEO. Expected to close by Nov 15.

Primavera Qiao Xing Mobile (2) QXM Parent Company Qiao Xing Universal Resources. Richter & Hampton LLP / Thorp Alberga N/A N/A N/A Voting Requirement >50% of toal shares >50% of disinterested shares >50% of total shares N/A N/A N/A Post-deal Private Equity Ownership Board Financial Advisor Board Legal Advisor (1) (2) (3) Not involved Stephens Inc.28 48% --NM NA SOKO Fitness & Spa Group SOKF Chairman & CEO (key mgmt) together with several existing institutional investors Jul-25-2011 90.20 $6. Not involved N/A Jun-27-2011 Apr-08-2010 83. NM indicates not meaningful Source: Company Filings.10 9. Morgan.8 in cash.9 shares of XING common stock plus $0.0% $4. of quorum in 2010 shareholder meeting on Apr 7. 2011. 2011.1% $1.1% $1.2x Completed on Aug 19. 2011 Summary of Completed or Abandoned Deals BMP Sunstone BJGP Sanofi-Aventis Chemspec International CPC Chairman & CEO.9x Completed on July 27.3x Withdrawn on Jun 27.50 $3. Lewis & Bockius LLP 27. Bloomberg. NA indicates not available.2% Houlihan Lokey Shearman & Sterling LLP / Maples and Calder Not involved Brean Murray.90 $1. Not involved N/A N/A Tiens Biotech Group Tongjitang Chinese Medicines TCM TBV Hanmax (controlled by CEO & Director TIENS (USA) Investment Holdings CEO) / Fosun Group Overseas Limited (owned by Chairman & CEO) Jun-27-2011 95.00 $7.0x Completed on Apr 15. 2008 Buyers (as announced) Announcement Date Pre-deal Buyer/mgmt Ownership % Bid Price per Share or ADS Price 1-Day Prior to Announcement Premium over previous day close (1) Price Revision Date Revised Price P/E (TTM) P/E (NTM) Status (3) Oct-28-2010 23.78 19% --NM 18. (Nasdaq: XING) Sep-09-2010 61. Mullin.92 $3.03 67% --28.00 $6. we convert to dollar value using XING's closing price on Sept-8-2010 Valuation multiples are based on bid price over TTM and NTM EPS as of deal announcement date.August 23.72 $1. 2011. data sourced from ROTH research if companies are covered.7x NA Completed on Aug 11.0x 90. 2011 Not involved Jan-03-2011 Oct-22-2010 >50% of disinterested voting shareholders representing >75% of voting disinterested shares Not involved Not disclosed Not disclosed Not involved Oct-12-2009 Nov-13-2009 Debt Financing Detail Board Approval/Definitive Agreement Initial Filing of SC 13E3 Not involved Oct-28-2010 N/A Standard Chartered US$ 70M Mar-21-2011 May-03-2011 CITIC Bank US$ 25M Nov-01-2010 Nov-26-2010 >50% of shareholders representing >75% of voting shares Not involved Morgan Stanley Asia Limited Sheppard.8% $8.32 27% Mar-21-2011 $8. Short-form merger.3x 7. ROTH Capital Partners Page 3 of 4 165 .8% $4. Inc.0x 8.0% $10.2% $10. Arent Fox LLP Not involved N/A N/A Not involved N/A N/A N/A Morgan Stanley Asia Limited NA Premium of bid price above the closing price on previous trading day before announcement The offer price is 1. (3) Abandoned due to lack Completed on Sep 29.60 55% --NM 11. Carret & Co.66 31% --125. 2011 Mar-10-2008 39.50 $3. 2011 Nov-11-2010 55.CHINA China Industry Note .70 22% --8. Short-form merger.9x Completed on Feb 24.55 10% --NM NA Sinoenergy SNEN Skywide Capital Management (owned by management) Oct-12-2009 39.0% $3. or Bloomberg if otherwise.

directors and owners own options. industry or security discussed in the report. On May 26. directly or indirectly. which at the time it is instituted and or reiterated. officers. ROTH has received compensation for investment banking services from Funtalk China Holdings Limited. The material.9 0 0 2 22. On September 28. that indicates an expectation that the price will depreciate by more than 10% over the next 12 months.. Consequently. 2011. SOKO Fitness & Spa Group and Yongye International.1 0. CA 92660 Disclosures: ROTH and/or its employees. as of 08/23/11 Count Percent 49 24. Inc. ROTH Capital Partners. are from sources believed to be reliable. Within the last twelve months..9 7 11. 2011 Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. Ratings System Definitions . Page 4 of 4 166 . Inc. For important disclosure information regarding the companies in this summary report. buys and sells from customers on a principal basis. ROTH changed its rating system in order to incorporate coverage that is Under Review. which at the time it is instituted and or reiterated. China Fire & Security Group. but are in no way guaranteed to be complete or accurate. price target and estimates for the security. related to the specific recommendations or views expressed in this report.4 Our rating system attempts to incorporate industry. LLC and its affiliates. Shares of SOKO Fitness & Spa Group may not be eligible for sale in one or more states. which at the time it is instituted and or reiterated. that indicates an expectation of a total return between negative 10% and 10% over the next 12 months. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements.ROTH employs a rating system based on the following: Buy: A rating. indicates the temporary removal of the prior rating. No part of this report may be reproduced in any form without the express written permission of ROTH. information and facts discussed in this report other than the information regarding ROTH Capital Partners. LLC. LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. Not Covered [NC]: ROTH does not publish research or have an opinion about this security. an offer or solicitation of the securities discussed. Additional information is available upon request. Sell: A rating. company and/or overall market risk and volatility. Inc. however. at any given point in time. Fushi Copperweld. Inc. Attention: Director of Research. that indicates an expectation of a total return of at least 10% over the next 12 months. Prior rating. Inc. Copyright 2011. our investment rating on a stock and its implied price movement may not correspond to the stated 12month price target. 888 San Clemente Drive.. ROTH changed its rating system in order to replace the Hold rating with Neutral. rights or warrants to purchase shares of Fushi Copperweld. Harbin Electric.2 Rating Buy [B] Neutral [N] Sell [S] Under Review [UR] Count 197 59 1 9 Percent 73. Any opinions or estimates in this report are subject to change without notice. Distribution of IB Services Firmwide IB Serv. This report should not be used as a complete analysis of the company. an investment in the stock may involve a high degree of risk and may not be suitable for all investors. Newport Beach. 2010./Past 12 Mos. is or will be. ROTH has managed or co-managed a public offering for Funtalk China Holdings Limited. Cogo Group. price target and estimates should no longer be relied upon for UR-rated securities. and as such. Within the last twelve months. stock.CHINA China Industry Note . Inc.August 23. Under Review [UR]: A rating. Additionally. ROTH makes a market in shares of China Advanced Construction Materials.. This is not. I also certify that no part of my compensation was.4 3. Neutral: A rating. Funtalk China Holdings Limited.8 22. which at the time it is instituted and or reiterated. please contact: The Director of Research at (800) 678-9147 or write to: ROTH Capital Partners. Member: FINRA/SIPC.

$15. NonGAAP EPS equaled $0. Avg. Earnings upside was limited by lower than expected gross margins (27.53 vs.8A 115.64E 2. $5.51E 0. The documents will undergo SEC review and the company will respond to comments by filing amended documents in an iterative process.7E 131. Cap. est.2Q11 Results Beat Est. Management will host a conference call on Wednesday at 9am ET.17E 7. ezhao@roth. Dial in: 877-317-6789.Price Target Cash (mil) Tot. 2011.00 $122.3M.6M in cash. We view the pending privatization as the primary value driver for shares of HRBN.6% was driven primarily by strength in linear and rotary motors.61E 0.com Emma Jia Zhao.65A 0.51/$0.66A 0.89E 5. 2011 Global Energy & Industrials: China Harbin Electric.25 $482.2M. Revenue equaled $131.62A 2. ROTH/Consensus est.. CFA.1x | HRBN .05 31.79A 0.8m at the end of 1Q10. LLC | 888 San Clemente Drive | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC Aug-11 Feb-11 Mar-11 Jan-11 Oct-10 Jun-11 Apr-11 Jul-11 167 .50.(mil) 3-Mo.0 16.0 8. Sales growth of 24. Roth Capital Partners. (mil) Mkt.0 4. in privatization-related expenses).4A 109. vs. Trading (800) 933-6820 CHINA FLASH NOTE | EQUITY RESEARCH | August 10.310 $24. We continue to view the pending privatization as the major value-driver for shares of HRBN. EBIT equaled $21. 12-Mo.45 .3M/ $113. Vol.158.6% vs.4M vs.2A 426. $122.3x 2Q11 results. Conf Call Wed 9am ET HRBN reported 2Q11 results that exceeded our revenue and EPS estimates.8 $80. HRBN filed its Form SC13E3 on July 13. Non-GAAP EPS excludes 2c benefit from a gain in fair value of warrants.9 15% —2012E— Curr 2.8M. which we believe is a substantial step forward in its going-private process. $0.com Sales (800) 933-6830.High Shares Out. The decrease in cash is primarily associated with capital expenditures for equipment purchase and plant construction. which we expect will persist for the next several quarters.5M. HRBN ended with 2Q11 with $87. ROTH/Consensus est. (949) 720-5775 mtobin@roth.7x —2011E— Curr 0.5%.5A —2011E— Curr 103.0 0. Analysis of Sales/Earnings Stock Data 52-Week Low .1E 476. Balance sheet. Conference call.$25. 3Yr. $115.3E 20.4A 106. $21.72A 5. EPS Growth Auditor: FRAZER FROST LLP EPS $ Yr Dec 1Q 2Q 3Q 4Q YEAR P/E —2010— 0. 29.3E 126. Further earnings upside was limited by continued margin pressure associated with inflated material and labor costs.0 HRBN One-Year Price and Volume History 30 25 20 15 10 5 Price May-11 Sep-10 Nov-10 Dec-10 Important Disclosures & Regulation AC Certification(s) are located on page 3 to 4 of this report. sharp y/y declines in linear motor margins) and higher than expected SG&A expenses (includes ~$3.8 2.Mark Tobin.41A 0.8E —2012E— Curr 578. largely in-line with our est. or 10c.82 .NASDAQ | Buy HRBN: First Take .5A 105. Privatization remains the focus. Management will host a conference call Wednesday at 9am ET. Debt (mil) Est.0 12. Inc. Pro-forma EPS for all periods Revenue ($ millions) Yr Dec 1Q 2Q 3Q 4Q YEAR —2010— 105.

automobile specialty micro-motors. Page 2 of 4 168 . COMPANY DESCRIPTION Harbin Electric. and other special motors. INC. Two of HRBN's major catalysts. controller automation systems. s A slow-down in China''s economic growth and continued inflation could impact sales and compress margins. Inc. through its indirect wholly owned subsidiary. August 10. Ltd (HTFE).. 2011 VALUATION Our $24 PT is based on the offer price of the proposed buy-out.HARBIN ELECTRIC. The Company offers three key product lines: industrial electric motors. Factors that may impede HRBN shares from reaching our price target include: s There are still numerous steps in the privatization process. Volatile raw materials costs HRBN is subject to market fluctuations and volatility of two major raw materials. oil pump for oilfield and linear motors for urban metro lines. such as delay in construction. some of which could lead to delays in completing the transaction. and automobile specialty micro-motors. linear motors and their integrated application systems. engineers. can be largely affected by central and local government policies. The development of urban railways can experience delays that out of control of HRBN. develops. customized linear motors. RISKS Change in macro policies in China. manufactures and sells an array of industrial electric motors. Harbin Tech Full Electric Co. copper and steel respectively. The Company operates.

price target and estimates for the security. directly or indirectly. related to the specific recommendations or views expressed in this report.9 0. is or will be. which at the time it is instituted and or reiterated. company and/or overall market risk and volatility. Distribution of IB Services Firmwide IB Serv. which at the time it is instituted and or reiterated. 2011 Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities.9 21. Disclosures: ROTH makes a market in shares of Harbin Electric. which at the time it is instituted and or reiterated. that indicates an expectation that the price will depreciate by more than 10% over the next 12 months. Consequently.0 Our rating system attempts to incorporate industry. INC. at any given point in time.7 0. I also certify that no part of my compensation was.9 7 11. Distribution Ratings/IB Services shows the number of companies in each rating category from which Roth or an affiliate received compensation for investment banking services in the past 12 month. 2010. that indicates an expectation of a total return of at least 10% over the next 12 months.ROTH employs a rating system based on the following: Buy: A rating. that indicates an expectation of a total return between negative 10% and 10% over the next 12 months. The material.HARBIN ELECTRIC. LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. ROTH changed its rating system in order to replace the Hold rating with Neutral. On May 26. indicates the temporary removal of the prior rating. price target and estimates should no longer be relied upon for UR-rated securities. August 10. Not Covered [NC]: ROTH does not publish research or have an opinion about this security. Prior rating. buys and sells from customers on a principal basis. except for the first box. information and facts Page 3 of 4 169 . On September 28. and as such. which at the time it is instituted and or reiterated. which may only represent the first note written during the past three years. Each box on the Rating and Price Target History chart above represents a date on which an analyst made a change to a rating or price target. as of 08/09/11 Count Percent 51 24. ROTH Capital Partners. Neutral: A rating./Past 12 Mos. Sell: A rating. Inc. Ratings System Definitions . Under Review [UR]: A rating.9 0 0 0 0 Rating Buy [B] Neutral [N] Sell [S] Under Review [UR] Count 205 59 2 0 Percent 75. 2011. our investment rating on a stock and its implied price movement may not correspond to the stated 12month price target. ROTH changed its rating system in order to incorporate coverage that is Under Review.

HARBIN ELECTRIC, INC.

August 10, 2011
discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are from sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used as a complete analysis of the company, industry or security discussed in the report. Additional information is available upon request. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report are subject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a high degree of risk and may not be suitable for all investors. No part of this report may be reproduced in any form without the express written permission of ROTH. Copyright 2011. Member: FINRA/SIPC.

Page 4 of 4

170

EQUITY RESEARCH

COMPANY UPDATE

Harbin Electric, Inc.
China August 10, 2011
Closing Price (8/9/11): 12-Month Target Price: 52-Week Range: Market Cap (MM): Shares O/S (MM): Float (MM): Shares Short (MM): Avg. Vol. (000) Book Value/Share: Dividend/Yield: Risk Profile: Maxim Group FYE: December 1Q 2Q 3Q 4Q FY Maxim Group FYE: December 2009A: GAAP 2010A: GAAP 2011E: GAAP 2012E: GAAP LT Earnings Growth Maxim Group FYE: December 1Q 2Q 3Q 4Q FY Consensus-First Call FYE: December 1Q 2Q 3Q 4Q FY $15.45 $24 $5.82 - $25.05 $485.1 31.4 16.8 7.7 2,180 $20.70 NA Medium Revenues ($M) 2011E 2012E $103.8A $122.1 $131.4A $157.4 $136.1 $155.3 $134.5 $153.8 $505.9 $588.6 Current Prior Current EPS EPS P/E $0.77 20.1 $2.46 6.3 $2.05 $2.14 7.5 $2.49 $2.67 6.2 10% - 15% GAAP Quarterly EPS Current Prior Current 2011E 2011E 2012E $0.34A $0.51 $0.55A $0.70 $0.59 $0.63 $0.67 $0.57 $0.68 $0.60 $2.05 $2.14 $2.49 Quarterly EPS 2011E 2012E $0.34A $0.58 $0.55A $0.66 $0.62 $0.70 $0.66 $0.74 $2.12 $2.78

Buy

(HRBN – Nasdaq – $15.45) Better than Expected 2Q11; Progress of SEC approval is a near-term catalyst; Reiterate Buy and $24 price target
Yesterday, HRBN reported 2Q11 financial results. Revenue was $131.4M, 16% and 17% higher than consensus and our estimate, respectively, representing 25% y/y and 27% q/q growth. GAAP EPS of $0.55 also beat our estimate of $0.48 and consensus of $0.50. Gross margin was 27.6% vs. 33.5% in 2Q10 and 29.1% in 1Q11, representing both y/y and q/q decline.
The strong growth was driven by both production volume and ASP increase. During the quarter, all segments recorded higher sales y/y, with linear motor, micro motor, Weihai and Xi’an rotary motor subsidiary achieving 22%, 20%, 24% and 30% y/y growth, respectively. China’s across the board inflation enabled HRBN to sell at higher ASPs. Meanwhile, gradual capacity expansion and new customer sign-ups drove volume growth. As expected, margin pressure was significant during 2Q11. Increased raw material and labor cost, mix shift to lower-margin products and new product launches combined to lead to a 1.5 ppt sequential reduction of the gross margin. Expenses of $3.3M related to the going private process and higher tax rate, 25.9% in 2Q11 vs. 15.8% in 2010, were the reasons that further lowered operating and net margin, respectively. Going forward, we believe margin pressure is likely to continue given that China’s CPI rose to 6.5% in July, the highest in three years. Revising estimates. We are raising our 2011 and 2012 revenue estimates by 7% to reflect likely stronger than expected revenue growth. Meanwhile, we adjusted margins lower to reflect rising cost/expenses. As a result, our 2011 and 2012 GAAP EPS estimates are reduced to $2.05 and $2.49, respectively, from our prior estimates of $2.14 and $2.67, respectively. According to the recent case of the going private process of China Security and Surveillance Technology, Inc. (CSR – NR), we estimate HRBN could have a revised schedule 13E-3 and preliminary proxy filed as early as late August. Our $24 price target is mainly based on a favorable outcome of HRBN’s LBO, which has an established offer price of $24 per share. We reiterate our Buy rating and believe the persistent gap, currently ~36%, to the LBO offering price creates buying opportunities.

Maxim Group LLC 405 Lexington Avenue New York, NY 10174 – www.maximgrp.com
SEE PAGES 6-8 FOR IMPORTANT DISCLOSURES AND DISCLAIMERS 171

Harbin Electric, Inc. (HRBN)
Exhibit 1. Actual vs. Maxim and Consensus
Maxim 2Q11 Total Rev ($M) GAAP EPS ($) $ $ Actual 131.4 0.55 $ $ Est 112.2 0.48 $ $ Consensus Actual vs. Actual vs. Est 113.8 0.50 Maxim 17% 14% Consensus 16% 9%

Source: Company Reports and Maxim Group estimates.

Exhibit 2. Detail Comparison
(In millions except per shr) Linear Motors Y/Y Growth % of Total Rev Specialty Micro-Motors Y/Y Growth % of Total Rev Rotary Motors - Weihai Y/Y Growth % of Total Rev Rotary Motors - Xi'an Y/Y Growth % of Total Rev Revenues Y/Y Growth Cost of sales Gross profit Y/Y Growth Gross Margin R&D As % of Rev G&A As % of Rev Total operating expenses Income from operations Y/Y Growth Operating Margin Other income (expenses), net Interest expense, net Loss on cross currency hedge settlement Gain on debt repurchase Change in fair value of warrant Total other income (expense) Income before income taxes Provision for income taxes 2Q10 Actual 20.1 74% 19% 15.2 78% 14% 23.6 39% 22% 44.6 6% 42% $ 105.4 175% (70.1) 35.3 175% 33.5% (0.4) 0.3% (6.9) 6.5% (7.2) 28.1 219% 26.6% 1.3 (1.0) (0.6) 1.7 1.4 29.5 (3.8) 2Q11E Expected 18.1 -10% 16% 14.7 -3% 13% 25.9 10% 23% 51.3 15% 46% $ 112.2 6% (80.4) 31.9 -10% 28.4% (1.3) 1.2% (10.3) 9.2% (11.7) 20.2 -28% 18.0% 1.2 (1.9) (0.4) (1.2) 19.1 (3.8) 2Q11A Actual 24.7 22% 19% 18.2 20% 14% 29.2 24% 22% 58.0 30% 44% $ 131.4 25% (95.2) 36.2 2% 27.6% (0.9) 0.7% (13.8) 10.5% (14.7) 21.5 -24% 16.3% 2.4 (1.3) 0.6 1.7 23.2 (6.0) -230% -246% 22% 57% 585 bps 13% 3 bps 13% (52) bps Actual vs. Expected 36% 3,246 262 24% 2,280 72 13% 1,394 (87) 13% 1,517 17% 1,817 bps 18% 14% 1,221 -30% (48) bps 34% 130 26% 6% 442 100% -35% bps (168) bps bps bps (86) bps

bps bps bps bps bps bps bps

(151) bps

Tax Rate 12.9% 20.0% 25.9% Net income before noncontrolling interest 25.7 15.2 17.2 Minority interests (0.0) (0.0) As % of net income 0.0% 0.0% 0.0% Net income 25.7 15.2 17.2 Y/Y Growth NM -41% -33% Net Margin 24.4% 13.6% 13.1% Foreign currency translation adjustment 1.3 7.0 Change in fair value of derivative instrument (or Reclassification adjustment for gain on sales of m Comprehensive income 27.0 15.2 24.2 Weighted average shares outstanding Basic 31.1 31.3 31.3 Diluted 31.3 31.4 31.4 EPS (to controlling interest) Basic $ 0.83 $ 0.49 $ 0.55 Diluted $ 0.82 $ 0.48 $ 0.55 Y/Y Growth NM -41% -33% Exchange Rate (RMB/US$) 6.84 6.54 6.54

59%

13% 13%

Source: Company Reports and Maxim Group estimates.

Maxim Group LLC

2

172

Harbin Electric, Inc. (HRBN)
Exhibit 3. Estimate Revision
3Q11E ($'s in millions, except EPS) Total net revenues y/y Growth Gross Profit y/y Growth Gross margin Income from operations y/y Growth Operating Margin Net Income y/y Growth Net Margin Diluted GAAP EPS y/y Growth $ $ Old 123.0 $ 12% 35.4 5% 29% 25.2 15% 20% 19.8 11% 16% 0.63 $ 10% 2011E ($'s in millions, except EPS) Total net revenues y/y Growth Gross Profit y/y Growth Gross margin Income from operations y/y Growth Operating Margin EBITDA y/y Growth EBITDA Margin Net Income y/y Growth Net Margin Diluted GAAP EPS y/y Growth $ $ Old 470.7 10% 135.0 -1% 29% 88.4 -5% 19% 100.4 -5% 21% 67.3 -12% 14% 2.14 -13% $ $ New 505.9 19% 140.2 3% 28% 82.3 -12% 16% 94.3 -11% 19% 64.5 -16% 13% 2.05 -16% -4% $ -4% -6% -7% 4% New 136.1 25% 37.3 11% 27% 22.6 4% 17% 18.4 3% 14% 0.59 3% -7% $ New vs. Old 11% 6% $ 4Q11E Old 131.6 $ 24% 37.5 21% 29% 26.7 71% 20% 21.4 69% 16% 0.68 $ 54% 2012E Old $ 547.6 16% 155.7 15% 28% 109.9 24% 20% 125.9 25% 23% 84.8 26% 15% 2.67 25% $ $ New 588.6 16% 157.9 13% 27% 100.7 22% 17% 116.7 24% 20% 78.6 22% 13% 2.49 21% -7% -7% -7% -8% 1% New 134.5 27% 36.5 17% 27% 21.9 40% 16% 18.1 42% 13% 0.57 31% -15% New vs. Old 2% -3%

-10%

-18%

-7%

-16%

New vs. Old 7%

New vs. Old 7%

Source: Company Reports and Maxim Group estimates.

Maxim Group LLC

3

173

Harbin Electric, Inc. (HRBN)
Exhibit 4. HRBN – Comparable Companies
8/10 Company Harbin Electric TKR HRBN Price $ 15.45 LAST $ $ $ $ $ $ $ $ $ 5.49 1.67 5.70 6.59 0.65 5.42 7.54 3.47 4.22 MktCap (mm) $ 484 EPS P/E __________________________________________________ 10A 11E 12E 10A 11E 12E $ 2.46 $ 2.05 $ 2.49 6.3x 7.5x 6.2x

Chinese Industrial Companies China Automotive CAAS A-Power APWR FushiCopperweld FSIN Lihua International LIWA Shengdatech SDTH Wonder Auto WATG ChemSpec CPC China Gerui Adv. Materia CHOP SORL Auto Parts SORL Average HK Listed China Motor Companies Harbin Power Equipment 1133-HK Shanghai Electric Group 2727-HK Dongfang Electric Group 1072-HK Chongqing Machinery & E2722-HK Shanghai Prime Machine 2345-HK Average

$ $ $ $ $ $ $ $ $

149 76 212 252 35 184 272 145 81

$ -$ $ $ $ $ $ $

1.10 1.30 1.40 0.49 0.96 0.95 1.01 1.06

$ -$ $ -$ $ $ $

1.19 1.16 1.89 1.28 1.05 1.08 1.10

$ -$ $ -$ $ $ $

1.25 -1.39 1.80 1.57 1.21 1.34 1.26

5.0x -4.4x 4.7x 1.3x -5.6x 7.9x 3.4x 4.0x 4.5x

4.6x -4.9x 3.5x -4.2x 7.1x 3.2x 3.8x 4.5x

4.4x 4.1x 3.7x 3.5x 6.2x 2.6x 3.3x 4.0x

$ $ $ $ $

1.07 0.46 2.99 0.24 0.17

$ $ $ $ $

723 1,369 1,018 261 132

$ $ $ $ $

0.11 0.03 0.20 0.03 0.02

$ $ $ $ $

0.11 0.04 0.23 0.03 0.02

$ $ $ $ $

0.12 0.04 0.27 0.04 0.02

9.5x 13.9x 15.2x 8.2x 9.1x 11.2x

9.9x 12.4x 13.0x 7.4x 8.2x 10.2x

9.0x 11.1x 11.2x 6.5x 7.3x 9.0x

China Mainland Listed China Motor Companies Xiangtan Electric 600416-SH $ 1.59 Zhejiang Founder Motor 002196-SZ $ 2.51 BroadOcean 002249-SZ $ 3.07 Jiangte Electric Motor 002176-SZ $ 3.59 Shanghai Electric Group 601727-SH $ 0.91 Dongfang Electric Group 600875-SH $ 3.62 Average

$ $ $ $ $ $

965 272 1,467 390 8,939 6,017

$ $ $ $ $ $

0.06 0.04 0.08 0.05 0.03 0.20

$ $ $ $ $ $

0.08 0.05 0.12 0.05 0.04 0.24

$ $ $ $ -$

0.12 0.15 0.18 0.07 0.28

26.8x 66.2x 38.2x 78.9x 27.3x 18.5x 42.7x

19.0x 46.0x 24.9x 74.3x 22.1x -15.1x 25.4x

12.8x 16.9x 16.7x 50.0x 12.8x 21.8x

US/International Motor Companies Siemens SI $ 108.16 $ 93,962 ABB ABB $ 21.88 $ 50,105 Emerson Electric EMR $ 44.38 $ 33,426 Illinois Tool Works ITW $ 44.38 $ 22,300 Cummins CMI $ 91.11 $ 18,003 Magna International MGA $ 39.33 $ 4,435 Rockwell Automation ROK $ 60.89 $ 8,683 Lear Corporation LEA $ 43.16 $ 2,015 Regal Beloit RBC $ 53.60 $ 2,064 Smith AO AOS $ 37.26 $ 1,137 Franklin Electric FELE $ 41.90 $ 975 Average Source: Thomson One, Bloomberg and Maxim Group estimates.

$ 6.09 $ 1.25 $ 2.69 $ 3.08 $ 5.17 $ 4.34 $ 3.05 $ 4.42 n/a $ 2.87 $ 1.94

$ 10.77 $ 1.58 $ 3.23 $ 3.83 $ 8.90 $ 4.94 $ 4.64 $ 5.46 n/a $ 2.18 $ 2.68

$ 10.71 $ 1.93 $ 3.74 $ 4.46 $ 10.63 $ 5.35 $ 5.41 $ 6.04 n/a -$ 2.97 $ 3.08

17.8x 17.5x 16.5x 14.4x 17.6x 9.1x 20.0x 9.8x -13.0x 21.6x 15.7x

10.0x 13.9x 13.7x 11.6x 10.2x 8.0x 13.1x 7.9x -17.1x 15.6x 12.1x

10.1x 11.3x 11.9x 9.9x 8.6x 7.4x 11.2x 7.1x 12.5x 13.6x 10.4x

Maxim Group LLC

4

174

Harbin Electric, Inc. (HRBN)
Exhibit 5. HRBN-Income Statement
(In millions except per shr) Revenue Drivers: Linear Motors Y/Y Growth % of Total Rev Specialty Micro-Motors Y/Y Growth % of Total Rev Rotary Motors - Weihai Y/Y Growth % of Total Rev Rotary Motors - Xi'an Y/Y Growth % of Total Rev Revenues Y/Y Growth Cost of sales Gross profit Y/Y Growth Gross Margin R&D As % of Rev G&A As % of Rev Total operating expenses Income from operations Y/Y Growth Operating Margin Other income (expenses), net Interest expense, net Total other income (expense) Income before income taxes Provision for income taxes Tax Rate Net income before noncontrolling intere Minority interests As % of net income Net income Y/Y Growth Net Margin Foreign currency translation adjustmen Comprehensive income Weighted average shares outstanding Basic Diluted EPS (to controlling interest) Basic Diluted Y/Y Growth D&A Share-based compensation EBITDA EBITDA margin Exchange Rate (RMB/US$) $ $ 2004 Full Yr 2005 Full Yr 2006 Full Yr 2007 Full Yr 36.6 2008 Full Yr 49.5 35% 41% 33.8 85% 28% 27.8 2009 Full Yr 1Q10 31-Mar 2Q10 30-Jun 3Q10 30-Sep 4Q10 31-Dec 2010 Full Yr 1Q11 31-Mar 2Q11 30-Jun 3Q11E 30-Sep 4Q11E 31-Dec 2011E Full Yr 2012E Full Yr

$

19.8 20.1 19.3 17.0 76.3 19.3 24.7 23.2 22.1 89.3 100.5 60% 74% 18% -14% 27% -3% 22% 20% 30% 17% 13% 56% 19% 19% 18% 16% 18% 19% 19% 17% 16% 18% 17% 18.3 16.2 15.2 15.3 14.0 60.8 15.5 18.2 18.4 16.8 68.9 75.8 166% 78% 81% -18% 51% -4% 20% 20% 20% 13% 10% 28% 15% 14% 14% 13% 14% 15% 14% 13% 13% 14% 13% 22.5 23.6 23.5 23.7 93.2 21.8 29.2 29.4 29.7 110.0 131.0 107% 39% 14% 3% 31% -3% 24% 25% 25% 18% 19% 0% 21% 22% 21% 22% 22% 21% 22% 22% 22% 22% 22% 45.0 44.6 48.9 49.9 188.5 46.3 58.0 63.6 64.9 232.8 275.9 13% 6% 11% 12% 11% 3% 30% 30% 30% 24% 18% 0% 0% 20% 43% 42% 45% 47% 44% 45% 44% 47% 48% 46% 47% 4.9 $ 23.6 $ 40.4 $ 65.4 $ 120.8 $ 223.2 $ 105.5 $ 105.4 $ 109.4 $ 106.2 $ 426.5 $ 103.8 $ 131.4 $ 136.1 $ 134.5 $ 505.9 $ 588.6 387% 71% 62% 85% 85% 243% 175% 133% -1% 91% (1.6%) 25% 25% 27% 19% 16% (2.3) (12.1) (20.8) (33.0) (73.3) (146.6) (69.7) (70.1) (75.8) (75.1) (290.8) (73.6) (95.2) (98.8) (98.1) (365.7) (430.7) 2.6 52.9% (0.1) 1.9% (0.2) 3.8% (0.3) 2.3 47.1% 0.0 0.0 2.3 0.0% 2.3 0.0% 2.3 47.6% 2.2 6.4 6.4 0.36 0.36 0.1 2.4 48.6% 8.28 $ $ 11.6 350% 48.9% (0.3) 1.4% (1.3) 5.3% (1.6) 10.0 42.1% 0.0 0.0 10.0 0.0% 10.0 0.0% 10.0 333% 42.3% 0.5 11.1 14.9 15.1 0.67 $ 0.66 $ 82% 0.4 10.3 43.7% 8.07 19.7 70% 48.6% (1.5) 3.7% (4.2) 10.3% (5.7) 14.0 34.6% 0.0 (2.5) 4.4 18.4 0.0% 18.4 0.0% 18.4 84% 45.6% 1.0 19.5 16.6 18.3 32.4 65% 49.6% (1.1) 1.6% (7.7) 11.7% (8.7) 23.7 36.3% (0.2) (6.6) (6.8) 16.9 0.0% 16.9 0.0% 16.9 (8%) 25.8% 7.2 13.2 17.1 18.6 47.5 46% 39.3% (1.2) 1.0% (11.9) 9.9% (13.1) 34.4 45% 28.5% 1.6 (6.1) (4.5) 29.9 (4.5) 15.1% 25.4 0.0% 25.4 50% 21.0% 9.5 40.0 20.2 21.3 76.6 61% 34.3% (2.1) 0.9% (18.7) 8.4% (20.8) 55.8 62% 25.0% 5.5 (12.3) (24.9) 30.9 (7.8) 25.2% 23.1 (3.5) 11.3% 19.6 (23%) 8.8% (0.1) 16.3 25.6 25.7 35.7 227% 33.9% (0.6) 0.6% (7.4) 7.0% (8.0) 27.7 246% 26.3% 1.1 (1.6) (0.8) 27.0 (4.1) 15.1% 22.9 (2.4) 8.7% 20.6 137% 19.5% 0.1 20.6 31.1 31.4 0.66 $ 0.66 $ 68% 3.3 0.3 31.3 6.84 35.3 175% 33.5% (0.4) 0.3% (6.9) 6.5% (7.2) 28.1 219% 26.6% 1.3 (1.0) 1.4 29.5 (3.8) 12.9% 25.7 (0.0) 0.0% 25.7 NM 24.4% 1.3 27.0 31.1 31.3 0.83 $ 0.82 $ NM 2.8 0.3 31.1 6.84 33.6 100% 30.7% (1.7) 1.5% (10.1) 9.2% (11.7) 21.9 68% 20.0% 0.7 (1.1) (0.7) 21.2 (3.3) 15.6% 17.9 (0.0) 0.1% 17.9 NM 16.3% 5.6 23.5 31.1 31.3 31.1 -14% 29.2% (0.8) 0.8% (14.6) 13.8% (15.4) 15.6 (39.7%) 14.7% 2.3 (0.8) 0.9 16.6 (3.8) 22.7% 12.8 (0.1) 0.4% 12.7 -31% 12.0% 6.7 19.4 31.1 31.3 135.7 77% 31.8% (3.4) 0.8% (39.0) 9.1% (42.4) 93.3 67% 21.9% 5.5 (4.6) 0.8 94.2 (14.9) 15.8% 79.2 (2.4) 2.6% 76.8 291% 18.0% 13.7 90.5 31.1 31.3 30.2 (15%) 29.1% (3.9) 3.7% (10.1) 9.7% (14.0) 16.3 (41%) 15.7% 1.1 (1.9) (1.2) 15.0 (4.2) 27.9% 10.8 (0.0) 0.1% 10.8 (47.4%) 10.4% 2.4 13.3 31.3 31.4 36.2 2% 27.6% (0.9) 0.7% (13.8) 10.5% (14.7) 21.5 (24%) 16.3% 2.4 (1.3) 1.7 23.2 (6.0) 25.9% 17.2 (0.0) 0.0% 17.2 (33.2%) 13.1% 7.0 24.2 31.3 31.4 37.3 11% 27.4% (1.1) 0.8% (13.6) 10.0% (14.7) 22.6 4% 16.6% 2.6 (1.3) 1.9 24.6 (6.1) 25.0% 18.4 0.0% 18.4 3% 13.5% 18.4 31.3 31.4 0.59 $ 0.59 $ 3% 2.9 0.1 25.6 6.51 36.5 17% 27.1% (1.1) 0.8% (13.5) 10.0% (14.5) 21.9 40% 16.3% 2.9 (1.3) 2.2 24.1 (6.0) 25.0% 18.1 0.0% 18.1 42% 13.4% 18.1 31.4 31.5 140.2 3% 27.7% (7.0) 1.4% (50.9) 10.1% (57.9) 82.3 -12% 16.3% 9.0 (5.7) 4.6 86.9 (22.4) 25.7% 64.5 (0.0) 0.0% 64.5 -16% 12.7% 64.5 31.3 31.4 157.9 13% 26.8% (5.0) 0.9% (52.2) 8.9% (57.2) 100.7 22% 17.1% 6.9 (5.0) 4.2 104.9 (26.2) 25.0% 78.6 0.0% 78.6 22% 13.4% 78.6 31.5 31.6 2.49 2.49 21% 14.7 1.3 116.7 19.8% 6.36

60.3 22% 27% 40.2 19% 18% 71.4 157% 23% 32% $ 44.5

1.11 $ 0.99 $ 1.01 $ 0.91 $ 53% (10%) 2.2 6.2 0.9 1.6 17.1 42.3% 7.80 31.4 48.1% 7.30

1.25 $ 0.77 $ 1.19 $ 0.77 $ 31% (35.7%) 7.7 17.0 1.8 1.2 43.8 36.3% 6.83 74.1 33.2% 6.84

0.57 $ 0.44 $ 2.47 $ 0.35 $ 0.55 $ 0.57 $ 0.44 $ 2.46 $ 0.34 $ 0.55 $ NM -25% 221% (47.4%) (33.2%) 3.1 2.3 11.5 2.9 2.9 0.3 0.2 1.0 0.1 0.1 25.2 6.84 18.2 6.60 105.8 24.8% 6.76 19.3 6.57 24.5 6.54

0.58 $ 2.06 $ 0.57 $ 2.05 $ 31% -16% 2.9 11.5 0.1 0.4 24.9 6.48 94.3 18.6% 6.48

Source: Company reports and Maxim Group estimates.

Maxim Group LLC

5

175

Harbin Electric, Inc. (HRBN) DISCLOSURES

Source: Investars.com

Maxim Group LLC Stock Rating System

As of:
% of Coverage Universe

8/10/2011
% of Ratings for which Firm provided Banking Services in the last 12 months 24.5% 0.0% 0.0%

Expected Performance* Buy Hold Sell Expected total return of 15% or more over next 12 months Expected total return of plus or minus 14% over next 12 months Expected total negative return of at least 15% over next 12 months

with Rating 65.3% 26.7% 8.0%

* Relative to Nasdaq Composite. An Under Review (UR) rating represents a stock that the Firm has temporarily placed under review due to a material change.

Maxim Group makes a market in Harbin Electric, Inc. Maxim Group expects to receive or intends to seek compensation for investment banking services from Harbin Electric, Inc. in the next 3 months.

I, Echo He, attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer. Furthermore, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report. The research analyst(s) primarily responsible for the preparation of this research report have received compensation based upon various factors, including the firm’s total revenues, a portion of which is generated by investment banking activities. Valuation Methods: Our Harbin Electric, Inc. valuation is based on the announced $24 per share price in the leverage buyout proposal. It is also supported by our comparable company analysis and discount cash flow method. Price Target and Investment Risks: Aside from general market and other economic risks, risks particular to our Harbin Electric, Inc. rating include: (1) Failure of the proposed LBO to be completed; (2) Slowdown of

Maxim Group LLC

6

176

Harbin Electric, Inc. (HRBN)
Chinese economy; (3) Raw material price increases; (4) High competition in industrial motor market; (5) Difficulties of developing linear motor market; and (6) Potential equity issuance.

RISK RATINGS
Risk ratings take into account both fundamental criteria and price volatility. Speculative – Fundamental Criteria: This is a risk rating assigned to early-stage companies with minimal to no revenues, lack of earnings, balance sheet concerns, and/or a short operating history. Accordingly, fundamental risk is expected to be significantly above the industry. Price Volatility: Because of the inherent fundamental criteria of the companies falling within this risk category, the price volatility is expected to be significant with the possibility that the investment could eventually be worthless. Speculative stocks may not be suitable for a significant class of individual investors. High – Fundamental Criteria: This is a risk rating assigned to companies having below-average revenue and earnings visibility, negative cash flow, and low market cap or public float. Accordingly, fundamental risk is expected to be above the industry. Price volatility: The price volatility of companies falling within this category is expected to be above the industry. High-risk stocks may not be suitable for a significant class of individual investors. Medium – Fundamental Criteria: This is a risk rating assigned to companies that may have average revenue and earnings visibility, positive cash flow, and is fairly liquid. Accordingly, both price volatility and fundamental risk are expected to approximate the industry average. Low – Fundamental Criteria: This is a risk rating assigned to companies that may have above-average revenue and earnings visibility, positive cash flow, and is fairly liquid. Accordingly, both price volatility and fundamental risk are expected to be below the industry.

DISCLAIMERS
Some companies that Maxim Group LLC follows are emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. The securities discussed in Maxim Group LLC research reports may not be suitable for some investors. Investors must make their own determination as to the appropriateness of an investment in any securities referred to herein, based on their specific investment objectives, financial status and risk tolerance.

Maxim Group LLC

7

177

Harbin Electric, Inc. (HRBN)
This communication is neither an offer to sell nor a solicitation of an offer to buy any securities mentioned herein. This publication is confidential for the information of the addressee only and may not be reproduced in whole or in part, copies circulated, or disclosed to another party, without the prior written consent of Maxim Group, LLC (“Maxim”). Information and opinions presented in this report have been obtained or derived from sources believed by Maxim to be reliable, but Maxim makes no representation as to their accuracy or completeness. The aforementioned sentence does not apply to the disclosures required by NASD Rule 2711. Maxim accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to Maxim. This report is not to be relied upon in substitution for the exercise of independent judgment. Maxim may have issued, and may in the future issue, other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. Those reports reflect the different assumptions, views and analytical methods of the analysts who prepared them and Maxim is under no obligation to ensure that such other reports are brought to the attention of any recipient of this report. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by Maxim and are subject to change without notice. The price, value of and income from any of the securities mentioned in this report can fall as well as rise. The value of securities is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities. Investors in securities such as ADRs, the values of which are influenced by currency volatility, effectively assume this risk. Securities recommended, offered or sold by Maxim: (1) are not insured by the Federal Deposit Insurance Company; (2) are not deposits or other obligations of any insured depository institution; and 3) are subject to investment risks, including the possible loss of principal invested. Indeed, in the case of some investments, the potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to pay more money to support these losses.

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST

Maxim Group LLC

8

178

72A 5.51/$0. Non-GAAP EPS equaled $0. (949) 720-5775 mtobin@roth.41A 0. EPS Growth Auditor: FRAZER FROST LLP EPS $ Yr Dec 1Q 2Q 3Q 4Q YEAR P/E —2010— 0. The company plans to invest a total of $100M during 2011.61E 0.8M.1E 490. 29. We are lowering estimates to reflect continued margin pressure associated with inflated material/labor costs.0 8. sharp y/y declines in linear motor margins) and higher than expected SG&A expenses (includes ~$3.45 . (3) elevated SG&A primarily related to the privatization.05E 2.1x | HRBN .2E 131.158. based on buy-out price.3x Pro-forma EPS for all periods Revenue ($ millions) Yr Dec 1Q 2Q 3Q 4Q YEAR —2010— 105. During the conference call. 12-Mo. which are currently operating at high utilization levels (Xi'an Simo shipments were constrained during Q2).5%. We maintain our BUY rating and $24 price target. The SEC will review and comment on these filings. LLC | 888 San Clemente Drive | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC Aug-11 Feb-11 Mar-11 Jan-11 Oct-10 Jun-11 Apr-11 Jul-11 179 .0 HRBN One-Year Price and Volume History 30 25 20 15 10 5 Price May-11 Sep-10 Nov-10 Dec-10 Important Disclosures & Regulation AC Certification(s) are located on page 5 to 6 of this report.Mark Tobin. est.3E 20.79A 0. Capacity expansion.53 (excludes 2c benefit from a gain in fair value of warrants) vs. We consider HRBN’s filing of SC13E3 on July 13 as an important step in its privatization process.8A 103.00 $87. Focus on Buy-out Recovery of rotary motors and strong linear motors sales drove Q2 revenue upside. in our view. We believe the pending privatization remains the primary value driver for shares of HRBN.8A 131. or 10c. Debt (mil) Est.3M/$113. Earnings upside was limited by lower than expected gross margins (27. Cap.64E 2.4M vs. Lowering Est on Margin Contraction.62A 2.3E 125. The next key milestone. is the announcement of the extraordinary shareholder meeting to vote on the buyout. $0.0 4. Avg.8 2. privatization-related Opex and full tax rate.82 . ezhao@roth.$15.25 $482.High Shares Out.310 $24. (mil) Mkt.4A 109.2A 426.0 0.0 12. prior 20%).17E 7.4A 106. to reflect margin pressure.89E 5. It is expanding capacity at Weihai and Xi'an. Privatization.5A —2011E— Curr Prev 103.5E 476. ROTH/Consensus est. Intraday Price: $16. Quarterly Update Estimates Changed Stock Data 52-Week Low .53A 0.05 31.64E 2. (2) continued gross margin pressure (which we believe would last for next several quarters) on rising material and labor costs coupled with cost reductions in certain segments to drive volume. Yang reiterated commitment to the deal and the $24 price and indicated that he is in regular communication with Abax and CDB.50.5x 7.54E 0.9E 578. Vol.1E 126.65A 0. roughly consistent with investment during 1H10.(mil) 3-Mo.7E 130.0 16.4 15% HRBN: Q2 Results Beat. HRBN invested a total of ~$41M in CapEx during 1H11. 2011 Global Energy & Industrials: China Harbin Electric. 2Q11 revenue upbeat. particularly in Xi'an SIMO. Mr.51E 0.com Emma Jia Zhao.8E —2012E— Curr Prev 568.4A 115.$25.Price Target Cash (mil) Tot.6% vs. CFA. (4) higher effective tax rate (25% vs.7x —2011E— Curr Prev 0. ROTH/Consensus est.57E 0.41A 0.6 $87. in privatization-related expenses).com Sales (800) 933-6830.NASDAQ | Buy $5. Inc. 3Yr. We are tempering our estimates to reflect: (1) capacity constraints. Trading (800) 933-6820 COMPANY NOTE | CHINA RESEARCH | August 10.66A 0. but earnings upside limited by margin contraction.3M.40 at 12:08PM ET —2012E— Curr Prev 2. Revenue equaled $131. The company will respond to comments by filing amended documents in an iterative process.9x 5. Lowering est. $115.5A 105. Roth Capital Partners. primarily driven by a strong recovery of rotary motors (Weihai and Xi’an) and better-than-expected linear motors sales.

596 25.1% Yr Ago Q 2Q10 33.458 16.8% -11.3 $1.847 13.02 Var (%) 14.0% 18.9% 35.651 29.326 (9.7 $122.9% $0.3% -1.5% 12.82 Var (%) -1.3% 2.176 16.89 (0.58 Previous Var ($) 3Q11 126.25) 5.662 18.201 58.0x $8.4 $2.1% -2.8 $40.7% Considering capacity constaints particularly in Xi'an SIMO Expecting margin pressure to continue for next several quarters Gross margin pressure Lower gross margin/elevated tax rate Page 2 of 6 180 .0% 33.313 29.8% 5.6% -5.4% $2.4% 11.HARBIN ELECTRIC.607) 29.7% 21.61 (0.8% 29.3% -6.51 Var ($) 16.9 $2.3% 33.263 19.0% 11.688 51.7% 18.210 1. key operating metrics.9% -6.7x 63 6.92 $80.6x $31.0% 23.513 6.9% -8.6% -146 18.402 24.498 28.6% -17.141 20. INC.6% -595 -155 16. China Company Note .9% -4.79 $87.7% -135 $0.64 -1.5% 28.069 28.6% -5.4x 87 3.6% -123 $2.5% 3.918 17.07) Fiscal Year 2011 476.879 28.9% -195 19.1% -35.3% 20.August 10.5% 50.1x 73 5.79 Current Estimate Revisions Revenue Gross Margin Operating Margin EPS (non-GAAP) 125. 2011 SUMMARY Financial results.447) 30.5% -6.3% 13.05 2.5% 21.7 $87.1% -6.53 Est 115.6% -60 $2.139 4.5% Primarily on upbeat reported Q2 results Expecting margin pressure to continue for next several quarters Gross margin pressure plus elevated expense related to privatization Lower gross margin/higher opex/elevated tax rate Revenue Gross Margin Operating Margin EPS (non-GAAP) 568.5% Operating cash cycle shortened to 97 days in Q2'11 vs.3% 7.016 27.0% -169 20.5% -17.9% Comments Primarily driven by strong linear and rotary motors segments Higher volume outplayed declining ASP Driven by both higher volume and higher pricing Driven by both higher volume and higher pricing Rising material & labor cost plus certain segment-specific reasons: Higher volume in lower margin products/lowering ASP to gain market Higher volume in lower margin products/launch of new products Higher pricing partially offsetting rising cost Higher pricing partially offsetting rising cost Higher revenue offset by dropping GP margin and higher SG&A Higher revenue offset by dropping GP margin and higher SG&A Excluding 2c benefit from a gain in fair value of warrants EPS includes ~10c in privatization-related expenses Act Performance Statistics Gross margin Y/Y Change (in bps) Q/Q Change (in bps) Accounts Payable Turnover DSOs Inventory Turnover Operating Cash Flow (in MM) Cash (in MM) (w/o restricted cash) Cash per share Debt (in MM) Debt per share 2Q11 27.12) Fiscal Year 2012 578.676 (1.289 29.8 $3.8% 1.744 885 (730) 4.4% 27.17 (0.4% $0.5x $9.0 $1.6% 41.0% $2. 116 days in 1Q'11 and 121 days in 2Q'10 Cash usage primarily associated with CapEx Expecting margin pressure to continue for next several quarters Gross margin pressure plus elevated expense related to privatization Lower gross margin/higher Opex/elevated tax rate Revenue Gross Margin Operating Margin EPS (non-GAAP) 490.6 $2.043 24.54 Est 29. and estimate revisions: Operating Results & Segment Detail Total Revenue Linear Motors Automobile specialty micro-motors Controllers and other special motors Rotary industrial motors (Weihai Hengda) Simo Motor Gross profit margin Linear Motors Automobile specialty micro-motors Controllers and other special motors Rotary industrial motors (Weihai Hengda) Simo Motor Operating Income Net Income (non-GAAP) Effective tax rate EPS (non-GAAP) Act 131.727 (195) (874) (710) 239 (12) (80) 282 455 590 0.5% Prv Q 1Q11 29.0% $0.6% -2.1% 17.325 2.0% 41.28 $57.

August 10. Ltd (HTFE). some of which could lead to delays in completing the transaction.. through its indirect wholly owned subsidiary. The development of urban railways can experience delays that out of control of HRBN. and other special motors. controller automation systems. develops. and automobile specialty micro-motors. Volatile raw materials costs HRBN is subject to market fluctuations and volatility of two major raw materials. The Company offers three key product lines: industrial electric motors. RISKS Change in macro policies in China. COMPANY DESCRIPTION Harbin Electric. s A slow-down in China''s economic growth and continued inflation could impact sales and compress margins. customized linear motors. manufactures and sells an array of industrial electric motors. The Company operates. oil pump for oilfield and linear motors for urban metro lines.HARBIN ELECTRIC. linear motors and their integrated application systems. Two of HRBN's major catalysts. Page 3 of 6 181 . automobile specialty micro-motors. such as delay in construction. China Company Note . INC. Harbin Tech Full Electric Co. engineers. copper and steel respectively. 2011 VALUATION Our $24 PT is based on the offer price of the proposed buy-out. Factors that may impede HRBN shares from reaching our price target include: s There are still numerous steps in the privatization process. can be largely affected by central and local government policies. Inc.

245 (843) 0 0 2.198 22.660) 11.073) 9.777 127.150) 36.403 62% (32.015) 0 (3.511 48.206 -0.879) 3.042 105.938 (4.119 0 0 (234) 0 26.9% (468) 1.915) 15.943 (836) 0 0 2.199) 1.612 34.0% (407.HARBIN ELECTRIC.154 (5.490 0 0 574 (623) 94.065 223.8% 30% $2.8% 15.24 -178% $0.376 17.490 490.061 (6.261 15.8% 34% 83.198) 36.983 (27.2% (1.82 N/A $0.296 23.358 0 0 0 0 29.9% 42% 18.9% Q2'10A 20.468 23.064) 1.030 1.390 0 0 566 0 23.839 13.3% 246% (6.5% (363) 0.015) 25.465 426.249 188.697 (1.282 24.714 12.788 19.093) 0.77 -36% $1.2% FY11E 87.066 (1.934 (7.371 18.6% (1.8% Q1'11A 19.7% 21.799) 10.3% (7.343 16.056) 7.9% (1) 25.069 14.234 84.240 28.077 23.2% (1.5% 85% $0.210 1.478) 0 0 1.434) 9.481 91.19 31% $1.3% (1.00 -19% $2.046 13.364 19.0% Q4'11E 21.4% 232% $0.91 37% 18.622) 76. 2011 HRBN .806 (12.613) 13.768) 135.441) 0 0 539 0 0 2.432) 76.320) 13.641) 161.1% -187% 7.240 20.020 5.8% 40% $0.528) 36.153 (1.343 30.500) 0 0 1.238 28.713 31.670 28.8% -23% 43.899 22.711 36.0% (75.953 18.62 1% 31.903 25.27 2% 22.688 (8.39 46% $0.000) 4.796) 25.215) 0 30.6% Q3'11E 22.0% 34.101 (1.593) 0 0 5.801) 10.1% Q2'11A 24.3% -24% (10.757 49.4% (90.063) 15.974) 9.8% (146.635 29.3% (30.5% Q3'10A 19.986) 25.379 21.853 20.320 17.511 0 0 132 0 84.7% -40% (38.252 15.354 31.3% (69.0% 13.037 28.1% 220% $0.2% (3.498 15.009 14.461) 138.34 -47% $0. INC.64 29% 31.118 20.170) 1.1% FY12E 101.0% 0 83.408 20.0% 291% 85.0% 16.55 -33% $0.448 1.924 35.402 24.575 30.9% (75.081 19.0% (290.41 -38% 31.000) 4.138 15.540 27.3% (7.57 41% $0.120 104.561 18.1% -24% $2. Net Other Income/expense-net Loss on cross currency hedge settlement Gain on debt extinguishment Change in Fair Value of Warrants Loss from disposal of subdivision Earnings before Taxes Provision for Income Tax effective tax rate Minority Interest Net Income (Loss) net margin % yoy growth % Non GAAP Net Income* net margin % yoy growth % Diluted EPS yoy growth % Non GAAP EPS yoy growth % Diluted weighted average shares outstanding EBITDA 36.641 23.761 (6.7% Q4'10A 17.913) 9.382 6.6% 11 17.613) 25.491) 19.355 133.65 60% 31.313 29.195) 27.043) 10.9% (6) 17.969 (4.813 19.425 97.155 (737) 0 46 (1.050 1.672) 8.1% (2.351 24.5% (5.310 2.1% -7% (3.8% (2.639) 9.6% 73% $0.1% 203% 19.315 21.485 243.163 (14.654 28.54 -17% 31.626) 30.363 60.066) 0 218 1.6% (93.583 (6.131 (3.987 14.72 60% 31.059) 9.378 25.158 (3.110) 34.4% -9% (41.165 97.64 32% $2.524) 15.8% -18% 64.0% 7% (3.886) 6.3% 19% -$0.183 2.2% (393) 1.2% 270% (18.7% (3.8% -8% 16.903 0 0.765) 22.954) 4209.761 35.435 49.3% Q1'10A 19.245 1.356 18.569 (3. and one-time items Source: Company reports.379) 1.810) 25.59 114% $0.133) 0 0 740 0 0 (302) 0 21.1% 25.1% -125% 10.468 45.313 0 0 65.7% (91) 12.7% 242% $0.731 26.53 -33% 31.505) 8.491) 18.19 31% 21.777 72.1% 8.2% (3.037) 0 25.9% 55. derivative valuation.903 (4.Income Statement FY07 Revenue Linear Motors Automobile specialty micro-motors Controllers and other special motors Rotary industrial motors (Weihai Hengda) Simo Motor Total Revenue yoy growth % Cost of Sales Gross Profit gross margin% Operating Expenses Selling.932 18.558 4.650 0 46.554 19.278) 8.0% (352.40 20% 27.9% (1.0% 95% $2.950 34.214 208.863 33.352 121.423 19.62 127% 31.770 46.66 68% $0.341 10.675 24.000 0 0 0 0 111.379 21.441 643 23.7% 16.742 33.000) 0 0 4.201 58.9% 57% (45.596 12.183) 0 0 5.983 20.829 -1.620) 0 (189) 0 0 0 0 0 16.6% (73.3% 28.9% 67% (10.918 0 38.71 43% 25.477 39.0% 22.873 16.466 (3.458 16.05 -25% 31.2% (6.839 13.626 10.109 44.66 142% 31.647 8.0% 0 16.417) 7.0% 0 18.468 27.6% 23.332 33.512 44.3% 69% (11.9% (14) 10.959 28.8% 8.251) 1.003 23.4% -574% 24.421 13. Roth Capital Partners estimates Mark Tobin (949) 720-5775 mtobin@roth.657 (623) 29.573 0 9.037 (978) 0 0 1.5% 1% $0.4% (2.015 (4.806 10.628 11.321 57.932 130.154 217.759 0 0 (1.968) 32.820 85% (73.302) 1.445 26.0% 50% 25.204 29.6% -33% $0.8% 93.599 105.5% (409) 1.267 5.33 7% 22.6% 27.8% (70.046 13.8% 25.663) 1.259) 0 0 2.664 27.249) 6.104) 35.7% (1.171) 16.3% Q1'09A 12.647) 0 0 1.101 0 0 (14.5% 85.3% -1037% 20.224 17.0% (594) 0.0% 50% $1.815 18.436 174.6% (71.com Page 4 of 6 182 .500) 0 0 1.862 55.426 8.5% -38% $0.000 0 0 0 0 22.820 568.6% (95.57 N/A $0.743) 35.532 961 21.846 0 30.5% -6% 16.942 106.8% (19.083 26.683 (21.881 109.5% 21.0% 24.726 41.064 29.0% -31% 19.54 -6% $0.426 22.924) 0 0 1.4% 5% (10.5% (948) 0.500) 12.475 1.784 (1.6% FY08 46.694 44.996) 25.5% 45% (2.5% Q3'09A 16.553) 0 0 1.903 25. China Company Note .46 221% $2.666 93.6% FY09 60.464 18.866 (1.304 0 0 (547) 0 16.853 12.983 *Pro-forma net income excludes stock compensation.065 107.941) (1.572 (1.780) 33.8% 14% $0.352) 20.479) -37.816 23.2% FY10A 76.000 0 0 0 0 24.393 28.806) 8.756) 8.908) -4.07 -121% $0.672 72.7% (823) 0.953 23.327 0 0 1.3% 41% -$0.2% 62% 6.0% 68% (14.8% (803) 0. General and Administrative Expenses as % of revenue Research and Development Expenses as % of revenue Income From Operations operating margin yoy growth % Other Income(Expenses) Interest Income/expense-net Realized Gain/loss on Sale of Marketable Securities Non-operating Income/expense.840 (1.114 1.324 42.383 10.578 0 120.204 27.987 14.91 -10% $0.6% 219% (10.453 (5.847 25.282 104.467 76.8% (20) 62.316) 0 0 5.831 16.555 1.9% -8% $0.79 137% 31.939 12.7% Q4'09A 20.5% -17% $0.162 13.962 24.334 60.462 (9.236 125.603 18.356 15.1% (3.0% 62% (7.016 131.208 18.4% -47% 12.063 (9.3% 8.879 16.142) 31.648 14.8% 24% (9.064 33.1% -33% 16.026 26.121 0 0 (434) 0 15.662 18.419) -14.725 36.0% 34% (6.767 7.343) 47.August 10.791) 12.5% 137% 20.863 (6.57 -8% 31.1% 113.159 10.41 -31% $0.305 103.296) 15.7% -41% (13.423) 0.523 243.1% (25.6% Q2'09A 11.044 27.097 (1.547 8.155 (13.

and as such. Prior rating. Ratings System Definitions . Distribution of IB Services Firmwide IB Serv. which may only represent the first note written during the past three years. that indicates an expectation that the price will depreciate by more than 10% over the next 12 months. ROTH changed its rating system in order to incorporate coverage that is Under Review. is or will be.4 22. Consequently. which at the time it is instituted and or reiterated. The material.ROTH employs a rating system based on the following: Buy: A rating. related to the specific recommendations or views expressed in this report. that indicates an expectation of a total return between negative 10% and 10% over the next 12 months. Sell: A rating. LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months.August 10. at any given point in time. Distribution Ratings/IB Services shows the number of companies in each rating category from which Roth or an affiliate received compensation for investment banking services in the past 12 month. that indicates an expectation of a total return of at least 10% over the next 12 months. which at the time it is instituted and or reiterated. which at the time it is instituted and or reiterated.HARBIN ELECTRIC. ROTH Capital Partners. our investment rating on a stock and its implied price movement may not correspond to the stated 12month price target. price target and estimates should no longer be relied upon for UR-rated securities. Neutral: A rating. as of 08/10/11 Count Percent 51 25.5 0. 2011.7 0 0 0 0 Rating Buy [B] Neutral [N] Sell [S] Under Review [UR] Count 204 60 2 0 Percent 76. company and/or overall market risk and volatility. 2010. Under Review [UR]: A rating. directly or indirectly.0 Our rating system attempts to incorporate industry. INC. Disclosures: ROTH makes a market in shares of Harbin Electric.0 7 11. which at the time it is instituted and or reiterated. price target and estimates for the security. Inc. buys and sells from customers on a principal basis. indicates the temporary removal of the prior rating. Not Covered [NC]: ROTH does not publish research or have an opinion about this security. information and facts Page 5 of 6 183 . I also certify that no part of my compensation was. Each box on the Rating and Price Target History chart above represents a date on which an analyst made a change to a rating or price target./Past 12 Mos. China Company Note . 2011 Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. On September 28. ROTH changed its rating system in order to replace the Hold rating with Neutral. On May 26.7 0. except for the first box.

but are in no way guaranteed to be complete or accurate. Copyright 2011. INC. however.HARBIN ELECTRIC. This report should not be used as a complete analysis of the company. industry or security discussed in the report. Page 6 of 6 184 . No part of this report may be reproduced in any form without the express written permission of ROTH. 2011 discussed in this report other than the information regarding ROTH Capital Partners. an investment in the stock may involve a high degree of risk and may not be suitable for all investors. an offer or solicitation of the securities discussed. are from sources believed to be reliable. Additional information is available upon request. This is not. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additionally. China Company Note . LLC and its affiliates.August 10. Member: FINRA/SIPC. Any opinions or estimates in this report are subject to change without notice.

com | Contact Us ©2011 Thomson Reuters.Q2 2011 Harbin Electric Inc Earnings Conference Call Event Date/Time: Aug. 10. including by framing or similar means. All rights reserved. 2011 / 1:00PM GMT THOMSON REUTERS STREETEVENTS | www. Republication or redistribution of Thomson Reuters content.streetevents. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. is prohibited without the prior written consent of Thomson Reuters.FINAL TRANSCRIPT HRBN . 185 .

Zedong Xu.EVP Finance & IR Good morning. Christy Shue . including by framing or similar means.Chairman and CEO Zedong Xu Harbin Electric Inc . All participants will be in listen-only mode.Harbin Electric Inc . We filed our quarterly report on the Form 10-Q for the three months ended June 30. to highlight our second quarter financial results.FINAL TRANSCRIPT Aug. and the Chief Financial Officer. Executive Vice President of Finance and Investor Relations. Please not this event is being recorded.EVP Finance & IR Tianfu Yang Harbin Electric Inc . Mr.Q2 2011 Harbin Electric Inc Earnings Conference Call CORPORATE PARTICIPANTS Christy Shue Harbin Electric Inc . Regarding our revenue. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. 10.Analyst Max Tsung Cutler Group . 1 THOMSON REUTERS STREETEVENTS | www. A detailed discussion of these factors and uncertainties is contained in the Company's filings with the SEC.Analyst Jonathan Hui Senrigan Capital . I am joined by our Chairman and the Chief Executive Officer.Analyst Justin Lumiere CGFI Group . 2011 / 1:00PM. (Operator Instructions). following the filing yesterday.com | Contact Us ©2011 Thomson Reuters. up $26m or 25% compared with $105m in the second quarter of last year. These forward-looking statements reflect the Company's current expectations concerning future events and are subject to a number of factors and uncertainties that could cause actual results to differ materially. 186 . Welcome to Harbin Electric's second quarter 2011 earnings conference call. (Operator Instructions). in the second quarter total revenues were $131m.CFO CONFERENCE CALL PARTICIPANTS Mark Tobin Roth Capital Markets .Analyst PRESENTATION Operator Good morning and welcome to the Harbin Electric second quarter 2011 financial results conference call. All rights reserved. Please go ahead. Before we begin I would like to remind you that our discussion this morning may include forward-looking statements. After today's presentation there will be a possibility to ask questions. Tianfu Yang. on the call. 2011 yesterday after market close and we issued a press release. Mr. is prohibited without the prior written consent of Thomson Reuters. Republication or redistribution of Thomson Reuters content. everyone. HRBN . I would now like to turn the conference over to Christy Shue.streetevents. This significant sales growth was mainly the result of higher sales across all major product lines.Analyst Echo He Maxim Group .

driven primarily by higher volumes and higher pricing. Copper. The Company expects to recover some of the legal expenses related to the class action lawsuits pursuant to its insurance policy. All rights reserved. If you look at the market.streetevents. is prohibited without the prior written consent of Thomson Reuters.9m in the second quarter last year. In operating expense we incurred significantly higher SG&A this quarter. 10. declined while sales volumes of lower margin products increased significantly. As a percentage of total sales. We were able to raise the price on most of our rotary motors this year. respectively.6% in the second quarter from 33.5% last year. The product mix in the linear motors has changed compared to last year in a big way. we have lowered selling prices for certain of our linear motors. the market price of copper has gone up approximately 30% in the second quarter versus the same time last year. which helped to offset some inflationary costs. In both Linear Motors and Specialty Micro Motors product lines. The higher SG&A included a $2. So combine those factors and also add in the other raw material cost inflation and labor cost inflation you have seen a bigger dramatic decline the gross margin in the Linear Motors. at a total of $13. The market price of rare earth permanent magnetic material more than tripled. oil pumps and propulsion systems.3m. In Specialty Micro Motors. In Specialty Micro Motors gross margin declined to 33.com | Contact Us ©2011 Thomson Reuters. In Rotary Motors. Our gross profit margin declined to 27. Also.Q2 2011 Harbin Electric Inc Earnings Conference Call In Linear Motors and Related Systems sales were up about $4.FINAL TRANSCRIPT Aug. We anticipate that the depreciation expense will continue to go up as many of our capital investments. mainly due to product mix. machinery and plant construction are put to operation and will start to depreciate the capital investment.5% versus 6. This is primarily due to higher raw material cost and the labor costs across all product lines. which generally experience higher manufacturing costs during the start-up stage due to more workforce training.5% in the same period last year. 187 . help us continue to capture new opportunities in the market and are essential for our growth in top line and bottom line. lower gross margin was mainly a result of change in product mix and additional costs and reduced production efficiency associated with the new product launch. Additionally. 2 THOMSON REUTERS STREETEVENTS | www. Changes in product mix and selling price are also the contributors. sales increased by $3m driven by higher volume of existing products and sales of new products. additional test runs and smaller initial orders. our continuing launch of new customized products. fees associated with legal and financial advisors for the Special Committee of the Board of Directors and some other related expenses. This amount included the legal fees associated with the class action lawsuits.9% in the second quarter from 37. In addition to higher raw materials and the labor costs.4m in depreciation expense in the cost of sales also hurt the overall gross margin. including by framing or similar means. steel and the rare earth permanent magnetic material are major raw materials for our products.8m compared to only $6. expenses in the second quarter of 2011 related to going private process totaled $3.1% last year.5m write-off of advances on inventory purchases due to vendors going out of business. slightly lower sales volume in our oil pumps and in propulsion systems for coal transportation trains were more than offset by higher volumes in other linear motors and sales of new motors. Volumes of higher margin products. the SG&A is 10. Rotary Motor sales were up $13m and $5. Also. such as new equipment. it is expected that higher raw material price will continue to pressure gross margin. Republication or redistribution of Thomson Reuters content. an increase of $0. in order to expand our customer base and gain market share. 2011 / 1:00PM. Although the Company anticipates passing on a portion of the higher costs of raw materials to increase the selling prices. gross margin declined mainly due to higher raw material and labor cost partially offset by higher selling price.5m year-over-year.6m at Xi'an Tech Full Simo and at our Weihai facility. HRBN . although some may have lower margins. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. In the Linear Motor and Related Systems product line gross margin declined.

com | Contact Us ©2011 Thomson Reuters.1m in the same quarter of last year. primarily due to lower gross profit margin. because of the preferential tax rate of 10% granted to our subsidiary Harbin Tech Full expired at the end of 2010.2m. In terms of the outlook. HRBN . All rights reserved. actually indicating improved management efficiency given we achieved higher revenues this quarter. Please stay tuned. 3 THOMSON REUTERS STREETEVENTS | www. we had -. The Company recorded a net income attributable to controlling interest of 17. or $0. Republication or redistribution of Thomson Reuters content. 188 . we had a higher provision for income tax. With regard to the Company's going private process. In the internet age anyone could write a blog and attack anyone else.0m this quarter compared to $3. born and grew up in China and immigrated to the US.Q2 2011 Harbin Electric Inc Earnings Conference Call If we exclude these two items that were not in the quarter last year and do a more apples-to-apples comparison. To remind you. higher R&D expenses.8m in the same quarter of last year. has caused the provision for income tax at Harbin Tech Full to be significantly higher in this quarter versus the same quarter last year. because there was a seasonally winter quarter we did not start capital investments.55 per diluted share in this quarter. 2011. on Jun 19. And in terms of capital expenditure. or $0. Last but not least. Our operating profits were $21. On July 13. 2011.6m and we believe our liquidity remains adequate. In our opinion the freedom has been abused by some short-sellers with the motivation to hurt our shareholders and benefit a few. Harbin Tech Full is in the process of applying for a new preferential income tax rate from the Chinese government. 2011 / 1:00PM. So in the past more than 10 years of the Company's growth path. 10.7m. since the new rate is due pending approval. We surely will need your support in the days ahead of us and we want to thank you in advance. After SEC completes its review of this document. Obviously nowadays the management continues to deal with challenges including some short-sellers' vicious attacks by using speculations. compared with a net income attributable to controlling interest of $25. higher SG&A expenses as we discussed earlier and also the higher income tax rate hurt our net margin and net income. we expect to deliver for both the top and bottom line. However. And the average corporate income tax rate is higher. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.streetevents. The net income to attribute to controlling interest was 33% lower in the second quarter. you probably see when you look at our first quarter. I would like just to comment -.5m this quarter versus $28. The Company will make an announcement regarding the special shareholder meeting when information is available.82 per diluted share in the same quarter of last year.at the end of June we had cash and cash equivalent of $87. One other point I would like to highlight is the income tax. the Company entered into an Agreement and Plan of Merger for the Company to go private. our SG&A would have been roughly in line with last year. including by framing or similar means. including the source of such information.after the Chinese New Year we started to execute our investment plan. the 25% standard rate that we used. the Company filed a Preliminary Proxy Statement together with a Schedule 13E-3 with the SEC indicating its intention to call a special meeting of its shareholders to vote on the Merger Agreement for the Company to go private. we would like to express our appreciation to our loyal shareholders who have supported us and stood by the Company in the past. There is a recent events section in the press release and in the 10-Q that provided the current standards of this event. A capacity expansion is under way at our Rotary Motor facilities in Xi'an and Weihai and we believe in the rest of the year we still will maintain solid revenues for the rest of the year.FINAL TRANSCRIPT Aug. but a total of about $41m capital expenditure all incurred in the second quarter as we -. is prohibited without the prior written consent of Thomson Reuters. In terms of our balance sheet. We advise our shareholders and interested investors to be vigilant and intelligent when review any outside information that may be disseminated about the Company. So the higher income tax rate.to say a few words. the Company has dealt with many challenges on the way. unfounded accusations and outright lies. management opted for caution and used a 25% standard income tax rate to calculate the provision for income tax. $6. the Company will schedule the special shareholder meeting.

normal capacity.Harbin Electric Inc . At Shanghai the design capacity actually right now we only need 30% to 40% because we're still actually moving -. Chinese means (spoken in Chinese) something like that. Christy Shue . Our first question comes from Mark Tobin of Roth Capital Markets. I don't know how to translate exactly into English. Mark. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. 189 . Tianfu Yang . The construction part 4 THOMSON REUTERS STREETEVENTS | www. including by framing or similar means. we run about 80%.Analyst Could you offer a little more color on your current utilization rates at your various facilities and then a little more detail on the capacity expansion projects? Christy Shue . Mark Tobin . And for the Linear Motors and also due to a new product we have launched. please limit your questions to only two questions.Harbin Electric Inc . These are the Company's prepared remarks. HRBN .EVP Finance & IR Okay.Harbin Electric Inc . so that many people will have the chance to ask a question.Q2 2011 Harbin Electric Inc Earnings Conference Call Management understands that many challenges. that's a more technical term. including absurd short-sellers attacks such as the one we saw today. Mark Tobin . may still lie ahead of us but we assure our shareholders that management of this Company always faces challenges without fear.later part of next year the Harbin capacity could be filled up to 100% and after that we may need to add more capacity by then. it's called alternate frequency permanent magnetic material motor. Yang. we have four manufacturing facilities. 2011 / 1:00PM.EVP Finance & IR As you most are aware.Roth Capital Markets .FINAL TRANSCRIPT Aug. QUESTIONS AND ANSWERS Operator We will now begin the question and answer session. (Operator Instructions). So we have a plan to also continue to expand the capacity at Harbin and we are planning by next year -. And please I'd like to remind the question -the people who ask the questions. 10.Harbin Electric Inc .com | Contact Us ©2011 Thomson Reuters.streetevents.at the factory.EVP Finance & IR Hi. Republication or redistribution of Thomson Reuters content.Analyst Hi. is prohibited without the prior written consent of Thomson Reuters. not exceeding two questions. At our Harbin manufacturing facility our current capacity. thanks for taking my question. then we need to install them at the facility -.Roth Capital Markets .receiving even more equipment and production lines. good morning. now we're ready to take questions.Chairman and CEO (spoken in Mandarin) Christy Shue . All rights reserved. let me turn the question to Mr.

Okay. what is your CapEx target for the remainder of 2011? Tianfu Yang . he was saying that in July -. So the capacity constraint is mostly severe at Xi'an. is prohibited without the prior written consent of Thomson Reuters. He mentioned that the land that we need will be not at the same place and we are working with the Xi'an government to get a new piece of land and then the land used right would cost us approximately $30m. So the Xi'an factory building new construction may not start at the same location.com | Contact Us ©2011 Thomson Reuters.FINAL TRANSCRIPT Aug.July that there were some orders that we did not really complete. the government has allocated us new land so we will have to plan building that new factory on the new land.Chairman and CEO (spoken in Mandarin) Christy Shue . And so (technical difficulty) with a lot of machinery and equipment not installed and received yet we're running about 30% to 40%. Mr. however. At Xi'an actually the most urgent thing is at Xi'an and at Xi'an Simo we are planning to actually combine -.Q2 2011 Harbin Electric Inc Earnings Conference Call -. but however we are also short on the space and the capacity and a lot of things happening there we have to deal with. And then by later next year we probably can hope to get an additional 50% of the capacity at Weihai. at Weihai factory the capacity is saturated and we started to build -. including by framing or similar means. trying every means to complete our orders on hand and have to contract out -.the first phase. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. Actually. So our plan is achievement and it's urgent that we really need to expand capacity and start building new factory to expand the capacity there. the construction part. Yang quoted about CNY10m of orders on hand that have to be postponed to the next month. 10. postpone that into the next month. that area has become a residential area because the Xi'an Municipal Government has moved in and we are the neighbor to the Xi'an Municipal Town Hall and there is no space for us to expand at the same location. HRBN .Harbin Electric Inc .construct a new factory but the main construction won't be completed by the end of the year. it's approximately $100m he mentioned. So right now we're actually just trying being innovative.for some of the investors who have visited our facility you know that it is in the economic development zone and. I think the new factory is 50. in second quarter we did not really complete all the orders on hand. Mark Tobin . So there are some subsidiaries in the process of moving to the same site. 190 .not contract but source some of the parts to other subsidiaries like Harbin and like Weihai to complete all our orders. So just by being innovative and find the means to do that we were able to reach this quarter's achievements. For example.we're still working on the power supply station there in Shanghai. And at Xi'an we may not be able to start right away because the Xi'an facility is -.EVP Finance & IR In terms of capital expenditure.Analyst That's helpful. and will mainly be used to construct the Weihai new factory and purchasing equipment and production lines.Harbin Electric Inc . Republication or redistribution of Thomson Reuters content.July is not second -. our forecast when they have indicated in the past has not changed.consolidate some of the subsidiaries together at one site so that we can improve the manufacturing efficiency. we had to delay that. Within two to three years we're hoping that the capacity can be maximized to 100%.streetevents. So right now we are working with the government. 2011 / 1:00PM. has completed and the second phase and third phase are also near completion where just some power station -.Roth Capital Markets . All rights reserved.000 square meters. 5 THOMSON REUTERS STREETEVENTS | www. But once we've completed the construction and we've started to move in our major production line there.

Thank you very much. So those are the common practice.Maxim Group . steel and the price on those raw materials has gone up quite significantly.Chairman and CEO (Spoken in Mandarin). and at Weihai we adjust the price two times. As you know.Roth Capital Markets . we have adjusted three times of the price of the Simo. likely [you will release it] in the immediate future. 10. Could you give me a range about your rotary motors that the selling price increase percentage wise year-over-year? Tianfu Yang . okay.FINAL TRANSCRIPT Aug. The question is what's the average selling price. 191 . and also you have to watch the market acceptance. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.for the ones that we raised the price. we don't know for sure. Christy Shue .streetevents. Regarding this and related issues.EVP Finance & IR Let me translate. one message sent out from Twitter stating that some positive evidence to prove certain allegations to the Company.Harbin Electric Inc . the copper. we had about 20% -. that's helpful.Maxim Group . our price -. including by framing or similar means. compared to last year.and when the raw material price goes down and sometimes we adjust back.Q2 2011 Harbin Electric Inc Earnings Conference Call Mark Tobin . Echo He . 2011 / 1:00PM. Republication or redistribution of Thomson Reuters content. especially in the past few days. My first question is about your average selling price. Approximately. Please go ahead. Okay. Well. So those are the criteria that we use -.Harbin Electric Inc .EVP Finance & IR We actually made some pre-payments to the government to secure that land in the second quarter with this (inaudible) in the 10-Q.raised the price about 20%.Harbin Electric Inc . 6 THOMSON REUTERS STREETEVENTS | www.Analyst Okay.Harbin Electric Inc . HRBN . what comments do you have? Tianfu Yang . is prohibited without the prior written consent of Thomson Reuters. The next question comes from Echo He of Maxim Group. Operator (Operator Instructions). Echo He .Chairman and CEO (spoken in Mandarin) Christy Shue . how much higher this year than last year? And as you know that it is common practice in the marketplace that when the raw material price gone up and the manufacturers usually raise the selling price of the product to compensate for some of the inflationary cost and we also did that. I do have a second question. So the next step.Analyst Oh hi. most of our rotary motors at Xi'an and Weihai.com | Contact Us ©2011 Thomson Reuters. thank you for taking my questions. whether we can continue to raise the price. we will have to look at the reaction from the market and how the customers accept those price -.higher price. So far. There are some negative reports out there in the market recently. So we also adjusted our selling price. All rights reserved.Analyst Yes. But the price adjustment usually have to go according to the raw material price.

2011 / 1:00PM. And so. And the reason he wants to share is it seems -. and you can see -. because the internet age is just information overflow and the many false information would be floating around and people just make up stories. as I just discussed earlier. many months of work. for example. -. and so we have really dealt many challenges. right now. and we -. last year. They do this at a particular time. however. the Company. So the Company -. and we have the special -. 192 . because we focus on technology and -.financial advisors to advise each party's work.Q2 2011 Harbin Electric Inc Earnings Conference Call Christy Shue . And. And particularly the scheme is designed in a way that it particularly benefit short sellers. without the capital. And each --they use very prominent investment advisors -.signed the merger agreement.FINAL TRANSCRIPT Aug. So we really have done -. and all we wanted is to be responsible for our shareholders and also for our clients. and also what you can see that the short sellers attack -. so I have to see -. and they use the internet to use some unfounded --. It's very long. And. and for the benefit of our Company and our customers and all that. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. and after -. and then they attack the Company. in light of that. So that's also that I.at the year we do acquisitions to grow the Company. And the proposal that they made to acquire the shares -. in the US. without the technology. do see our capital market here as -.the (inaudible) attack. he believes that privatization is the choice for the Company to continue to be on the healthy path.in the sense large but probably still small. Yang thinks that this question gives him an opportunity to comment and share some of his thoughts with his shareholders.made up. all whole process that took long and really reflect that not only he feels responsible executing judicial duty to protect the shareholders' interest.and to benefit to the -. and they have finally approved the plan to support Mr. very detailed and to have come this far. the [eBanks]. following the regulations and the laws under the special committee's evaluation process. and you need to use your intelligence and analyze the information out there in the internet. And the main purpose is just to hurt our shareholders and to hurt our -. with the responsibility for our shareholders. we needed to advance further. manufactured documents and some of the outright lies to attack the Company. HRBN . Republication or redistribution of Thomson Reuters content. make up information that is floating on the internet and just are 7 THOMSON REUTERS STREETEVENTS | www. during this process. 10. for our customers. from a very small company. is prohibited without the prior written consent of Thomson Reuters. for the Chinese Development Bank. I wasn't able to write down all of them. And our special committee has also gone through many months of assessment and their work.EVP Finance & IR Mr.the capital markets are to be very difficult for Chinese companies last year. in June. Yang and lend the money for him to acquire the shares.independent special committee working on behalf of the minority shareholders.outstanding shares in the marketplace. so I would really encourage -advise our shareholders that you really need to see what's their real purpose.but. so I was just trying to translate from memory. and we're given several acquisitions among the road.the Company has followed every requirement and regulatory requirement and the laws. And during this privatization process. We see many opportunities in the marketplace and. And actually he does communicate with the China Development Bank and the eBanks.in order for the Company to continue to grow. $24 is what I believe is protected the shareholders' interest and benefit.from our Company growth really rapidly.for the benefit of a few of the short sellers. they had about three to four months of rigorous due diligence of the Company. including by framing or similar means.Harbin Electric Inc . So this. But the short sellers used the outright lies and the manufactured stories to attack the Company. and we also see some -. because he has said a lot of stuff. We have thousands of our workers and staff and employees working really hard to deliver values to our Shareholders. As the Company actually has grown up so fast and. expand our capacity. proposed to acquire the Company. and did many.streetevents.com | Contact Us ©2011 Thomson Reuters.but the capital investment is also very important factor for the Company to continue to grow.particularly after a number of tax on Chinese companies. and following exactly what the laws and regulations required. So there's several times that it happened. All rights reserved. we won't be able to capture all these opportunities out there in the marketplace in China.encountered the short seller attacks. because. in term of merger. grown to such a large company.sorry there.but you probably can see that this is very vicious and a very planned attack on the Company. For our Company we do need a platform. and -. the Company has signed the agreement to -. we -. And also.dealt with many challenges on the oppositional side.

Our next question comes from Justin Lumiere of [CGFI] Group. Republication or redistribution of Thomson Reuters content. And probably you can see that. understand and the Company relied. any other questions? Operator (Operator Instructions).CGFI Group . is prohibited without the prior written consent of Thomson Reuters.FINAL TRANSCRIPT Aug. Obviously. So we have identified the many domestic business opportunities.with the difficulty with the US capital markets. And you can also learn from the capital market in the US. and I know that you discussed about tapping the Chinese capital markets just because -. or through acquisitions. 10.EVP Finance & IR Hi. in capitalism. So that's our expectations.Analyst Hello? Christy Shue . and for the repayment of certain debts.Q2 2011 Harbin Electric Inc Earnings Conference Call trying to scare and hurt our shareholders. including by framing or similar means. But in there it's disclosed that there is a consulting agreement where they paid $3m for a five-year agreement to help tap into the Chinese capital markets. in a timely fashion. So acquisition is a very important role to fuel the Company's continued growth. particularly in the China market where consolidation continues. 2011 / 1:00PM. in the past few years. Management believes it is critical to maintain adequate access to capital and to have flexibility to deploy funds in areas needed. How are you doing? Christy Shue . given the rapid economic growth in China and believe that an adequate access to capital could allow us to capture these business opportunities. and our growth -. First of all. organically. Okay. Justin. there was large striking. Justin Lumiere .Analyst Hi. the overview. on the US capital markets to provide the funds for our large capital injection project and acquisitions. All right. we needed the capital.Harbin Electric Inc .CGFI Group . 193 . last year mainly. for the Company to continue to grow organically or through acquisitions. and why you use a consultant? Christy Shue . Justin Lumiere .CGFI Group . Justin Lumiere .EVP Finance & IR Hi. Please go ahead. Let me elaborate the rationale behind that consulting agreement. To support the planned growth. 8 THOMSON REUTERS STREETEVENTS | www. Can you just shed a little light on what that is. when opportunity arises.made every effort to protect our shareholders' benefit.Harbin Electric Inc .some from organic growth but largely also from acquisitions. our management has continued to communicate and continued to expect and plan that the Company will continue to grow rapidly in the next few years. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. to a large extent.Analyst Yes.Harbin Electric Inc . However.EVP Finance & IR Okay.streetevents. I just saw that you expanded the liquidity and capital resources section. in the past that you know well. So what we have done for the last few months is we tried our -. All rights reserved.com | Contact Us ©2011 Thomson Reuters. HRBN .

there is a lot of --mechanisms.should it go private. So this is the decision that the Management made for the future of the Company. we strongly believe that we'll need -. 194 .the Management needed to be vigilant about the next few years' capital needs. that we perceived that the US capital markets had become hostile.Analyst Yes. a number of Chinese companies in the middle of last year. particularly those companies that became public in the US through a reverse merger process. A number of them later become of a more.CGFI Group . Mr. it wouldn't seem possible to raise capital from the US capital markets on the favorable terms. including by framing or similar means. Justin Lumiere . The private equity funds and the government funds and all that. And so. funding opportunities we believe for all Chinese companies seemed to dwindle rapidly after short seller attacks on Chinese companies.the Company will need to seek alternative source of financing for the next few years. in order to execute our business plan. like in the US. given that the Management expects. last year. there are some common practices in China.EVP Finance & IR Well. in October. so we needed to -. So we worked out a agreement with a third party that committed to provide an assistance to act in an advisory role to help the Company to raise capital in the next few years. Yang has just mentioned. So.like Mr. So we believed that we needed to take quick action before opportunities to obtain financing deteriorated any further. All rights reserved. so it is natural that the Company would target financial institutions in China. Christy Shue . what's good -. And if we will want to continue to grow the Company. that you would require the assistance of a third-party advisor to tap the capital markets? Couldn't you go directly to banks? Christy Shue . to US-listed Chinese companies. under these circumstances. But however. okay. obviously. in the near term. Although you started to develop a lot of advisory companies like the investment bankers. Justin Lumiere . So. not just a few. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.Harbin Electric Inc .capital market as in the US. is this something that's necessary in China. doing business there.competing with the global companies. very good. the Company has most of its operations in China. it's developing.to give the Management the ability to further access the US capital markets provide the Management with some comfort and flexibility with respect to future financing when making growth plans and business decisions. the -. 9 THOMSON REUTERS STREETEVENTS | www. And the Management has ambitions to build the Company into a world-class and comparable -. Also. arrange something that would take a commission a lot higher than that. and funding supply in China has been growing rapidly. So you do have to consider.that's public information -. 2011 / 1:00PM. 10. really has grown rapidly in China. the Company had received ongoing private buyout proposal submitted by the Chairman. the technology and the capital are a critical part to the Company's future. systems have not established sophisticatedly and maturely and.Harbin Electric Inc . once the Company -.EVP Finance & IR Yes. Yang. you should know that China is not as mature market -.best for the business. HRBN . especially if the Company is taken private. the Company filed $100m self-registration statement -.streetevents. Republication or redistribution of Thomson Reuters content. But in China. So the Company has the most -.Q2 2011 Harbin Electric Inc Earnings Conference Call You might remember. So our Management quickly assessed the situation and believe that. I guess what I wanted to know also.since.Analyst Okay. or possibly at all. any investment bankers that arrange a loan. the Company would completely lose access to the US capital markets. or very difficult. is prohibited without the prior written consent of Thomson Reuters.com | Contact Us ©2011 Thomson Reuters.FINAL TRANSCRIPT Aug.CGFI Group . everybody knows. starting in the middle of 2010. although it's growing.

Q2 2011 Harbin Electric Inc Earnings Conference Call Justin Lumiere .EVP Finance & IR We do not have any details to provide. we'll disclose. I was wondering if you have any kind of timeline or deadline for the SEC review regarding the management-led buyout. Christy Shue . if that's the case? Christy Shue .Analyst Hi.EVP Finance & IR Yes. is prohibited without the prior written consent of Thomson Reuters. seeking legal action against these short sellers. Operator The next question comes from Jonathan Hui of Senrigan Capital. Thank you.Analyst All right. Max Tsung . and could you provide some details? Christy Shue . including by framing or similar means. Jonathan Hui . we are not at the point to provide any details regarding that. Jonathan Hui . You mentioned earlier that a number of the short sellers had actually been making outright lies about the Company. if you've met with their lawyers or if you know what kind of information they're considering for their review? 10 THOMSON REUTERS STREETEVENTS | www. HRBN . I just had one question. thank you very much. If information that would be -. and if you have any idea of what kind of questions they're asking. we are not -. Jonathan Hui . 195 .Harbin Electric Inc .Senrigan Capital . Please go ahead.EVP Finance & IR We have stated in our press release the Company reserves the right to take legal actions against anyone who uses false information and attack the Company. or has the Management considered. I see.Senrigan Capital .Analyst Do you know what legal rights you have in this kind of situation. All rights reserved. 10.we don't feel it's appropriate to disclose those information yet.Cutler Group . Okay.streetevents.Harbin Electric Inc . Now have you considered. Republication or redistribution of Thomson Reuters content. At this point. Please go ahead.FINAL TRANSCRIPT Aug.that we believe it's appropriate to disclose. 2011 / 1:00PM.CGFI Group . But at this time.Analyst Hi. Thank you for taking my question. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.com | Contact Us ©2011 Thomson Reuters.Harbin Electric Inc .Analyst Okay. any other questions? Operator The next question comes from [Max Tsung of Cutler Group].Senrigan Capital .

Max Tsung . 196 . such a big company. on our part. So we will just work with them and will. So we realize that.Cutler Group . you really need a lot of work. actually we disclosed that fully in our 10K and we did also made some explanations in the 10K that -. at the end of the year we realized that still material weaknesses existed.before we turn off the conference. how long SEC will take. Republication or redistribution of Thomson Reuters content. 11 THOMSON REUTERS STREETEVENTS | www. (Spoken in Mandarin). Regarding to Frazer Frost question.EVP Finance & IR Okay. we do not have control on the time. is prohibited without the prior written consent of Thomson Reuters.FINAL TRANSCRIPT Aug. we will work with SEC to respond to any comments they have.what are the material weaknesses. and so.Harbin Electric Inc . And.Chairman and CEO (Spoken in Mandarin). 2011 / 1:00PM. a large former state-owned company. Christy Shue . thanks. I was wondering. given that they've been involved in some questionable accounting practices at other firms. And then one other question. last year (inaudible). But however. does not mean that every other company audited by the same auditor would have problems or the auditor would have -.for all the other companies. thank you very much. Or maybe alleged the problem.make mistakes or any -.particularly we mentioned that it's mainly associated with our Xi'an Simo facility. But. So I don't think that it's appropriate to say that. we have -. and so that -. The SEC review process is a standard procedure. -we will ensure that the process goes as smoothly as possible. and we will just close the conference now. what are the -. and we follow the SEC regulations and the laws to disclosure area. 10. Okay. including by framing or similar means. looking at your last 10K.Harbin Electric Inc .Harbin Electric Inc . All rights reserved. and that's all our intention as to for the best of the Company and also be responsible for our shareholders. we will disclose. from our part. we know where we are weak and where we need to improve.streetevents. has been working rigorously to enhance the internal control procedure at Xi'an Simo since the day that we acquired them.we run out of the time.Analyst Okay.if they have any comments. and the SEC will take their time.Q2 2011 Harbin Electric Inc Earnings Conference Call Christy Shue . I would like to pass this call to Mr. And so we don't hide those.Harbin Electric Inc . Tianfu Yang . One of the allegations that the short sellers have made is that the internal controls of the auditing that you have might not be sufficient.EVP Finance & IR As far as the material weaknesses that the short sellers are accusing. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. But I would like to -.Analyst Okay. which was a state-owned company that we acquired in 2009. accused the problem. Max Tsung .the Company. So we are -. I don't think it's appropriate to say that one company had a problem or the company audited by this auditor had a problem.EVP Finance & IR We do not have those details available. Well. obviously. I was wondering if you still find they are sufficient or if you've considered finding an alternative auditor for your finances? Christy Shue . HRBN . it said that Frazer Frost was your current auditor. If we have weaknesses. And we will work with SEC to -.I will just close my comments on that point. Yang. to see if he has any closing remarks before we call off.com | Contact Us ©2011 Thomson Reuters. the Management.Cutler Group . but we will continue to deal with that and enhance in full our Company.

content. And I truly think that those are my asset and those are the best part. at this moment. And we did get a lot of attention from the marketplace from our shareholders and from interested investors. to create value for our shareholders and to protect our shareholders' interest and benefit. All Rights Reserved. please feel free to call me at 61 312 8612. that I really had -. In the conference calls upon which Event Transcripts are based. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. I believe our responsibility. the Company has -. is prohibited without the prior written consent of Thomson Reuters. And obviously. HRBN . have a nice day. I should say.or is in a very complex situation right -.Q2 2011 Harbin Electric Inc Earnings Conference Call Christy Shue . All rights reserved. And also. Yang and the Company a lot of support. which he fully appreciate.EVP Finance & IR Okay. including by framing or similar means. companies may make projections or other forward-looking statements regarding a variety of items. in the past. 2011 / 1:00PM. And. IN NO WAY DOES THOMSON REUTERS OR THE APPLICABLE COMPANY ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY EVENT TRANSCRIPT.FINAL TRANSCRIPT Aug. Republication or redistribution of Thomson Reuters content. THERE MAY BE MATERIAL ERRORS. and it matters for our support. 4169367-2011-08-10T20:05:12. And this is what I actually believe. which are more specifically identified in the companies' most recent SEC filings. Bye-bye.create value for our shareholders and to protect our shareholders' value. Okay. there can be no assurance that the results contemplated in the forward-looking statements will be realized. Mr. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.that we really have had the shareholders' support. First of all. DISCLAIMER Thomson Reuters reserves the right to make changes to documents.loyal shareholders have supported the Company. and we also appreciate the shareholders. he was very happy that he has the chance to share with our shareholders the achievements that the Company has made so far. therefore. You may now disconnect. any of the assumptions could prove inaccurate or incorrect and. I so [badly]. OMISSIONS. Such forward-looking statements are based upon current expectations and involve risks and uncertainties. the whole -. Actual results may differ materially from those stated in any forward-looking statement based on a number of important factors and risks. and the Management.entire employees of the Company has worked so hard to add value to our shareholders. Thomson Reuters. very critical point at this moment. Operator The conference is now concluded. Thank you for attending today's presentation. 197 . Although the companies may indicate and believe that the assumptions underlying the forward-looking statements are reasonable. And the Company. So and we appreciate for shareholders. and this is the best part of my life. one of the responsibility is to make to -. or other information on this web site without obligation to notify any person of such changes. 10. have given Mr.463 12 THOMSON REUTERS STREETEVENTS | www. our shareholders have supported the Company -. OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS.critical. Yang wants to say a few words. that's the close for the conference today. if anyone has further questions.streetevents. And thank you. truly want to thank you.com | Contact Us ©2011 Thomson Reuters. And.Harbin Electric Inc . and we will work every effort to continue to do so. ©2011. THE INFORMATION CONTAINED IN EVENT TRANSCRIPTS IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION.

EQUITY RESEARCH

COMPANY UPDATE
China August 4, 2011
Closing Price (8/3/11): 12-Month Target Price: 52-Week Range: Market Cap (MM): Shares O/S (MM): Float (MM): Shares Short (MM): Avg. Vol. (000) Book Value/Share: Dividend/Yield: Risk Profile: Maxim Group FYE: December 1Q 2Q 3Q 4Q FY Maxim Group FYE: December 2009A: GAAP 2010A: GAAP 2011E: GAAP 2012E: GAAP LT Earnings Growth Maxim Group FYE: December 1Q 2Q 3Q 4Q FY Consensus-First Call FYE: December 1Q 2Q 3Q 4Q FY Echo He, MD, PhD ehe@maximgrp.com $17.68 $24 $5.82 - $25.05 $555.2 31.4 16.8 7.7 2,040 $19.60 NA Medium Revenues ($M) 2011E 2012E $103.8A $122.1 $112.2 $134.7 $123.0 $140.4 $131.6 $150.4 $470.7 $547.6 Current Current EPS P/E $0.77 23.0 $2.46 7.2 $2.14 8.3 $2.67 6.6 10% - 15% GAAP Quarterly EPS Current 2011E $0.34A $0.48 $0.63 $0.68 Current 2012E $0.58 $0.66 $0.70 $0.74

Harbin Electric, Inc.
(HRBN – Nasdaq – $17.68)

Buy

Expecting margin pressure in 2Q11; Progress of SEC approval is a near-term catalyst; Reiterate Buy and $24 price target
HRBN is scheduled to report 2Q11 financial results on Tuesday, August 9, after the Market closes. A conference call is scheduled for 9:00am EDT the next day (Wednesday, August 10), with a dial-in number of (877) 317-6789 and the ID Harbin Electric.
We expect HRBN to report revenue inline or higher than consensus and our estimates, mainly driven by gradual capacity expansion in its rotary motor facilities. However, its EPS may come below consensus and our estimate, mainly due to an increase in raw material prices. Chinese manufacturers across the board are experiencing margin pressure. On one hand, prices of basic raw materials (steel and copper are specific to HRBN), labor, utilities and transportations are mostly higher than last year; on the other hand, government’s price control on key manufacturing products prevents them from raising ASP. Our channel checks show that steel and copper prices increased in 2Q11 by 3% and 24% y/y, respectively. The SEC approval process of HRBN’s LBO may be shorter than previously expected. Recently, another Chinese company, China Security and Surveillance Technology, Inc. (CSR – NR) received SEC approval on its LBO proposal, announcing on July 29 a record date and a meeting date for its annual shareholders meeting to vote on the LBO proposal. CSR filed its first draft of 13E-3 and preliminary proxy on May 31, 2011, and followed with three amended versions thereafter. Based on CSR’s timeline, HRBN may be able to receive SEC approval by the end of September, about two months after its first filing of schedule 13E-3 and preliminary proxy on July 13. 2011. We reiterate our Buy rating. Our $24 price target is mainly based on a favorable outcome of HRBN’s LBO. In our opinion, the persistent gap, currently ~30% between the share price and the LBO offering price at $24 per share, creates buying opportunities.

$2.14 $2.67 Quarterly EPS 2011E 2012E $0.34A $0.58 $0.50 $0.66 $0.62 $0.70 $0.66 $0.74 $2.12 $2.78 (212) 895-3718

Maxim Group LLC 405 Lexington Avenue New York, NY 10174 – www.maximgrp.com
SEE PAGES 4-6 FOR IMPORTANT DISCLOSURES AND DISCLAIMERS 198

Harbin Electric, Inc. (HRBN)
Exhibit 1. Maxim Estimates vs. Consensus
2Q11E Total Rev ($M) GAAP EPS ($) Maxim Consensus Est Est $ 112.2 $ 113.8 $ 0.48 $ 0.50 Maxim Consensus Est Est $ 470.7 $ 473.8 $ 2.14 $ 2.12 Maxim vs. Consensus -1% -3% Maxim vs. Consensus -1% 1%

2011E Total Rev ($M) GAAP EPS ($)

Exhibit 2. HRBN – Comparable Companies
8/3 Company Harbin Electric TKR HRBN Price $ 17.68 LAST $ $ $ $ $ $ $ $ $ 6.66 1.67 6.40 6.39 0.59 5.42 7.65 3.76 4.81 MktCap (mm) $ 554 EPS P/E __________________________________________________ 10A 11E 12E 10A 11E 12E $ 2.46 $ 2.14 $ 2.67 7.2x 8.3x 6.6x

Chinese Industrial Companies China Automotive CAAS A-Power APWR FushiCopperweld FSIN Lihua International LIWA Shengdatech SDTH Wonder Auto WATG ChemSpec CPC China Gerui Adv. Materia CHOP SORL Auto Parts SORL Average HK Listed China Motor Companies Harbin Power Equipment 1133-HK Shanghai Electric Group 2727-HK Dongfang Electric Group 1072-HK Chongqing Machinery & E2722-HK Shanghai Prime Machine 2345-HK Average

$ $ $ $ $ $ $ $ $

180 76 238 244 32 184 276 158 93

$ -$ $ $ $ $ $ $

1.10 1.30 1.40 0.49 0.96 0.95 1.01 1.06

$ -$ $ -$ $ $ $

1.19 1.18 1.78 1.28 1.05 1.08 1.10

$ -$ $ -$ $ $ $

1.25 -1.37 1.80 1.57 1.21 1.34 1.26

6.1x -4.9x 4.6x 1.2x -5.6x 8.1x 3.7x 4.5x 4.8x

5.6x -5.4x 3.6x -4.2x 7.3x 3.5x 4.4x 4.9x

5.3x 4.7x 3.6x 3.5x 6.3x 2.8x 3.8x 4.3x

$ $ $ $ $

1.23 0.51 3.51 0.28 0.21

$ $ $ $ $

833 1,527 1,193 308 158

$ $ $ $ $

0.11 0.03 0.20 0.03 0.02

$ $ $ $ $

0.11 0.04 0.23 0.03 0.02

$ $ $ $ $

0.12 0.04 0.27 0.04 0.02

10.9x 15.5x 17.8x 9.7x 10.9x 13.0x

11.4x 13.8x 15.3x 8.8x 9.8x 11.8x

10.4x 12.4x 13.2x 7.7x 8.7x 10.4x

China Mainland Listed China Motor Companies Xiangtan Electric 600416-SH $ 1.74 Zhejiang Founder Motor 002196-SZ $ 2.65 BroadOcean 002249-SZ $ 3.07 Jiangte Electric Motor 002176-SZ $ 4.02 Shanghai Electric Group 601727-SH $ 1.00 Dongfang Electric Group 600875-SH $ 3.80 Average

$ $ $ $ $ $

1,059 288 1,467 436 9,881 6,317

$ $ $ $ $ $

0.06 0.04 0.08 0.05 0.03 0.20

$ $ $ $ $ $

0.08 0.05 0.12 0.05 0.04 0.24

$ $ $ $ -$

0.12 0.15 0.18 0.07 0.28

29.4x 69.9x 38.2x 88.4x 30.2x 19.4x 45.9x

20.9x 48.6x 24.9x 83.2x 24.5x -15.8x 26.9x

14.1x 17.8x 16.7x 55.9x 13.4x 23.6x

US/International Motor Companies Siemens SI $ 117.51 $ 102,084 ABB ABB $ 23.13 $ 52,968 Emerson Electric EMR $ 48.46 $ 36,499 Illinois Tool Works ITW $ 48.87 $ 24,556 Cummins CMI $ 101.54 $ 20,064 Magna International MGA $ 46.98 $ 5,297 Rockwell Automation ROK $ 70.82 $ 10,099 Lear Corporation LEA $ 47.05 $ 2,197 Regal Beloit RBC $ 57.99 $ 2,233 Smith AO AOS $ 40.69 $ 1,242 Franklin Electric FELE $ 44.51 $ 1,035 Average Source: Thomson One, Bloomberg and Maxim Group estimates.

$ 6.09 $ 1.25 $ 2.69 $ 3.08 $ 5.17 $ 4.34 $ 3.05 $ 4.42 n/a $ 2.87 $ 1.94

$ 11.30 $ 1.58 $ 3.26 $ 3.82 $ 8.93 $ 5.16 $ 4.64 $ 5.30 n/a $ 2.18 $ 2.54

$ 10.94 $ 1.94 $ 3.83 $ 4.47 $ 10.63 $ 5.59 $ 5.43 $ 6.00 n/a -$ 2.97 $ 2.96

19.3x 18.5x 18.0x 15.9x 19.6x 10.8x 23.2x 10.7x -14.2x 22.9x 17.3x

10.4x 14.6x 14.9x 12.8x 11.4x 9.1x 15.3x 8.9x -18.6x 17.6x 13.4x

10.7x 11.9x 12.7x 10.9x 9.5x 8.4x 13.0x 7.8x 13.7x 15.1x 11.4x

Maxim Group LLC

2

199

Harbin Electric, Inc. (HRBN)
Exhibit 3. HRBN-Income Statement
(In millions except per shr) Revenue Drivers: Linear Motors Y/Y Growth % of Total Rev Specialty Micro-Motors Y/Y Growth % of Total Rev Rotary Motors - Weihai Y/Y Growth % of Total Rev Rotary Motors - Xi'an Y/Y Growth % of Total Rev Revenues Y/Y Growth Cost of sales Gross profit Y/Y Growth Gross Margin R&D As % of Rev G&A As % of Rev Total operating expenses Income from operations Y/Y Growth Operating Margin Other income (expenses), net Interest expense, net Total other income (expense) Income before income taxes Provision for income taxes Tax Rate Net income before noncontrolling intere Minority interests As % of net income Net income Y/Y Growth Net Margin Foreign currency translation adjustmen Comprehensive income Weighted average shares outstanding Basic Diluted EPS (to controlling interest) Basic Diluted Y/Y Growth D&A Share-based compensation EBITDA EBITDA margin Exchange Rate (RMB/US$) $ $ 2004 Full Yr 2005 Full Yr 2006 Full Yr 2007 Full Yr 36.6 2008 Full Yr 49.5 35% 41% 33.8 85% 28% 27.8 2009 Full Yr 2010 Full Yr 1Q11 31-Mar 2Q11E 30-Jun 3Q11E 30-Sep 4Q11E 31-Dec 2011E Full Yr 1Q12E 31-Mar 2Q121E 30-Jun 3Q12E 30-Sep 4Q12E 31-Dec 2012E Full Yr

$

4.9 (2.3) 2.6 52.9% (0.1) 1.9% (0.2) 3.8% (0.3) 2.3 47.1% 0.0 0.0 2.3 0.0% 2.3 0.0% 2.3 47.6% 2.2 6.4 6.4 0.36 0.36 0.1 2.4 48.6% 8.28

$

23.6 $ 387% (12.1) 11.6 350% 48.9% (0.3) 1.4% (1.3) 5.3% (1.6) 10.0 42.1% 0.0 0.0 10.0 0.0% 10.0 0.0% 10.0 333% 42.3% 0.5 11.1 14.9 15.1

76.3 19.3 18.1 19.3 20.4 77.2 21.2 20.8 21.3 23.5 86.8 27% -3% -10% 0% 20% 1% 10% 15% 10% 15% 12% 56% 18% 19% 16% 16% 16% 16% 17% 15% 15% 16% 16% 18.3 60.8 15.5 14.7 15.3 16.1 61.7 17.1 16.2 16.8 17.7 67.9 51% -4% (3.0%) 0% 15% 2% 10% 10% 10% 10% 10% 28% 14% 15% 13% 12% 12% 13% 14% 12% 12% 12% 12% 93.2 21.8 25.9 27.0 30.8 105.5 27.2 31.1 31.9 35.5 125.7 31% -3% 10% 15% 30% 13% 25% 20% 18% 15% 19% 0% 22% 21% 23% 22% 23% 22% 22% 23% 23% 24% 23% 188.5 46.3 51.3 58.7 62.4 218.7 55.6 64.1 67.5 71.8 258.9 11% 3% 15% 20% 25% 16% 20% 25% 15% 15% 18% 0% 0% 20% 44% 45% 46% 48% 47% 46% 46% 48% 48% 48% 47% 40.4 $ 65.4 $ 120.8 $ 223.2 $ 426.5 $ 103.8 $ 112.2 $ 123.0 $ 131.6 $ 470.7 $ 122.1 $ 134.7 $ 140.4 $ 150.4 $ 547.6 71% 62% 85% 85% 91% (1.6%) 6% 12% 24% 10% 18% 20% 14% 14% 16% (20.8) (33.0) (73.3) (146.6) (290.8) (73.6) (80.4) (87.6) (94.1) (335.7) (87.0) (96.5) (100.5) (107.9) (391.9) 19.7 70% 48.6% (1.5) 3.7% (4.2) 10.3% (5.7) 14.0 34.6% 0.0 (2.5) 4.4 18.4 0.0% 18.4 0.0% 18.4 84% 45.6% 1.0 19.5 16.6 18.3 32.4 65% 49.6% (1.1) 1.6% (7.7) 11.7% (8.7) 23.7 36.3% (0.2) (6.6) (6.8) 16.9 0.0% 16.9 0.0% 16.9 (8%) 25.8% 7.2 13.2 17.1 18.6 47.5 46% 39.3% (1.2) 1.0% (11.9) 9.9% (13.1) 34.4 45% 28.5% 1.6 (6.1) (4.5) 29.9 (4.5) 15.1% 25.4 0.0% 25.4 50% 21.0% 9.5 40.0 20.2 21.3 76.6 61% 34.3% (2.1) 0.9% (18.7) 8.4% (20.8) 55.8 62% 25.0% 5.5 (12.3) (24.9) 30.9 (7.8) 25.2% 23.1 (3.5) 11.3% 19.6 (23%) 8.8% (0.1) 16.3 25.6 25.7 135.7 77% 31.8% (3.4) 0.8% (39.0) 9.1% (42.4) 93.3 67% 21.9% 5.5 (4.6) 0.8 94.2 (14.9) 15.8% 79.2 (2.4) 2.6% 76.8 291% 18.0% 13.7 90.5 31.1 31.3 30.2 (15%) 29.1% (3.9) 3.7% (10.1) 9.7% (14.0) 16.3 (41%) 15.7% 1.1 (1.9) (1.2) 15.0 (4.2) 27.9% 10.8 (0.0) 0.1% 10.8 (47.4%) 10.4% 2.4 13.3 31.3 31.4 31.9 -10% 28.4% (1.3) 1.2% (10.3) 9.2% (11.7) 20.2 (28%) 18.0% 1.2 (1.9) (1.2) 19.1 (3.8) 20.0% 15.2 0.0% 15.2 (40.6%) 13.6% 15.2 31.3 31.4 35.4 5% 28.8% (1.2) 1.0% (9.0) 7.3% (10.2) 25.2 15% 20.5% 1.3 (1.9) (1.0) 24.1 (4.3) 18.0% 19.8 0.0% 19.8 11% 16.1% 19.8 31.4 31.5 0.63 $ 0.63 $ 10% 2.9 0.1 28.2 6.51 37.5 21% 28.5% (1.3) 1.0% (9.5) 7.2% (10.8) 26.7 71% 20.3% 1.4 (1.9) (0.9) 25.8 (4.4) 17.0% 21.4 0.0% 21.4 69% 16.3% 21.4 31.4 31.6 135.0 -1% 28.7% (7.8) 1.7% (38.9) 8.3% (46.6) 88.4 -5% 18.8% 5.1 (7.7) (4.4) 84.0 (16.7) 19.9% 67.3 (0.0) 0.0% 67.3 -12% 14.3% 67.3 31.3 31.5 35.1 16% 28.8% (1.0) 0.8% (10.0) 8.2% (11.0) 24.1 48% 19.8% 1.2 (1.9) (1.1) 23.0 (4.6) 20.0% 18.4 0.0% 18.4 70% 15.1% 18.4 31.5 31.6 0.58 $ 0.58 $ 69% 38.2 20% 28.4% (1.1) 0.8% (10.1) 7.5% (11.2) 27.0 34% 20.1% 1.5 (1.9) (0.9) 26.2 (5.2) 20.0% 20.9 0.0% 20.9 37% 15.5% 20.9 31.6 31.7 0.66 $ 0.66 $ 36% 39.9 13% 28.4% (1.1) 0.8% (10.2) 7.3% (11.4) 28.5 13% 20.3% 1.4 (1.9) (0.9) 27.6 (5.5) 20.0% 22.1 0.0% 22.1 12% 15.7% 22.1 31.6 31.7 0.70 $ 0.70 $ 11% 42.5 13% 28.2% (1.2) 0.8% (11.0) 7.3% (12.2) 30.3 13% 20.1% 1.3 (1.9) (1.1) 29.2 (5.8) 20.0% 23.4 0.0% 23.4 9% 15.5% 23.4 31.7 31.8 0.74 $ 0.74 $ 8% 155.7 15% 28.4% (4.4) 0.8% (41.3) 7.5% (45.7) 109.9 24% 20.1% 5.5 (7.7) (4.0) 106.0 (21.2) 20.0% 84.8 0.0% 84.8 26% 15.5% 84.8 31.6 31.7 2.68 2.67 25% 14.7 1.3 125.9 23.0% 6.36

60.3 22% 27% 40.2 19% 18% 71.4 157% 23% 32% $ 44.5

$ $

0.67 $ 0.66 $ 82% 0.4 10.3 43.7% 8.07

1.11 $ 0.99 $ 1.01 $ 0.91 $ 53% (10%) 2.2 6.2 0.9 1.6 17.1 42.3% 7.80 31.4 48.1% 7.30

1.25 $ 0.77 $ 2.47 $ 0.35 $ 0.49 $ 1.19 $ 0.77 $ 2.46 $ 0.34 $ 0.48 $ 31% (35.7%) 221% (47.4%) (40.8%) 7.7 17.0 11.5 2.9 2.9 1.8 1.2 1.0 0.1 0.1 43.8 36.3% 6.83 74.1 33.2% 6.84 105.8 24.8% 6.76 19.3 6.57 23.2 6.54

0.68 $ 2.15 $ 0.68 $ 2.14 $ 54% -13% 2.9 11.5 0.1 0.4 29.7 6.48 100.4 21.3% 6.48

6.45

6.42

6.39

6.36

Source: Company reports and Maxim Group estimates.

Maxim Group LLC

3

200

Harbin Electric, Inc. (HRBN) DISCLOSURES

Source: Investars.com

Maxim Group LLC Stock Rating System

As of:
% of Coverage Universe

8/4/2011
% of Ratings for which Firm provided Banking Services in the last 12 months 24.5% 0.0% 0.0%

Expected Performance* Buy Hold Sell Expected total return of 15% or more over next 12 months Expected total return of plus or minus 14% over next 12 months Expected total negative return of at least 15% over next 12 months

with Rating 65.3% 26.7% 8.0%

* Relative to Nasdaq Composite. An Under Review (UR) rating represents a stock that the Firm has temporarily placed under review due to a material change.

Maxim Group makes a market in Harbin Electric, Inc. Maxim Group expects to receive or intends to seek compensation for investment banking services from Harbin Electric, Inc. in the next 3 months.

I, Echo He, attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer. Furthermore, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report. The research analyst(s) primarily responsible for the preparation of this research report have received compensation based upon various factors, including the firm’s total revenues, a portion of which is generated by investment banking activities. Valuation Methods: Our Harbin Electric, Inc. valuation is based on the announced $24 per share price in the leverage buyout proposal. It is also supported by our comparable company analysis and discount cash flow method. Price Target and Investment Risks: Aside from general market and other economic risks, risks particular to our Harbin Electric, Inc. rating include: (1) Failure of the proposed LBO to be completed; (2) Slowdown of

Maxim Group LLC

4

201

Harbin Electric, Inc. (HRBN)
Chinese economy; (3) Raw material price increases; (4) High competition in industrial motor market; (5) Difficulties of developing linear motor market; and (6) Potential equity issuance.

RISK RATINGS
Risk ratings take into account both fundamental criteria and price volatility. Speculative – Fundamental Criteria: This is a risk rating assigned to early-stage companies with minimal to no revenues, lack of earnings, balance sheet concerns, and/or a short operating history. Accordingly, fundamental risk is expected to be significantly above the industry. Price Volatility: Because of the inherent fundamental criteria of the companies falling within this risk category, the price volatility is expected to be significant with the possibility that the investment could eventually be worthless. Speculative stocks may not be suitable for a significant class of individual investors. High – Fundamental Criteria: This is a risk rating assigned to companies having below-average revenue and earnings visibility, negative cash flow, and low market cap or public float. Accordingly, fundamental risk is expected to be above the industry. Price volatility: The price volatility of companies falling within this category is expected to be above the industry. High-risk stocks may not be suitable for a significant class of individual investors. Medium – Fundamental Criteria: This is a risk rating assigned to companies that may have average revenue and earnings visibility, positive cash flow, and is fairly liquid. Accordingly, both price volatility and fundamental risk are expected to approximate the industry average. Low – Fundamental Criteria: This is a risk rating assigned to companies that may have above-average revenue and earnings visibility, positive cash flow, and is fairly liquid. Accordingly, both price volatility and fundamental risk are expected to be below the industry.

DISCLAIMERS
Some companies that Maxim Group LLC follows are emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. The securities discussed in Maxim Group LLC research reports may not be suitable for some investors. Investors must make their own determination as to the appropriateness of an investment in any securities referred to herein, based on their specific investment objectives, financial status and risk tolerance.

Maxim Group LLC

5

202

Harbin Electric, Inc. (HRBN)
This communication is neither an offer to sell nor a solicitation of an offer to buy any securities mentioned herein. This publication is confidential for the information of the addressee only and may not be reproduced in whole or in part, copies circulated, or disclosed to another party, without the prior written consent of Maxim Group, LLC (“Maxim”). Information and opinions presented in this report have been obtained or derived from sources believed by Maxim to be reliable, but Maxim makes no representation as to their accuracy or completeness. The aforementioned sentence does not apply to the disclosures required by NASD Rule 2711. Maxim accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to Maxim. This report is not to be relied upon in substitution for the exercise of independent judgment. Maxim may have issued, and may in the future issue, other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. Those reports reflect the different assumptions, views and analytical methods of the analysts who prepared them and Maxim is under no obligation to ensure that such other reports are brought to the attention of any recipient of this report. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by Maxim and are subject to change without notice. The price, value of and income from any of the securities mentioned in this report can fall as well as rise. The value of securities is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities. Investors in securities such as ADRs, the values of which are influenced by currency volatility, effectively assume this risk. Securities recommended, offered or sold by Maxim: (1) are not insured by the Federal Deposit Insurance Company; (2) are not deposits or other obligations of any insured depository institution; and 3) are subject to investment risks, including the possible loss of principal invested. Indeed, in the case of some investments, the potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to pay more money to support these losses.

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST

Maxim Group LLC

6

203

Mark Tobin, (949) 720-5775 mtobin@roth.com Kun Tao, CFA, (949) 720-7149 ktao@roth.com Emma Jia Zhao, CFA, ezhao@roth.com Sales (800) 933-6830, Trading (800) 933-6820

INDUSTRY NOTE | CHINA EQUITY RESEARCH | July 19, 2011

China
U.S.-Listed China - Privatization, PE Investment, & Dual-Listing (5th Edition)
This report provides an update on the activity within the U.S.-listed China sector related to privatization, PE investment, and dual-listing. It includes a table providing details for each company pursuing privatization. PRIVATIZATION UPDATE Since our last edition (dated June 21, 2011), two more companies (CHNG, TBV) made goingprivate announcements, bringing the total number of active privatization transactions within the U.S.-listed China sector to ten. Please refer to the attached tables for relevant details. We have once again expanded our tables to include more information as deals proceed. Below are some updates since our last edition, including the official filing of HRBN's SC 13E3 together with a preliminary proxy document. We believe this event was noteworthy, bolstering confidence in many of the ongoing privatizations. This confidence was reflected in stock prices, with discounts to respective offer prices narrowing by more than 10 percentage points on average over the past month.
s

Reason for Report:
Industry Update

Roth Covered Companies Mentioned in this Report:
CFSG FSIN FTLK HRBN $8.31 $7.86 $6.71 $19.09 Neutral Buy Buy Buy

Stock prices are as of previous day's close, if not otherwise specified

s

s s

s

June 27, 2011 - TBV filed SC 13E3 announcing its Chairman & CEO, who currently owns 95.1% stake, is to take the company private for $1.72 per share. As this is deemed short-form merger under Section 253 of the Delaware General Corporation Law, no board approval or shareholder vote is required. June 30, 2011 - CHNG announced that its Chairman & CEO (owns ~14% of the company) is working with a consortium backed by Themes Investment Partners to formulate a proposal to take the company private. July 5, 2011 - CSR announced expiration of Go-shop period. July 11, 2011 - CPC announced that shareholder extraordinary general meeting of shareholders to consider and vote on the going-private proposal would be held on Aug 15, 2011 in Shanghai. July 13, 2011 - HRBN officially filed SC13E3 together with preliminary proxy document.

ATV's TENDER OFFER Related to this activity, on July 12th, Acorn International's (ATV) co-founders (Chairman and CEO) successfully completed a tender offer, purchasing 20M ordinary shares and regaining a 52% controlling stake in the company. Of note, the board recommended shareholders reject the tender offer based on a number of factors; however, a tender offer is not subject to board approval and nonetheless was executed (oversubscribed). We view tender offers as an alternative method (vs. privatization) for Chairmen/management to increase ownership.

Important Disclosures & Regulation AC Certification(s) are located on page 6 to 8 of this report.
Roth Capital Partners, LLC | 24 Corporate Plaza | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC

204

CHINA
Summary of On-going Deals
China Natural Gas CNinsure CHNG CISG Chairman & CEO, TPG Asia, Chairman consortium backed by & CEO, CDH Themes Investment Inservice Partners Jun-30-2011 14.0% $4.25
(1)

China Industry Note - July 19, 2011
Chemspec International CPC Chairman & CEO, Primavera China Security & China Fire & Surveillance Security Technology CFSG CSR Bain Capital Chairman & CEO (Management's 59.1% stake already agreed to vote for the agreement) Mar-07-2011 59.1% $9.00 43.8% --17.3x 16.4x $8.31 (7.7%) Board approved, pending shareholder vote; Expected to close by Nov 15, 2011 May-20-2011 Jun-10-2011 Mar-08-2011 20.9% $6.50 58.5% --6.8x 5.9x $5.32 (18.2%) Board approved, pending shareholder vote

Buyers (as announced)

Funtalk China Fushi Copperweld FTLK FSIN Chairman & CEO (key Chariman & CEO, mgt), ARCH, Capital Abax Global Capital Ally, GM Investment

Harbin Electric HRBN Chairman & CEO, Abax Global Capital

Puda Coal PUDA Chairman

(4)

Tiens Biotech Group TBV TIENS (USA) Investment Holdings Group (owned by Chairman & CEO) Jun-27-2011 95.1% $1.72 67.0% --28.7x NA $1.60 (7.0%) Short-form merger. No need for board approval nor shareholder vote N/A Jun-27-2011 N/A $122.7M

Announcement Date Pre-deal Buyer/mgmt Ownership % Bid Price per Share or ADS Premium over previous day close Price Revision Date Revised Price P/E (TTM) P/E (NTM)
(2) (2)

May-16-2011 34.3% $19.00 44.4% --15.0x 13.3x $14.81 (22.1%) Under board review

Nov-11-2010 55.8% $8.00 26.6% Mar-21-2011 $8.10 9.0x 8.2x $7.80 (3.7%) Shareholder EGM scheduled on Aug 15, 2011; Expected to close by the end of Q3'11 Mar-21-2011 May-03-2011

Mar-25-2011 77.1% $7.10 15.4% May-31-2011 $7.20 8.4x 8.7x $6.71 (6.8%) Board approved, pending shareholder vote; Expected to close by the end of Q3' 2011 May-31-2011 Jun-14-2011

Nov-03-2010 29.2% $11.50 26.4% --8.8x 8.2x $7.86 (31.7%) Under board review

Oct-11-2010 40.6% $24.00 20.2% --8.8x 7.3x $19.09 (20.5%) Board approved, pending shareholder vote; Expected to close in Q4' 2011 Jun-20-2011 Jul-13-2011 >50% total & >50% of disinterested shares $750.0M (1) Debt: CDB-$400M, Abax note-$25M; (2) Equity: Abax cash$38.8M, Mgmt rollover$264.1M, Abax rollover-$40.6M China Development Bank: US$ 400M Abax: US$25M 23.2% Morgan Stanley & Co. / Lazard Freres & Co. LLC Gibson, Dunn & Crutcher LLP

Apr-29-2011 31.6% $12.00 100.0% --10.9x 10.1x $6.00 (50.0%) Under board review; Shares halted since Apr 11, 2011

22.8% --5.8x 5.2x $3.41 (19.8%) Board informed; (buyers formulating proposal)

Current Price (07/18/2011) Current Discount to Bid Price Status

Board Approval / Definitive Agreement Initial Filing of SC 13E3 Voting Requirement Implied Equity Value (3)

Pending N/A N/A $91.2M

Pending N/A N/A $953.1M

Apr-20-2011 May-31-2011

Pending N/A N/A $439.3M

Pending N/A N/A $360.0M

>50% total & >75% total & >50% of disinterested >2/3 of voting shares >50% of disinterested >50% of disinterested shares at EGM shares shares $292.0M $257.8M $583.2M $433.9M (1) Debt: None; (2) Equity: PAG Asia Capital-$150M (5) , PE rollover-$223.5M , Mgmt rollover$111.1M None 77.7% Bank of America Merrill Lynch

Source of funding

N/A

The Acquisition will be funded by equity capital from buyer group

(1) Debt: $70M; (2) Equity: Primavera$65M, Mgmt-$6M, Mgmt rollover- $168M

(1) Debt: $60M; (2) Equity: Bain$160.7M, Mgmt rollover-$51.3M

(1) Debt: $500M; (2) Equity: Mgmt rollover-$141.1M

N/A

N/A

(1) Debt:None; (2) Equity: Buyer$6.6M; Mgmt rollover116.7M

Debt Financing Detail Post-deal Private Equity Ownership

N/A N/A

None N/A

Standard Chartered US$ 70M 27.2%

BofA, Citi, HSBC US$ 60M 75.8%

China Development Bank US$ 500M PE not involved

N/A N/A

N/A N/A Cowen and Company, LLC / Morgan Joseph TriArtisan LLC Not disclosed

None PE Not involved

Board Financial Advisor

N/A

Duff & Phelps, LLC

Houlihan Lokey

Barclays Capital

Imperial Capital, LLC

BofA Merrill Lynch

N/A

Board Legal Advisor
(1) (2) (3) (4) (5)

N/A

O'Melveny & Myers LLP and Walkers

Shearman & Sterling LLP / Maples and Calder

Shearman & Sterling LLP

Skadden, Arps, Slate, Shearman & Sterling Meagher & Flom LLP / LLP Maples and Calder

Gibson, Dunn & Crutcher LLP

N/A

Premium of bid price above the closing price on previous trading day before announcement Valuation multiples are based on TTM and NTM EPS as of deal announcement date; data sourced from ROTH research if companies are covered, or Bloomberg if otherwise; NA indicates not available, NM indicates not meaningful Implied Equity Value is calculated based on latest available bid price and shares outstanding number as disclosed PUDA stock halted since April 11, 2011, lastest available close price is $6.00 US$ 150M investment in convertible preferred shares

Source: Company Filings, Bloomberg, ROTH Capital Partners

Page 2 of 8

205

CHINA

China Industry Note - July 19, 2011

Summary of Completed or Abandoned Deals BMP Sunstone BJGP Sanofi-Aventis Buyers (as announced)

Announcement Date Pre-deal Buyer/mgmt Ownership % Bid Price per Share or ADS Price 1-Day Prior to Announcement Premium (1) P/E (TTM) (3) P/E (NTM) (3) Status

Oct-28-2010 23.0% $10.00 $7.66 31% 125.0x 90.9x Completed on Feb 24, 2011

Qiao Xing Mobile (2) QXM Parent Company Qiao Xing Universal Resources, Inc. (Nasdaq: XING) Sep-09-2010 61.0% $3.92 $3.55 10% NM NA Abandoned due to lack of quorum in shareholder meeting on Apr 7, 2011 Not involved Jan-03-2011 Oct-22-2010 >50% of disinterested voting shareholders representing >75% of voting disinterested shares Not involved Not disclosed Not disclosed

Tongjitang Chinese Medicines Sinoenergy TCM SNEN Skywide Capital Management Hanmax (controlled by CEO) / CEO & Director (owned by management) Fosun Oct-12-2009 39.1% $1.90 $1.28 48% NM NA Completed on Sep 29, 2010 Apr-08-2010 83.0% $4.50 $3.78 19% NM 18.0x Completed on Apr 15, 2011 Mar-10-2008 39.2% $10.20 $6.60 55% NM 11.3x Withdrawn on Jun 27, 2008

Debt/Convertible Financing Board Approval/Signing Definitive Agreement Initial Filing of SC 13E3 Voting Threshold Post-deal Private Equity Ownership Board Financial Advisor Board Legal Advisor
(1) (2)

Not involved Oct-28-2010 N/A >50% of toal shares

Not involved Oct-12-2009 Nov-13-2009 >50% of total shares

CITIC Bank US$ 25M Nov-01-2010 Nov-26-2010 >50% of shareholders representing >75% of voting shares Not involved Morgan Stanley Asia Limited Sheppard, Mullin, Richter & Hampton LLP / Thorp Alberga

N/A N/A N/A N/A

Not involved Stephens Inc. Morgan, Lewis & Bockius LLP

Not involved Brean Murray, Carret & Co. Arent Fox LLP

N/A Morgan Stanley Asia Limited NA

Premium of bid price above the closing price on previous trading day before announcement The offer price is 1.9 shares of XING common stock plus $0.8 in cash, we convert to dollar value using XING's closing price on Sept-8-2010 (3) Valuation multiples are calculated as of deal announcement date; data sourced from ROTH research if companies are covered, or Bloomberg if otherwise; NA indicates not available, NM indicates not meaningful Source: Company Filings, Bloomberg, ROTH Capital Partners

Page 3 of 8

206

There are still numerous steps remaining in the privatization process. we believe Funtalk will be impacted by the overall progress of the mobile communication market.20 price target is in line with the takeout offer. Funtalk China Holdings Limted VALUATION Our $7. Factors that may impede share price from reaching the target include a buyout process does not materializes for various reasons. Page 4 of 8 207 .Samsung has been the major supplier of Funtalk''s wholesale distribution business since inception. RISKS FTLK may need to raise additional capital to support CapEx requirements Dependence on Samsung as principal supplier .The Chinese regulatory body (namely MIIT) has the ability to significant influence the industry. horizontal consolidations. 3G spending and customer demand as well as IT infrastructure/network technology advancements. VALUATION Our $9. We believe such dependence exposes Funtalk to significant risk in the event of a downturn in Samsung''s business prospects. or unexpected management shake-up. Inc. RISKS Going private risk. Concerns on over-capacity. accompanied with imposed tariffs on steel exports. Accordingly. and significant changes in the steel industry can impact the company business prospect. substantial weakness in the company's fundamentals. Any unexpected changes or progress delay in project execution will significantly impact CFSG's financial performance. 2011 China Fire & Security Group. and represents 9.00 price target is based on the going private offer price. Change in macro policies. Short product life cycle of mobile communication devices: rapidly changing customer preference and demand Potential downturn of overall mobile communication market . CFSG's major revenues come from the iron and steel industry.2x our 2011 EPS of $0.On a macro level. extended customer payment period may have led to recent CFSG decrease in cash and increasing A/R balance. Factors that may impede CFSG shares from reaching price target include a buyout process does not materialize or substantial weakness in the company's fundamentals.CHINA China Industry Note . The failure to complete this transaction in a timely manner could negatively impact share price. have placed the industry under close monitoring by the central government. Changes in the regulatory environment could alter the market/competitive landscape . as well as any deterioration of its strategic relationship with Samsung. The company's revenue recognition and profit generation relies on large projects. Dominating market power of mobile communication carriers .78.Funtalk may have limited bargaining power and flexibility when negotiating with carriers in both wholesale and retail operations. Depressed steel prices and continuous market consolidation have caused many steel makers facing challenging market conditions. Concentration risk.July 19. Extended customer payment period.

Its overall global expansion strategy faces execution risk due to a variety of factors. The company's current CFO. Management turnover. Craig Studwell. FSIN's Board of Directors received a going private proposal from its Chairman (Mr. oil pump for oilfield and linear motors for urban metro lines. Going private transaction risk. copper and steel respectively. such as delay in construction. FSIN continues to integrate its acquired operations. VALUATION Our $24 PT is based on the offer price of the proposed buy-out. Page 5 of 8 208 .CHINA China Industry Note . Fushi's selling prices are highly dependent on copper. 2011 Fushi Copperweld. Inc. aluminum and steel prices. This price reflects a P/E multiple of 10x our FY11 EPS estimate. can be largely affected by central and local government policies. Inc. RISKS Volatile raw material prices. Execution/integration risk. The development of urban railways can experience delays that out of control of HRBN. The inability to complete this transaction could negatively impact share performance. RISKS Change in macro policies in China. Changes in these prices may adversely impact demand for FSIN's bi-metallic products and its operational results. Factors that may impede HRBN shares from reaching our price target include: there are still numerous steps in the privatization process. and rapid decline in copper prices. unsuccessful ramping up of CCS facilities in China. In November 2010. was appointed in October 2010. and Dalian Jinchuan. Harbin Electric. VALUATION Our $11.50 price target reflects the proposed Fu/Abax going private bid price. including Copperweld. Volatile raw materials costs.July 19. Factors that may impede FSIN shares from reaching price target include failure of completion of the going private buyout. we note that his tenure with FSIN is limited. HRBN is subject to market fluctuations and volatility of two major raw materials.50 per share. While we view Mr. Two of HRBN's major catalysts. Fu) and Abax Global Capital to acquire all of the outstanding shares of common stock for $11. Shanghai Hongtai. some of which could lead to delays in completing the transaction or a slow-down in China's economic growth and continued inflation could impact sales and compress margins. Studwell as highly experienced and capable.

24 Corporate Plaza. Inc. LLC. On May 26. 2010. Inc. I also certify that no part of my compensation was. Inc. Page 6 of 8 209 . ROTH changed its rating system in order to incorporate coverage that is Under Review. directors and owners own options. related to the specific recommendations or views expressed in this report. and as such. 2011. Fushi Copperweld. On September 28. Funtalk China Holdings Limited and Harbin Electric. 2011 Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. Attention: Director of Research.CHINA China Industry Note . Inc. ROTH has received compensation for investment banking services from Funtalk China Holdings Limited. please contact: The Director of Research at (800) 678-9147 or write to: ROTH Capital Partners. ROTH changed its rating system in order to replace the Hold rating with Neutral. Newport Beach. ROTH has managed or co-managed a public offering for Funtalk China Holdings Limited. For important disclosure information regarding the companies in this summary report. ROTH makes a market in shares of China Fire & Security Group.July 19. buys and sells from customers on a principal basis.. Within the last twelve months. Disclosures: ROTH and/or its employees.. Within the last twelve months. stock. directly or indirectly. CA 92660. officers. is or will be. rights or warrants to purchase shares of Fushi Copperweld.

4 6 10.ROTH employs a rating system based on the following: Buy: A rating.7 21. our investment rating on a stock and its implied price movement may not correspond to the stated 12month price target.0 Our rating system attempts to incorporate industry. which at the time it is instituted and or reiterated. Ratings System Definitions . Consequently. 2011 Each box on the Rating and Price Target History chart above represents a date on which an analyst made a change to a rating or price target. as of 07/19/11 Count Percent 51 24. company and/or overall market risk and volatility. which at the time it is instituted and or reiterated.July 19. that indicates an expectation of a total return between negative 10% and 10% over the next 12 months.CHINA China Industry Note . which may only represent the first note written during the past three years.5 0 0 0 0 Rating Buy [B] Neutral [N] Sell [S] Under Review [UR] Count 209 57 2 0 Percent 77. at any given point in time. Distribution Ratings/IB Services shows the number of companies in each rating category from which Roth or an affiliate received compensation for investment banking services in the past 12 month. Neutral: A rating.7 0. Distribution of IB Services Firmwide IB Serv. that indicates an expectation of a total return of at least 10% over the next 12 months./Past 12 Mos. except for the first box. Page 7 of 8 210 .2 0.

information and facts discussed in this report other than the information regarding ROTH Capital Partners. LLC and its affiliates. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additional information is available upon request. however. price target and estimates should no longer be relied upon for UR-rated securities. Any opinions or estimates in this report are subject to change without notice. are from sources believed to be reliable. Page 8 of 8 211 . LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. price target and estimates for the security. ROTH Capital Partners. Additionally. Not Covered [NC]: ROTH does not publish research or have an opinion about this security. Member: FINRA/SIPC. indicates the temporary removal of the prior rating. The material. Under Review [UR]: A rating.CHINA China Industry Note . This is not. which at the time it is instituted and or reiterated. No part of this report may be reproduced in any form without the express written permission of ROTH. Prior rating. an investment in the stock may involve a high degree of risk and may not be suitable for all investors. This report should not be used as a complete analysis of the company. an offer or solicitation of the securities discussed. industry or security discussed in the report. Copyright 2011. 2011 Sell: A rating. but are in no way guaranteed to be complete or accurate. that indicates an expectation that the price will depreciate by more than 10% over the next 12 months.July 19. which at the time it is instituted and or reiterated.

The Company offers three product lines: linear motors (LMs) and integrated systems. such as high/low voltage motors and speed control motors. (Harbin Tech Full). Dollars Fiscal Year Ends: December Employees 4.8% 52 Weeks -3..430 Exchanges: NAS Share Type: Common Harbin Electric.. and large-sized motors and some specialized motors.. including small. Ltd.250.366 Total Shares Outstanding: 31. COMPANY PROFILE Figures in U.481. CT 06461 U. (Weihai Tech Full) and Xi'an Tech Full Simo Motor Co. (Shanghai Tech Full). Stock Chart Officers Chairman & Chief Executive Tianfu Yang Chief Financial Officer Zedong Xu Executive Vice President & Secretary Christy Young Shue Stock Price (7/8/2011): 16. The Company offers a range of industrial rotary motors. develops. Weihai Tech Full Simo Motor Co.S.0% Earnings / Dividends (as of 3/31/2011) Earnings 0. Ltd. It sells its products in China. Inc.7% 4 Weeks 3. specialty micro-motors and industrial rotary motors.S.820 Closely Held Shares: 10. but also to certain international markets. The Company acquired Xi'an Tech Full Simo in October 2009. Ltd. manufactures. Inc.250 Major Industry: Machinery & Equipment Sub Industry: Miscellaneous Machinery & Equipment Country: United States Currency: U.451. Ltd. It designs. supplies and services a range of electric motors. medium.642.34 2.Company FundamentalsCompany Fundamentals\Company Profile A Wright Investors' Service Research Report: Harbin Electric. Shanghai Tech Full Electric Co.91 Recent stock performance 1 Week 3.14 Ratio Analysis Dividends 0. specialty micro-motors and industrial rotary motors.S. Key Data Ticker: HRBN 2010 Sales: 426.9% 13 Weeks -11. The Company operates four manufacturing facilities in China: Harbin Tech Full Electric Co.00 0. including linear motors.882 Most Recent Qtr Last 12 Months 212 .A. (Harbin Electric) is a holding company.. Dollars Wright Quality Rating:CAA20 440 Wheelers Farms Road Milford. (Xi'an Tech Full Simo).00 Market Capitalization: 528.

but accuracy. Harbin 150060 UNITED STATES Copyright ©2000-2011 Distributed by Wright Investors' Service. 213 . in any form or by any means.24 Payout Ratio 0.90 Dividend Yield Price / Sales Ratio Price / Book Ratio 1. Except for quotations by established news media. Inc.harbinelectric.23 % Held by Insiders 34. or transmitted for commercial purposes. completeness and opinions are not guaranteed. mechanical.06% Address Phone +86 86 451-8611-6757 Home Page http://www. All Rights Reserved. photocopying.00% 0. or otherwise without prior written permission. stored in a retrieval system. recording.com Ha Ping Lu Ji Zhong Qu Harbin Kai Fa Qu. no pages on this site may be reproduced.Price / Earnings Ratio 7. electronic. Information is believed reliable.00% 1.

784 238. including small. With sales of $426. when the company's sales were $223. supplies and services a range of electric motors. Ltd.78 million of which 91% was Equipment). (Harbin Tech Full). Inc.A.2%) 171.. Recent Sales at Harbin Electric 426 223 121 24 40 65 2005 2006 2007 2008 2009 2010 (Figures in Millions of U.48 million . Year Ended Sales Sales Sales/ (mlns) Growth Emp (US$) Largest Region 91.571 Taiwan (29.191 the United States (100. ($273. The Company offers a range of industrial rotary motors.430 employees.Company Fundamentals\Comparative Business Analysis A Wright Investors' Service Research Report: Harbin Electric. this equates to sales of US$96. Ltd. (Xi'an Tech Full Simo). The Company offers three product lines: linear motors (LMs) and integrated systems. (2010 sales of $762.56 million of which 75% was Manufacturing Operations).704%).271 per employee. The Company acquired Xi'an Tech Full Simo in October 2009.0% versus 2009. specialty micro-motors and industrial rotary motors. It sells its products in China. Dollars) Harbin Electric currently has 4. Inc.7% Dec 2010 273.4% 214 . operates in the Motors and generators sector. CT 06461 U. specialty micro-motors and industrial rotary motors. including linear motors. Sales Comparisons (Fiscal Year ending 2010) Company Harbin Electric American Railcar Industries. and large-sized motors and some specialized motors.191 and US$258. develops. It designs.481 Kulicke And Soffa Industries. Competitor Analysis Harbin Electric. Weihai Tech Full Simo Motor Co. American Railcar Industries. Inc. (Weihai Tech Full) and Xi'an Tech Full Simo Motor Co.S. Inc. Wright Comparative Business Analysis Report Report Date: 7/8/2011 Company Description Harbin Electric. (Harbin Electric) is a holding company.571 per employee.86 million of which 56% was North America). Inc. (Shanghai Tech Full).23 million. and Cascade Corporation ($409. but also to certain international markets. This represents an increase of 91. Inc. which had sales between US$171. medium.. This is a great deal lower than the three comparable companies. The Company operates four manufacturing facilities in China: Harbin Tech Full Electric Co.563 -35.0%) Dec 2010 426. manufactures. Shanghai Tech Full Electric Co.271 the United States (100. Sales at Harbin Electric have increased during each of the previous five years (and since 2005.. This analysis compares Harbin Electric with three other companies: Kulicke And Soffa Industries. Inc.0% 96..S. such as high/low voltage motors and speed control motors. sales have increased a total of 1. Sep 2010 762. Provided By CorporateInformation.48 million for the year ending December of 2010. Note that some of the figures stated herein could be distorted based on exact classification of employees and subcontractors.com 440 Wheelers Farms Road Milford.0%) 258. Ltd. Sales Analysis Harbin Electric reported sales of $426. Ltd.

9% of sales to 46.90. The gross margin in 2010 was the lowest of the previous five years (in 2007. During the past 13 weeks.e.07 1.0% of sales. This company is currently trading at 1. Summary of company valuations (as of 7/8/2011). The company's earnings before interest.5% and 22.3% 11. Inc. Profitability Analysis On the $426.10 million.82 million.1% of sales. when the profit margin was 8. Company Harbin Electric Kulicke And Soffa Industries.23 1.23 times book value.66% The market capitalization of this company is $528. This was significantly better than the 11. Cascade Corporation P/E 7. Inc. Year Margin Margin extra 2010 2009 34.9% 32.00% 36.. or 18.2% Company Harbin Electric Harbin Electric Kulicke And Soffa Industries.81 2.0% 18. This profit margin is an improvement over the level the company achieved in 2009.1% of sales).3% of sales. depreciation and amorization (EBITDA) were $102.4% 227.4 Price/ Price/ Book Sales 1.3% and 117.2%).84 million.14 per share. Thus.1% of sales.0% 27.00 117.9% 13. In 2010. The three comparable companies had EBITDA margins that were all less (between 2. the value of the company's inventory totalled $62. or 24. American Railcar Industries. when the EBITDA margin was equal to 27.1% 8.42 52 Wk Pr Chg -3.45 million . These 12 month earnings are lower than the earnings per share achieved during the calendar year ending last December.858 30.0%) than that achieved by Harbin Electric.23 times book value. the stock has fallen 11..98 million.2% return the company achieved in 2009. 2010 Cascade Corporation 2011 Inventory Analysis As of December 2010.81 and 2. The capitalization of the floating stock (i.e. The company's price to book ratio is lower than that of all three comparable companies.4% 24. earnings before extraordinary items at Harbin Electric were $76. This gross profit margin is lower than the company achieved in 2009. There was a wide variation in the gross profit margins at the three comparable companies. 2010 American Railcar Industries. the stock of this company was down 3.5% -9. or 65.3%. the Price / Earnings ratio is 7. the stock of Harbin Electric has performed significantly worse than the three comparable companies. the gross profit was 34.0% to $16.8% 5.7%.30% 54. when the company reported earnings of 2.Cascade Corporation Jan 2011 409. the cost of goods sold totalled $281.9% of sales (i. Dividend Analysis This company has paid no dividends during the last 12 months.24 1.2 N/A 18.48 million . the gross margin had been as high as 51.48 million in sales reported by the company in 2010.86% 2.6% of sales. Harbin Electric is trading at 1.8% 22.5% 2.1% 36. During the 12 months ending 3/31/2011. the company had 82 days of inventory on hand (another way to look at this is 215 . Note that the earnings number Includes Or Excludes Extraordinary Charge Or Credit. Profitability Comparison Gross Earns Profit EBITDA bef.4% 46.46 per share. The company has not paid any dividends during the previous 6 calendar years.8% of sales.1% 18. The company's return on equity in 2010 was 23. from 11. (Extraordinary items have been excluded).9 5. Since the cost of goods sold was $281. which are trading between 1.10 million for the year. During the past 52 weeks.699 the United States (43. when cost of goods sold totalled 63. This EBITDA margin is worse than the company achieved in 2009.5%) Recent Stock Performance For the 52 weeks ending 7/8/2011.24 times sales.91. earnings per share totalled $2. which saw gains between 36.5% in 2010 from 2009. that which is not closely held) is $348. Earnings per share rose 219. Inc. taxes.23 2.12 1. Inc.8%.

09 million on R&D. NO REPRESENTATION OR WARRANTY IS MADE REGARDING THE ACCURACY.e. equivalent to 193 days in inventory. This is an improvement over the end of 2009. Inc. FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT. 2010 Cascade Corporation 2011 Copyright 2001-2011 The Winthrop Corporation Distributed by Wright Investors' Service. INDIRECT. Inc. the company's long term debt was $50.8% of sales.12 0. the accounts receivable for the company were $87. WITHOUT WARRANTY OF ANY KIND. All Rights Reserved Important Legal Notice THIS REPORT IS PROVIDED FOR GENERAL INFORMATION ONLY. which is equivalent to 75 days of sales.42 million in 2010).0% 88 0. Harbin Electric spent $1. INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY. MODIFIED OR FRAMED WITHOUT PRIOR WRITTEN PERMISSION. Sales 2010 0. As of December 2010.6% Kulicke And Soffa Industries.4% 76 0. all monies owed) were $151. IN NO EVENT WILL THE WINTHROP CORPORATION.5 times per year). CONTENT MAY NOT BE REPRODUCED. IS NOT TO BE CONSIDERED AS INVESTMENT ADVICE AND SHOULD NOT BE RELIED UPON FOR INVESTMENT DECISIONS. THE REPORTS ARE COMPUTER GENERATED AND MAY BE SUBJECT TO PROGRAMMATIC AND/OR CONTENT ERRORS.75 million. SPECIAL OR CONSEQUENTIAL DAMAGES. 2010 American Railcar Industries. when Harbin Electric had 164 days of sales in accounts receivable.9% of sales.31 0. which was 0.8% 66 7. Research and Development Research and Development Expenses at Harbin Electric in 2010 were $3. During each of the previous 3 years. VISITORS SHOULD VERIFY INFORMATION WITH OTHER RELIABLE SOURCES. the company has increased the amount of money it has spent on Research and Development (in 2007.12.to say that the company turned over its inventory 4. THIS REPORT IS PROVIDED AS IS. THE CONTENT OF THIS REPORT IS PROTECTED BY APPLICABLE COPYRIGHT LAWS. Inc. The long term debt to equity ratio of the company is 0.91 million..89 0. In terms of inventory turnover. RELIABILITY OR TIMELINESS OF THE CONTENT.17 75 94 55 59 82 0. INC. DISTRIBUTED.07 million and total liabilities (i.42 million. WRIGHT INVESTORS' SERVICE. which is equivalent to 0. 216 . OR ANY OF THEIR DATA PROVIDERS BE LIABLE FOR ANY DIRECT. Harbin Electric spent $2. EXPRESS OR IMPLIED. Financial Positions Company Harbin Electric LT Debt/ Days Days R&D/ Year Equity AR Inv. this is a significant improvement over December 2009. NO MATTER WHAT THE CAUSE. when the company's inventory was $74. In 2009.61 million. Financial Position As of December 2010.06 million versus $3.

01 0.0% 0.8% n/a 68.2 % Earned Growth % Profit Rate (ROE) Book Value Begin Yr n/a 1.16 PRETAX CR & $.00 0.1% 34.46 219.0% 0.0% 0. Inc.00 0.0 28. Inc.4% 0.1% 34. no pages on this site may be reproduced.5% 9.8 2.9% 0.4% 26.INCLUDES OR EXCLUDES EXTRAORDINARY CHARGE OR CREDIT.3% 2.0% 0.00 0.280.35 16. or transmitted for commercial purposes.48 2.10 PRETAX CR MAR).7 7.77 12 Month % Dividends Payout Per Ratio Share 0. Equity Capital Earnings 12 Month Earnings Per % Share Change D AD D AD AD AD Year Value Ratios Dividends Calendar Year 2005 2006 2007 2008 2009 2010 7/8/2011 Market Price/ Price/ Price Earnings Book Dividend Last Ratio Ratio Yield 8. $.04 PRETAX CHG IN 2008 ($.14 n/c 23.0% 0.8% 10.26 PRETAX CR & $.0% 0.S. in any form or by any means.00 0. INCLS$.50 7.3 8. All Rights Reserved.91 12.00 0.0% 0.0% 0.7 1. A DEVELOPMENT STAGE COMPANY REFLECTS 1 MONTH OF DATA Copyright ©2000-2011 Distributed by Wright Investors' Service. Dollars Price Harbin Electric.0% 0.00 0. electronic.1 7. 217 .4% 10.U. $.0% 0.5% 2.34 n/a 13.05 25.8% 0.280. recording.02 PRETAX CR & $.9 n/c 5.9% 30.19 n/c 53.4 9.77 -35.8 1.6 1.97 PRETAX CHG IN 2009 ($.10 8. NOM PRETAX CR JUN & $. photocopying. Except for quotations by established news media.9% 23. or otherwise without prior written permission.04 PRETAX CHG DEC.94 7.01 PRETAX CR MAR). $. Information is believed reliable.00 0. completeness and opinions are not guaranteed.99 20.0% -9.04 PRETAX CHG DEC.4% 26.38 PRETAX CHG SEP.7 26.0% 10.91 1.01PRETAX CR SEP.Company Fundamentals\Summary Analysis SUMMARY ANALYSIS: Per Share. INCLS $. stored in a retrieval system.5% 9.0% 68.54 17.65 4.66 1. but accuracy.38 (A): INCLUDES OR EXCLUDES EXTRAORDINARY CHARGE OR CREDIT .0% 0. INCLS $.55 PRETAX CHG JUN & $.5 6. mechanical.0% 0.03 PRETAX CR IN DEC 2006 (B): YEAR END CHANGED FROM JUL IN 2004 (C): NAME CHANGED FROM TORCH EXECUTIVE SERVICES LTD (D): BASED ON FULLY DILUTED SHARES (E): A DEVELOPMENT STAGE COMPANY.

271 55.000 42.6% 16. Except for quotations by established news media.102 65. or otherwise without prior written permission. Dollars Harbin Electric.291 34.354 149.S. no pages on this site may be reproduced.820 223.702 58.8% 84.403 120. or transmitted for commercial purposes.6% 38.3% 18. Depreciation. Earnings before Interest.481 Cost of Goods Sold After Tax Income before Extraordinary Charges and Credits Amount in thousands Employees After Tax Sales Income Per Per Number Employee Employee 180 270 490 2. Information is believed reliable.379 21.0% % of Sales % of Sales % of Sales 11.8% 91. recording. stored in a retrieval system.234 426.891 48.9% 61.0% 19.556 68. in any form or by any means.892 63.5% 141. Inc.010 17. and Amortization (EBITDA) Amount in thousands Sales Amount in thousands 23. photocopying.430 131.410 45.647 8.3% 24.558 96.6% 10. Inc.728 49.689 4. completeness and opinions are not guaranteed.554 53.495 12.2% 48.6% 20.8% 25.7% 84.340 Year 2005 2006 2007 2008 2009 2010 YearAmount to-year in Growth thousands n/c 70. Taxes.439 45.000 4.8% 21.900 4.809 21.815 18.7% 31. 218 . mechanical.475 60.600 37. electronic.644 40.357 43.8% 76.416 65.9% 10.089 49.688 133.030 25.8% 70.903 25.Company Fundamentals\Sales Analysis SALES ANALYSIS: Figures in thousands of U. All Rights Reserved.0% Copyright ©2000-2011 Distributed by Wright Investors' Service.9% 109.6% 281. but accuracy.899 32.

250 9.5% -4.0% -4.990 6.910 16.460 20.540 21.9% 31.840 16.2% 4.690 15.750 11.Jun Jul .6% -32.Dec 2006 Jan .5% 59.000 9.9% 123.2% -3.5% -0.700 12.800 4.850 3.3% 7.9% 7. High Price 4.Dec 2008 Jan .850 7.120 16.Mar Apr .350 20.300 7.2% -9.500 16.110 22.6% -23.2% -53.820 219 .Mar Apr . Inc.Jun Jul . Dollars Harbin Electric.4% -13.000 9.910 n/a -7.900 19.6% -15.6% 90.U.910 11.590 16.8% 33.1% 50.3% 245.9% -11.100 14.1% 6.Dec 2010 Jan .700 Low Price 2.Jun Jul .000 2.7% 5.1% 42.790 24.Sep Oct .1% 10.890 4.250 12.Jun 7/8/2011 17.Sep Oct .740 13.920 4.000 16.910 15.000 12.0% -15.250 25.900 16.940 13.9% -27.Mar Apr .4% -3.900 13.1% -22.Dec 2011 Jan .000 3.3% -26.960 11.6% -49.0% 71.6% 42.890 17.Mar Apr .Jun Jul .Jun Jul .1% -69.5% 8.8% n/a n/a n/a n/a 233.Mar Apr .Company Fundamentals\Price Analysis PRICE ANALYSIS: Per Share.650 8.000 7.180 4.Sep Oct .550 16.0% Quarter 2005 Jan .250 8.450 3.3% 55.000 21.4% 157.480 12.361 26.500 5.150 15.Sep Oct .880 20.700 27.000 18.5% 6.500 15.S.Dec 2007 Jan .260 25.Sep Oct .950 20.9% 21.5% -1.Jun Jul .650 17.550 12.440 8.760 28.050 14.0% 154.280 15.700 4.500 11.640 16.100 11.5% -16.050 12.250 8.1% 251.Sep Oct .Dec 2009 Jan .650 14.060 16.150 8.030 12.210 11.Mar Apr .3% -13.500 8.0% 19.6% 9.1% 222.250 6.Mar Apr .010 Closing Quarterly 12 months Price %Change %Change 3.

Copyright ©2000-2011 Distributed by Wright Investors' Service, Inc. All Rights Reserved. Except for quotations by established news media, no pages on this site may be reproduced, stored in a retrieval system, or transmitted for commercial purposes, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without prior written permission. Information is believed reliable, but accuracy, completeness and opinions are not guaranteed.

220

Company Fundamentals\Earnings & Dividends Analysis

EARNINGS AND DIVIDENDS ANALYSIS:
Per Share- U.S. Dollars Fiscal Year Ends in December
Earnings Per Share 12 Months Calendar % Years Earnings Change 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (A):
E BCE

Harbin Electric, Inc.

Dividends Per Share 12 Months % Dividends Change n/a 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n/a n/c n/c n/c n/c n/c n/c n/c n/c n/c n/c Quarterly Reported Dividends Q1 Mar. n/a 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Q2 Jun. n/a 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n/a Q3 Sep. n/a 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n/a Q4 Dec. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n/a % Payout n/c 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.8% 0.0% n/c

Quarterly Reported Earnings Q1 Mar. n/a n/a n/a 0.12 0.21 0.20 0.27 0.34 0.66 0.34 Q2 Jun. n/a n/a n/a 0.18 0.20 0.24 0.31 -0.21 0.82 n/a Q3 Sep. n/a n/a n/a 0.19 0.23 0.26 0.34 -0.07 0.57 n/a Q4 Dec. n/a n/a 0.12 0.17 0.37 0.21 0.27 0.71 0.41 n/a

n/a n/a n/a D 0.66 AD 1.01 D 0.91 AD 1.19

n/c n/c n/c n/c 53.0% -9.9% 30.8%

AD 0.77 -35.3% AD 2.46 219.5% n/a n/c

INCLUDES OR EXCLUDES EXTRAORDINARY CHARGE OR CREDIT - INCLUDES OR EXCLUDES EXTRAORDINARY CHARGE OR CREDIT, INCLS $.26 PRETAX CR & $.97 PRETAX CHG IN 2009 ($.04 PRETAX CHG DEC, $.16 PRETAX CR & $.38 PRETAX CHG SEP, $.55 PRETAX CHG JUN & $.10 PRETAX CR MAR), INCLS $.02 PRETAX CR & $.04 PRETAX CHG IN 2008 ($.04 PRETAX CHG DEC, $.01PRETAX CR SEP, NOM PRETAX CR JUN & $.01 PRETAX CR MAR), INCLS$.03 PRETAX CR IN DEC 2006
(B): (C): (D): (E):

YEAR END CHANGED FROM JUL IN 2004 NAME CHANGED FROM TORCH EXECUTIVE SERVICES LTD BASED ON FULLY DILUTED SHARES A DEVELOPMENT STAGE COMPANY, A DEVELOPMENT STAGE COMPANY REFLECTS 1 MONTH OF DATA

Copyright ©2000-2011 Distributed by Wright Investors' Service, Inc. All Rights Reserved. Except for quotations by established news media, no pages on this site may be reproduced, stored in a retrieval system, or transmitted for commercial purposes, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without prior written permission. Information is believed reliable, but accuracy, completeness and opinions are not guaranteed.

221

Financial Statement AnalysesFinancial Statement Analyses\Balance Sheet - Common Size

Balance Sheet - (Common Size): Harbin

Electric, Inc.
2009 2008 2007 2006

Figures are expressed as Percent of Total Assets. Total Assets are in millions of U.S. Dollars.

Fiscal Year Fiscal Year End Date Assets Total Assets Cash & Short Term Investments Cash Short Term Investments Receivables (Net) Inventories -Total Raw Materials Work in Process Finished Goods Progress Payments & Other Prepaid Expenses Other Current Assets Current Assets - Total Long Term Receivables Investment in Associated Companies Other Investments Property Plant and Equipment - Gross Accumulated Depreciation Property Plant and Equipment – Net Other Assets Deferred Charges

2010

12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006

574.3 17.4%

531.0 18.2%

235.5 20.8%

132.6 34.3%

93.0 72.4%

15.3% 10.9% 1.5% 3.6% 6.2% -0.4% 2.8% 0.4% 46.8% 0.0% 0.0% 0.0% 32.2% 2.1% 30.1% 23.1% 0.1%

18.9% 14.1% 2.2% 5.4% 8.2% -1.7% 2.2% 0.0% 53.4% 0.0% 0.0%

13.6% 9.3% 1.1% 3.4% 4.8% 0.0% 1.5% 0.0% 45.2% 0.0% 0.0% 0.4%

17.7% 1.9% 0.7% 0.6% 0.6% 0.0% 1.3% 0.0% 55.3% 0.1% 0.0% 0.8% 19.1% 1.1% 18.0% 25.8% 1.7%

9.6% 0.6% 0.5% 0.1% 0.0% 0.0% 0.9% 0.0% 83.5% 0.0% 0.0% 0.0% 10.8% 0.9% 9.9% 6.6% 3.0%
222

30.6% 1.1% 29.4% 17.2% 0.1%

41.5% 1.2% 40.3% 14.1% 0.7%

Tangible Other Assets Intangible Other Assets Total Assets Liabilities & Shareholders' Equity Total Liabilities & Shareholders' Equity Accounts Payable Short Term Debt & Current Portion of Long Term Debt Accrued Payroll Income Taxes Payable Dividends Payable Other Current Liabilities Current Liabilities - Total Long Term Debt Long Term Debt Excluding Capitalized Leases Capitalized Lease Obligations Provision for Risks and Charges Deferred Income Deferred Taxes Deferred Taxes - Credit Deferred Taxes - Debit Deferred Tax Liability in Untaxed Reserves Other Liabilities Total Liabilities Non-Equity Reserves Minority Interest

9.4% 13.6% 100.0%

2.9% 14.2% 100.0%

5.4% 7.9% 100.0%

19.7% 4.4% 100.0%

2.9% 0.7% 100.0%

574.3 4.7% 5.5%

531.0 10.5% 10.7%

235.5 3.6% 2.2%

132.6 1.3% 0.0%

93.0 0.7% 0.0%

1.4% 0.0% 5.8% 17.4% 8.7% 8.7% 0.0%

1.6% 0.0% 9.5% 32.3% 0.8% 0.8% 0.0%

0.9% 0.0% 2.1% 8.8% 14.3% 14.3% 0.0%

0.6% 0.0% 1.2% 3.1% 25.0% 25.0% 0.0%

0.6% 0.0% 1.7% 3.0% 30.8% 30.8% 0.0%

0.0% 0.0%

0.0% 0.0%

0.0% 0.0%

0.0% 0.0%

0.0% 0.0%

0.3% 26.4% 0.0% 0.5%

0.9% 34.0% 0.0% 4.0%

2.8% 25.8% 0.0% 0.0%

8.2% 36.2% 0.0% 0.0%

17.8% 51.6% 0.0% 0.0%
223

Preferred Stock Preferred Stock Issued for ESOP ESOP Guarantees Preferred Issued Common Equity Total Liabilities & Shareholders' Equity

0.0% 0.0% 0.0% 73.1% 100.0%

0.0% 0.0% 0.0% 62.0% 100.0%

0.0% 0.0% 0.0% 74.2% 100.0%

0.0% 0.0% 0.0% 63.8% 100.0%

0.0% 0.0% 0.0% 48.4% 100.0%

Copyright ©2000-2011 Distributed by Wright Investors' Service, Inc. All Rights Reserved. Except for quotations by established news media, no pages on this site may be reproduced, stored in a retrieval system, or transmitted for commercial purposes, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without prior written permission. Information is believed reliable, but accuracy, completeness and opinions are not guaranteed.

224

Financial Statement Analyses\Balance Sheet - Year-Year % Change

Balance Sheet - (Year to Year Percent Change): Harbin
Figures are the Percent Changes from the Prior Year.

Electric, Inc.
2007 2006

Fiscal Year Fiscal Year End Date Assets Total Assets Cash & Short Term Investments Cash Short Term Investments Receivables (Net) Inventories -Total Raw Materials Work in Process Finished Goods Progress Payments & Other Prepaid Expenses Other Current Assets Current Assets - Total Long Term Receivables Investment in Associated Companies Other Investments Property Plant and Equipment - Gross Accumulated Depreciation Property Plant and Equipment – Net Other Assets Deferred Charges

2010

2009

2008

12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006

8.2% 3.5%

125.5% 97.1%

77.5% 7.4%

42.7% -32.4%

274.9% 898.0%

-12.5% -16.1% -26.7% -26.8% -18.1%

213.4% 241.1% 337.6% 256.4% 286.1%

35.9% 754.2% 192.1% 906.2% 1,222.4%

164.5% 340.8% 113.6% 558.7% 2,750.5%

3.7% -56.6% 336.5% -35.8% -97.2%

35.6%

232.0%

99.2%

112.3% 20,275.7%

-5.1%

166.3%

44.9% -100.0%

-5.4%

365.5%

0.0% 13.8% 94.6% 10.7% 45.1% 38.3% 66.0% 109.4% 64.7% 175.3% -78.5% 286.6% 101.1% 297.9% -3.1% -24.5% 152.8% 83.0% 158.8% 460.5% -19.7% 21.6% 76.5% 18.5% 1,722.6%

225

Tangible Other Assets Intangible Other Assets Total Assets Liabilities & Shareholders' Equity Total Liabilities & Shareholders' Equity Accounts Payable Short Term Debt & Current Portion of Long Term Debt Accrued Payroll Income Taxes Payable Dividends Payable Other Current Liabilities Current Liabilities - Total Long Term Debt Long Term Debt Excluding Capitalized Leases Capitalized Lease Obligations Provision for Risks and Charges Deferred Income Deferred Taxes Deferred Taxes - Credit Deferred Taxes - Debit Deferred Tax Liability in Untaxed Reserves Other Liabilities Total Liabilities Non-Equity Reserves Minority Interest

250.1% 3.3% 8.2%

20.4% 303.9% 125.5%

-51.1% 217.0% 77.5%

863.8% 821.4% 42.7% 91.1% 274.9%

8.2% -52.0% -44.2%

125.5% 565.3% 987.5%

77.5% 398.3%

42.7% 153.8%

274.9% 252.0%

-0.3%

292.7%

149.8%

50.7%

-34.1% -41.7% 1,037.7% 1,037.7%

909.2% 726.9% -86.9% -86.9%

225.8% 409.8% 1.5% 1.5%

-0.7% 48,170.7% 46.8% 15.9% 15.9% 1,341.4%

-67.0% -16.0%

-28.8% 196.6%

-40.1% 26.7%

-34.5% 0.2% 24,832.0%

-86.6%
226

Preferred Stock Preferred Stock Issued for ESOP ESOP Guarantees Preferred Issued Common Equity Total Liabilities & Shareholders' Equity 27.5% 8.2% 88.5% 125.5% 106.4% 77.5% 87.9% 42.7% 83.0% 274.9%

Copyright ©2000-2011 Distributed by Wright Investors' Service, Inc. All Rights Reserved. Except for quotations by established news media, no pages on this site may be reproduced, stored in a retrieval system, or transmitted for commercial purposes, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without prior written permission. Information is believed reliable, but accuracy, completeness and opinions are not guaranteed.

227

Financial Statement Analyses\Balance Sheet - Five-Year Averages

Balance Sheet - (5 Year Averages): Harbin
Figures in millions of U.S. Dollars.

Electric, Inc.
2008 2007 2006

Fiscal Year Fiscal Year End Date Assets Total Assets Cash & Short Term Investments Cash Short Term Investments Receivables (Net) Inventories -Total Raw Materials Work in Process Finished Goods Progress Payments & Other Prepaid Expenses Other Current Assets Current Assets - Total Long Term Receivables Investment in Associated Companies Other Investments Property Plant and Equipment - Gross Accumulated Depreciation Property Plant and Equipment – Net Other Assets Deferred Charges

2010

2009

12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006

313.3 71.6

203.4 53.0

97.2 33.7

50.1 23.9

50.5 32.6 4.9 11.6 18.3 -2.2 6.7 0.5 161.9 0.0 0.0

34.7 20.3 3.2 7.5 11.4 -1.8 3.6 0.0 111.5 0.0 0.0

14.6 5.3 0.8 1.8 2.6 0.0 1.2 0.0 54.8 0.0 0.0 0.4

8.2 0.9 0.3 0.2 0.4 0.0 0.5 0.0 33.6 0.0 0.0 0.2 8.7 0.5 8.2 8.1 1.0

96.1 4.6 91.5 59.4 1.5

60.8 2.3 58.4 33.0 1.4

28.3 1.1 27.2 14.8 1.3

228

3 5.8 30.2 2.4 59.Tangible Other Assets Intangible Other Assets Total Assets Liabilities & Shareholders' Equity Total Liabilities & Shareholders' Equity Accounts Payable Short Term Debt & Current Portion of Long Term Debt Accrued Payroll Income Taxes Payable Dividends Payable Other Current Liabilities Current Liabilities .2 0.8 313.2 5.1 313.0 1.Debit Deferred Tax Liability in Untaxed Reserves Other Liabilities Total Liabilities Non-Equity Reserves Minority Interest 22.0 0.4 0.0 18.0 0.4 97.1 97.Total Long Term Debt Long Term Debt Excluding Capitalized Leases Capitalized Lease Obligations Provision for Risks and Charges Deferred Income Deferred Taxes Deferred Taxes .4 8.5 0.2 203.0 0.Credit Deferred Taxes .3 18.7 18.8 31.0 0.4 50.0 97.0 4.0 8.4 12.3 12.1 0.1 19.4 20.0 5.0 11.0 0.0 0.0 229 .5 4.0 0.0 2.0 0.6 5.8 7.6 19.8 1.0 30.1 0.4 12.3 11.4 13.2 50.3 0.0 4.9 0.7 67.3 6.0 0.0 0.9 19.5 19.7 203.7 39.8 19.0 0.0 0.8 0.2 35.7 0.3 0.6 1.0 0.3 0.

0 0.1 Copyright ©2000-2011 Distributed by Wright Investors' Service.Preferred Stock Preferred Stock Issued for ESOP ESOP Guarantees Preferred Issued Common Equity Total Liabilities & Shareholders' Equity 0.3 0. Except for quotations by established news media. electronic.9 50. Information is believed reliable.8 97.0 0.0 0. stored in a retrieval system. photocopying.0 0. or otherwise without prior written permission.6 203. mechanical. but accuracy.0 0. All Rights Reserved.0 210. completeness and opinions are not guaranteed. recording.0 0. Inc.0 0. in any form or by any means.0 30.2 0. or transmitted for commercial purposes.4 0.0 131.0 65.7 313.0 0. 230 . no pages on this site may be reproduced.

Net Sales or Revenues are in millions of U.0% 0.6% 0.Financial Statement Analyses\Income Statement .3% 23.6% 1.9% 25.1% 0.2% 37.6% 31.2% 0.0% 25.0% 0.1% 13.0% 0.8% 49.0% 0.9% 5.3% -1.8% 34.5% 48.0% 0.6% 9.0% 0.0% 1.(Common Size): Harbin Electric.0% 0.0% 9.0% 0.8% 45.8 2007 65.Common Size Income Statement .6% 0.2% 10.0% 71.4 2006 40.0% 0.0% 0.Total Operating Income Extraordinary Credit .9% 24. Fiscal Year Net Sales or Revenues Cost of Goods Sold Depreciation.6% 58.3% 34.0% 0.0% 0.0% 6.0% 0.6% 3.2 2008 120.4% 21.0% 0.0% 0.0% 5.1% 0.0% 0.8% 21.0% 0.0% 5.0% 0.9% 63.7% 25.Pretax Non-Operating Interest Income Reserves .5% 36. 2010 426.0% 0.0% 0.4% 0.4 Figures are expressed as Percent of Net Sales or Revenues.8% 45.3% 19.0% 0.0% 0.0% 0.0% 0.7% 30.7% 0.2% 0.3% 14.0% 0.0% 0.5% 1.0% 51.Net Earnings before Interest.6% 48.0% 0.7% 2. Inc.S.3% 10.1% 25.0% 1.5 2009 223.1% 0. General & Administrative Expenses Other Operating Expenses Operating Expenses .0% 0. Taxes.3% 49.1% 2.0% 36.3% -0. Depletion & Amortization Gross Income Selling.0% 0. Dollars.0% 78.0% 22.6% 231 .0% 18.2% 1.0% 0.0% 0.5% 63.0% 0.0% 28.3% 17.1% 0.0% 8.7% 0.0% 0.0% 0.5% 0.6% 53.0% 3.Increase/Decrease Pretax Equity in Earnings Other Income/Expense . Depreciation & Amortization (EBITDA) Earnings before Interest & Taxes(EBIT) Interest Expense on Debt Interest Capitalized Pretax Income Income Taxes Minority Interest Equity in Earnings After Tax Other Income/Expense Discontinued Operations Net Income before Extraordinary Items/Preferred Dividends 65.Pretax Extraordinary Charge .9% 0.6% 0.9% 0.1% 0.3% 2.8% 13.7% 65.9% 0.0% 0.0% 3.7% 1.6% 1.3% 39.6% 21.0% 0.9% 32.1% 75.4% 0.

0% 0. in any form or by any means.0% 0.0% 0.0% 0. or otherwise without prior written permission. photocopying.8% 21.0% 0.available to Common 0. no pages on this site may be reproduced. Except for quotations by established news media. All Rights Reserved.0% 8. recording. Inc. electronic. Information is believed reliable. completeness and opinions are not guaranteed.8% 45. 232 .0% 18. but accuracy.Extraordinary Items & Gain/Loss Sale of Assets Preferred Dividend Requirements Net Income after Preferred Dividends . or transmitted for commercial purposes. mechanical.0% 25.0% 0.6% Copyright ©2000-2011 Distributed by Wright Investors' Service. stored in a retrieval system.0% 0.0% 0.0% 0.

Pretax Non-Operating Interest Income Reserves .0% 57.3% 2.8% 100.3% 76.3% 84. 2008 84.0% 99.Net Earnings before Interest.9% 255.3% 62.4% -60.Total Operating Income Extraordinary Credit .2% 2009 84. Taxes.7% 62.1% 145.4% 45.Financial Statement Analyses\Income Statement . Electric.1% Fiscal Year Net Sales or Revenues Cost of Goods Sold Depreciation.4% 233 .Pretax Extraordinary Charge .5% 21.2% 123.Increase/Decrease Pretax Equity in Earnings Other Income/Expense .3% -30.1% -86.1% 104.6% 106.4% -95.0% 98.2% 61.0% 170.4% 25.8% 69.(Year to Year Percent Change): Harbin Figures are the Percent Changes from the Prior Year.4% 91.0% -330.4% 77.7% 10.8% 58.6% 108.4% 125.2% 100.5% 100.4% 50.7% 79.4% 57.0% 67.7% 107.8% 58.7% 121.1% 108.3% 86. Inc.0% 65. General & Administrative Expenses Other Operating Expenses Operating Expenses . Depletion & Amortization Gross Income Selling.7% 14.0% 2006 70.6% 100.1% 105.1% 102.2% 204.9% -4.1% 12.5% -21.0% 53.342.3% 3.4% 93.Year-Year % Change Income Statement .5% 72.1% 54.9% 71.0% 93.6% 46.7% 2007 61. Depreciation & Amortization (EBITDA) Earnings before Interest & Taxes(EBIT) Interest Expense on Debt Interest Capitalized Pretax Income Income Taxes Minority Interest Equity in Earnings After Tax Other Income/Expense Discontinued Operations 2010 91.1% 40.6% 70.9% -8.

6% 50.6% 50.3% 84. but accuracy. no pages on this site may be reproduced. completeness and opinions are not guaranteed.Net Income before Extraordinary Items/Preferred Dividends Extraordinary Items & Gain/Loss Sale of Assets Preferred Dividend Requirements Net Income after Preferred Dividends available to Common 291. Information is believed reliable. electronic.1% -8. 234 .4% Copyright ©2000-2011 Distributed by Wright Investors' Service. or otherwise without prior written permission. Except for quotations by established news media. in any form or by any means. or transmitted for commercial purposes. photocopying.0% -22. mechanical. All Rights Reserved.0% -22.1% -8. stored in a retrieval system. recording.4% 291.3% 84. Inc.

Depletion & Amortization Gross Income Selling.9 0.0 0.6 28.9 0.0 0.8 2.2 0.0 0.5 0.Increase/Decrease Pretax Equity in Earnings Other Income/Expense .1 33.5 22.6 16.(5 Year Averages): Harbin Figures in millions of U.0 0.2 15.0 9.9 109.0 9.Five-Year Averages Income Statement .4 18.8 26.Total Operating Income Extraordinary Credit .5 0.9 0.9 12.0 0.1 0.0 0.0 0.0 67.4 44.1 0.4 1.0 0.1 0. Inc.0 5.9 0.0 0.0 0.0 0. Electric.8 0.8 44.2 12.4 0. Depreciation & Amortization (EBITDA) Earnings before Interest & Taxes(EBIT) Interest Expense on Debt Interest Capitalized Pretax Income Income Taxes Minority Interest Equity in Earnings After Tax Other Income/Expense Discontinued Operations Net Income before Extraordinary Items/Preferred Dividends Extraordinary Items & Gain/Loss Sale of Assets 62.2 0.S.1 0.2 0.3 9.0 1.3 26. 2010 2009 2008 2007 2006 175.1 55.0 0.1 25.0 31.0 0. General & Administrative Expenses Other Operating Expenses Operating Expenses .0 0. Dollars.0 0.1 21.Net Earnings before Interest.0 131.7 0.0 5.1 0.6 16.0 0.0 0.0 2.7 0.9 0.0 0.Financial Statement Analyses\Income Statement .5 48.1 14.8 0.0 3.0 1.7 50.0 .Pretax Non-Operating Interest Income Reserves .8 1.0 9.4 0.9 6.3 94.4 Fiscal Year Net Sales or Revenues Cost of Goods Sold Depreciation.0 0.7 18.0 0.0 0.0 2.9 2.0 0. Taxes.0 0.Pretax Extraordinary Charge .7 3.0 0.7 0.0 5.0 235 38.4 37.3 27.8 0.9 0.

0 0. photocopying. mechanical. no pages on this site may be reproduced.Preferred Dividend Requirements Net Income after Preferred Dividends .0 0.0 9.available to Common 0.1 14.4 18. Except for quotations by established news media. or transmitted for commercial purposes. recording. or otherwise without prior written permission. in any form or by any means. but accuracy. completeness and opinions are not guaranteed. 236 .0 0. stored in a retrieval system. Information is believed reliable.1 31.1 Copyright ©2000-2011 Distributed by Wright Investors' Service. Inc. electronic. All Rights Reserved.

0% 0.1 0.3 -2.0% 0.9 208.8 0.0 2.8% 22.4 1.6 -0.9 -44.9 -1.5 -0.8% 0.8 5.S.0 0.5% -86.5% 15.0% 19.0% 25.8% 88.7 15.5 0.5% 65.0% 27.8% 6.1% 0.8 0.Net Change Sources of Capital: Harbin Electric.0% 83.9 1.6% 92.1% 29. Year to year % changes pertain to reported Balance Sheet values.9% 100.6% 0.2% 1.6 4.1 11.0 4.0% 28.5 14.0 2.0 9.0 0.0% 2.5% 16. Dollars.0 0.2% 0.1 -2.0% 28.3 117.0% 0.2 12.1% 0.0 9.0% 38.9 -0.0% 0.0% 35.2% 40.1 0.0 4.9% 1.7 4.6% 61.0 6.7 0.3% 32.9% 237 .7% 10.4 0.7 9.0 0.0% 0.6 2.6% 0.0 0.3 0.2% 1.8 354.0 -0.Financial Statement Analyses\Sources of Capital .0% 1.1% 9. Fiscal Year Fiscal Year End Date Total Capital Percent of Total Capital Short Term Debt Long Term Debt Other Liabilities Total Liabilities Minority Interest Preferred Stock Retained Earnings Common Equity Total Capital Year to Year Net Changes Short Term Debt Long Term Debt Other Liabilities Total Liabilities Minority Interest Preferred Stock Retained Earnings Common Equity Total Capital Year to Year Percent Changes Short Term Debt Long Term Debt 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 472.4% 71.5 4.0 2.2% 100. 2010 2009 2008 2007 2006 Currency figures are in millions of U. Inc.7% 987.0 1.3% 50.7 73.0% -2.6 6.0 0.9% 100.1% 3.8% 100.037.6 0.0 1.0% 0.0% 16.8% 100.

2% 84.8% 196. completeness and opinions are not guaranteed. or otherwise without prior written permission.0 16. 238 .7% -34.6% -28.6% 45.9 21.5 66.1% 26.0% -16.3% 329.6% 88.9 47.832.2 46.9% 59. in any form or by any means.5 62.6 -19.4% 61. Except for quotations by established news media.1% 87. mechanical.0 45.3 22.7 36.6% -40.8 111.6 46. Information is believed reliable.9% 60.2 81. stored in a retrieval system.0 0.6% 180. or transmitted for commercial purposes.0% -86.3 39.Other Liabilities Total Liabilities Minority Interest Preferred Stock Retained Earnings Common Equity Total Capital Total Liabilities & Common Equity Total Liabilities Net Change in Liabilities as % of Total Liabilities Common Equity Net Change in Common Equity as % of Common Equity Cash Flow Operating Activities Financing Activities Investing Activities -67.9% 23.0% 95.2% 33. no pages on this site may be reproduced.4% 93.4% 106. recording.9% 150.2 89.5% 70.1 9.5 Copyright ©2000-2011 Distributed by Wright Investors' Service.6% 27.6 51.5 71.5% 0. Inc.1 0.8% 47.2% 151.2% 24.4% 76. photocopying.6% 48.0% 419. electronic.5% 33.7% 83. but accuracy.1 42.0% 199.8 21.0% 174. All Rights Reserved.9 99.1 4.

9 17.7 4. electronic.0 20.9 5. Plant & Equipment Turnover Depreciation.3 2. no pages on this site may be reproduced.6% Copyright ©2000-2011 Distributed by Wright Investors' Service. 239 . stored in a retrieval system.Financial Ratio AnalysesFinancial Ratio Analyses\Accounting Ratios Accounting Ratios: Harbin Fiscal Year Fiscal Year End Date Receivables Turnover Receivables . or transmitted for commercial purposes.2 0.3% 6. Plant & Equipment Depreciation.2% 62. Plant & Equipment Turnover Net Property.Number of Days Gross Property.Number of Days Inventory Turnover Inventory .1 89.0 4.4 2.0 104.0 0. mechanical. but accuracy.2 108.9 80.2 18.7% 4.4% 79.5 0.1% 145.3 1. 2010 2009 2008 2007 2006 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 4. Depletion & Amortization % of Gross Property.8 90.1 2. Inc. Depletion & Amortization Year to Year Change Depreciation.6 1. photocopying. or otherwise without prior written permission.4 1.8 63. Depletion & Amortization Year to Year % Change Electric.2% 2.5 4. recording.4 5. Except for quotations by established news media.2 1. Information is believed reliable.6% 0.0% 86.9% 2.9 124. completeness and opinions are not guaranteed.5 20.8 83.4 3.2 0. Inc. All Rights Reserved. in any form or by any means.3 2.6 2.5 79.4 4.1 2.5 2.

0% 112.0% 0.4 166. mechanical. Net Sales are in millions of U.0% 22.0% 192.6% 63. Plant & Equipment Gross Accumulated Depreciation Property Plant & Equipment Net Other Assets Total Assets 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 426.0% 43. 240 . Dollars.9% 0.8% 0.5% 52.4% 0.0% 1. Information is believed reliable.0% 126.5% 18. or transmitted for commercial purposes.6% 0. electronic.6% 27.8% 81.2 43.8 40.0% 0.2% 0.8% 40.7% 70.2% 120. completeness and opinions are not guaranteed. Inc.4% 194.6% 20.8% 36.8% 2.0% 0.0% 26. All Rights Reserved.0% 0.0% 0. no pages on this site may be reproduced.0% 3.1% 134.9% 0.6% 40.0% 88. photocopying.1% 0.5% 38.S.4% 78. Except for quotations by established news media.0% 0. or otherwise without prior written permission. Inc.0% 1.1% 230.0% 0.3% 1.8% 15.8% 2.9% 237.6% 31.2% 36.0% 2.7% 0.0% 0.7% 2. stored in a retrieval system.0% 0.0% 24.4% 2.0% 72.2% 0.9% 33. but accuracy.8% 0.0% 0. 2010 2009 2008 2007 2006 Figures are expressed as the ratio of Net Sales. in any form or by any means.4% 223.5 23.8% 22.9% Copyright ©2000-2011 Distributed by Wright Investors' Service.0% 40.7% 44.5% 65.Financial Ratio Analyses\Asset Utilization Asset Utilization: Harbin Electric.3% 202.4 69.6% 14. recording. Fiscal Year Fiscal Year End Date Net Sales Cash & Cash Equivalents Short-Term Investments Accounts Receivable Inventories Other Current Assets Total Current Assets Total Long Term Receivables & Investments Long Term Receivables Investments in Associated Companies Other Investments Property.1% 0.0% 0.

2 325.7 3.7 4.2 19.1 3. photocopying. stored in a retrieval system.7 6.1 3. in any form or by any means.0 6. recording.8 5.6 3.5 Copyright ©2000-2011 Distributed by Wright Investors' Service.0 24.1 7.7 8. Inc.Financial Ratio Analyses\Fixed Charges Coverage Fixed Charges Coverage: Harbin Fiscal Year Fiscal Year End Date EBIT/Total Interest Expense EBIT/Net Interest EBIT/(Total Interest Exp + Pfd Div) EBIT/Dividends on Common Shares EBIT/(Dividends on Common + Pfd) EBITDA/Total Interest Expense EBITDA/Net Interest EBITDA/(Total Interest Exp + Pfd Div) EBITDA/Dividends on Com Shares EBITDA/(Dividends on Com + Pfd) Electric.4 293.7 293. electronic.6 8.7 21.7 3.5 8.1 22.2 6.0 3.4 3. 2009 2008 2007 2006 2010 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 19. 241 . or transmitted for commercial purposes. completeness and opinions are not guaranteed. mechanical.8 8. no pages on this site may be reproduced.5 8. Inc.3 21. but accuracy.6 3.8 8. or otherwise without prior written permission. Except for quotations by established news media. All Rights Reserved.6 5.0 3.6 3. Information is believed reliable.7 3.7 325.

1% 99.0% 0.1% 39.0% 140.0% 6.3% 16.0% 0.6% 0.0% 0.0% 0.0% 0.0% 0.8% 38.6% 30.0% 136.2% 19.0% 0.4% 45.6% 30.1% 140.0% 9.6% 0.0% 0. 2010 2009 2008 2007 2006 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 50.5% 0.3% 43.2% 22.9% 2.2% 74.1% 19.7% 0.5% 48.8% 63.6% 11.0% 0.0% 242 .1% 28.0% 0.8% 16.5% 18.8% 134.0% 0.3% 16.7% 86.0% 10.2% 14.0% 0.3% 138.0% 28. Inc.Financial Ratio Analyses\Leverage Analysis Leverage Analysis: Harbin Fiscal Year Fiscal Year End Date Long Term Debt % of EBIT Long Term Debt % of EBITDA Long Term Debt % of Total Assets Long Term Debt % of Total Capital Long Term Debt % of Com Equity Total Debt % of EBIT Total Debt % of EBITDA Total Debt % of Total Assets Total Debt % of Total Capital Total Debt % of Total Capital & Short Term Debt Total Debt % of Common Equity Minority Interest % of EBIT Minority Interest % of EBITDA Minority Interest % of Total Assets Minority Interest % of Total Capital Minority Interest % of Com Equity Preferred Stock % of EBIT Preferred Stock % of EDITDA Preferred Stock % of Total Assets Electric.6% 4.0% 0.6% 18.0% 0.5% 0.6% 25.2% 1.5% 0.9% 132.5% 125.9% 8.9% 82.8% 18.8% 38.2% 107.0% 6.5% 17.0% 0.0% 28.0% 0.0% 11.2% 17.0% 0.9% 132.6% 25.0% 92.7% 10.0% 0.8% 38.0% 0.8% 1.0% 0.4% 14.9% 14.8% 63.1% 39.0% 0.1% 0.0% 0.0% 0.2% 0.5% 2.5% 136.0% 0.0% 0.8% 134.0% 0.

4% 41.0% 92. electronic.0% 74.9% 88.7% 0.0% 0.0% 0.0% 73.4% 13.0% 91.9% 20. Except for quotations by established news media.7% 0.8% 47. but accuracy.0% 0. mechanical.8% 3.8% 71.9% 88. stored in a retrieval system.8% 66.3% 54.5% 31.0% 63.1% 0.2% 58.0% 51.2% 79.0% 72.5% 101.1% 0. or transmitted for commercial purposes.8% 18.6% 0.2% 35.8% 82. no pages on this site may be reproduced.0% 0.0% 62.0% 0.1% Copyright ©2000-2011 Distributed by Wright Investors' Service.1% 88.5% 0. All Rights Reserved.0% 0. completeness and opinions are not guaranteed.9% 0.5% 0. 243 .4% 61. Information is believed reliable.2% 83. in any form or by any means. Inc.3% 4. recording.0% 48. photocopying.8% 98.6% 28.0% 124. or otherwise without prior written permission.2% 3.Preferred Stock % of Total Capital Preferred Stock % of Total Equity Common Equity % of Total Assets Common Equity % of Total Capital Total Capital % of Total Assets Capital Expenditure % of Sales Fixed Assets % of Common Equity Working Capital % of Total Capital Dividend Payout Funds From Operations % of Total Debt 0.6% 41.

9% 1.0 38.6% 105.4% 108.0% 17.1 26.2% 91.2% 101.5% 20.4% 86.1% 1.8% 527.2% 170.1% 83.1% 17.5 11.1% 37.1 28.3 9.1% 112.376.6 9.3 802.3% 2.4% 89.1% 1.4 18.number of days Inventory to Cash & Equivalents .4% 98.8 15.0% 21.3% 192.0% 46.1% 19.7 14.S.3% 72.0 0.number of days Receivables % of Total Assets Current Ratio Total Debt % of Total Capital Funds from Operations % of Current Liabilities Funds from Operations % of Long Term Debt Funds from Operations % of Total Debt Funds from Operations % of Total Capital Cash Flow (in milllions of U.4% 124. Dollars) Operating Activities Electric.7% 18.6% 80.0% 126.545.0% 1.8% 35.9% 93.4% 34.7 16.3% 124.0 32.5% 18.9 244 .4 571.1 18.6% 63. Inc.Financial Ratio Analyses\Liquidity Analysis Liquidity Analysis: Harbin Fiscal Year Fiscal Year End Date Total Current Assets % Net Sales Cash % of Current Assets Cash & Equivalents % of Current Assets Quick Ratio Receivables % of Current Assets Receivable Turnover number of days Inventories % of Current Assets Inventory Turnover .5% 79.4% 51.1% 51.6% 17.4 23.5% 72.5 3.367.5 42.9 30.0% 62.0% 3.6 463.6% 28.3% 202.8% 17.5 41.3 62.1% 590.7% 27.0 17.1 35.1 16.1 13.1% 90.1 6.9 20.6% 5.9% 88. 2010 2009 2008 2007 2006 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 63.9 32.

1 0.7 36. no pages on this site may be reproduced.8 111. electronic. completeness and opinions are not guaranteed. or otherwise without prior written permission. All Rights Reserved. photocopying. but accuracy. mechanical. stored in a retrieval system. in any form or by any means.5 71. or transmitted for commercial purposes. Except for quotations by established news media.1 39.Financing Activities Investing Activities 22.0 47. Information is believed reliable. recording. 245 .5 Copyright ©2000-2011 Distributed by Wright Investors' Service.2 89.2 81. Inc.1 4.

00 0.63 0.35 10.38 4. in any form or by any means.19 1.24 17.91 0.31 0.84 1. 246 .01 1. Information is believed reliable.43 0.00 2. or transmitted for commercial purposes.00 0.77 0. Figures are in U. Inc.15 1.93 0.63 0. electronic. All Rights Reserved.19 0.91 0.93 0.11 1.38 7.15 1.00 3.46 0.31 2.00 0.09 5.01 0.60 1.24 13.46 2.63 0.01 2.11 1. Inc.19 1.00 0.80 2. but accuracy.Financial Ratio Analyses\Per-Share Ratios Per Share Data: Harbin Electric.00 1.65 3. 2010 2009 2008 2007 2006 Figures are expressed as per unit of respective shares. Fiscal Year Fiscal Year End Date Sales Operating Income Pre-tax Income Net Income (Continuing Operations) Net Income Before Extra Items Extraordinary Items Net Income After Extraordinary Items Net Income Available to Common Shares Fully Diluted Earnings Common Dividends Cash Earnings Book Value Retained Earnings Assets 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 13.36 18.11 0. no pages on this site may be reproduced.93 0.36 10.50 1.00 1.29 4.S. mechanical.77 2. Dollars.35 1.00 1.46 2.11 1. photocopying.66 7.65 2.00 1.46 2. recording.99 3.77 0. stored in a retrieval system.93 0.15 0.80 1.00 2.58 5. or otherwise without prior written permission.47 1.65 1.46 0.60 Copyright ©2000-2011 Distributed by Wright Investors' Service. Except for quotations by established news media.78 7.34 2. completeness and opinions are not guaranteed.56 1.

electronic.8% 7.3% 18.S.0% 0.144.3% 48. recording.9% 22.1% 6.8% 21.3% 10.6% 36.8% 16.6% 34. no pages on this site may be reproduced.8% 23.2% Copyright ©2000-2011 Distributed by Wright Investors' Service.7% 199.2% 14. but accuracy.0% 25.0% 36.8% 26.1% 22.7% 30.5 22. Except for quotations by established news media.6% 53.2% 18. Inc.6% 59.9% 25. Information is believed reliable.0% 36.5% 0.0% 13.0% 9.9% 1.9% 3.7% 13.2% 27.Financial Ratio Analyses\Profitability Growth Profitability Analysis: Harbin Currency figures are in U.2% 0.4% 0.7% 45.248 0. 2010 2009 2008 2007 2006 Fiscal Year Fiscal Year End Date Gross Income Margin Operating Income Margin Pretax Income Margin EBIT Margin Net Income Margin Return on Equity .6% 51.3% 25.1% 29.0% 76. mechanical.0% 40.5% 24.0% 20.0% 5.0% 21.6% 45.2% 0.4 63. All Rights Reserved.5% 34.5% 39. Dollars.8% 9.Total Return on Invested Capital Return on Assets Asset Turnover Financial Leverage Interest Expense on Debt Effective Tax Rate Cash Flow % Sales Selling.5 39. completeness and opinions are not guaranteed.1% 23. or transmitted for commercial purposes.382 15.954 0.5% 2.450.2% 6.4% 1.3% 28.5% 14.355.8% 33.0% 19. or otherwise without prior written permission.8% 36.8% 9. Electric.334 15. Inc. 247 .3% 25.7 19.0% 7.833 13.8% 49. in any form or by any means.8% 34.5% 17. General & Administrative Expenses % of Sales Research & Development Expense Operating Income Return On Total Capital 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 31.9% 70. photocopying.0% 0.6% 17.8% 0.619.4 18.200. stored in a retrieval system.9% 19.7% 8.

Current Year Stock Exchange Listings Number of Institutional Investors Number of Shareholders Closely Held Shares as % of Total Shares Outstanding Copyright ©2000-2011 Distributed by Wright Investors' Service.437 364. stored in a retrieval system.1% Investment Acceptance Rating Total Market Value of Shares Outstanding . in any form or by any means.Current Year Turnover Rate . recording. completeness and opinions are not guaranteed. Wright Quality Rating Electric. no pages on this site may be reproduced.Current Year Trading Volume . Except for quotations by established news media. electronic.Investment Acceptance: Harbin Currency figures are in millions of U.Three Year Average .S.858 3. or otherwise without prior written permission. 248 . Inc. but accuracy.3% NAS 123 34 34.Current Year Public Market Value (Excludes Closely Held) . mechanical.Three Year Average . Dollars. photocopying.Three Year Average . Information is believed reliable.1% 650. Inc. CAA20 CAA20 510 528 337 348 1. or transmitted for commercial purposes.Three Year Average .Wright Quality Rating AnalysesWright Quality Rating Analyses\Investment Acceptance Wright Quality Rating . All Rights Reserved.

1 22.Financial Strength: Harbin Wright Quality Rating Financial Strength Rating Total Shareholders' Equity (Millions of U. Dollars) Total Shareholders' Equity as % Total Capital Preferred Stock as % of Total Capital Long Term Debt as % of Total Capital Long Term Debt (Millions of U.S. Dollars) Electric. 249 .S. mechanical. Except for quotations by established news media.4% 19.Wright Quality Rating Analyses\Financial Strength Wright Quality Rating . electronic.3% 50 0 50 20. but accuracy.0% 10. Inc. C C AA20 AA20 433 89.1% 0. completeness and opinions are not guaranteed.S.S. All Rights Reserved. Dollars) Lease Obligations (Millions of U. or transmitted for commercial purposes. photocopying. Information is believed reliable. recording. in any form or by any means.2 1.4 Long Term Debt including Leases (Millions of U.8 2. stored in a retrieval system. no pages on this site may be reproduced. or otherwise without prior written permission. Dollars) Total Debt as % of Total Capital Fixed Charge Coverage Ratio: Pretax Income to Interest Expense & Preferred Dividends Fixed Charge Coverage Ratio: Pretax Income to Net Interest Income & Preferred Dividends Quick Ratio (Cash & Receivables / Current Liabilities) Current Ratio (Current Assets / Current Liabilities) Copyright ©2000-2011 Distributed by Wright Investors' Service. Inc.

Basic Trend Cash Earnings Return on Equity . electronic.Basic Trend Cash Earnings Return on Equity .7% 17.0% 16.0% 32. photocopying.6% 1.Stability Index Return On Assets (Time-Weighted Average) Pre-Tax Income as % of Total Assets (Time-Weighted Average) Operating Income as % of Total Assets (Time-Weighted Average) Operating Income as % of Total Capital (Adjusted Rate) Pre-Tax Income as % of Total Assets (Time-Weighted Average) Operating Income as % of Total Assets (Time-Weighted Average) Operating Income as % of Total Capital (Adjusted Rate) 1.657. Except for quotations by established news media. completeness and opinions are not guaranteed.7% 17.Time-Weighted Average .0% -4. recording.8% 99.Time-Weighted Normal . CA CA A20 A20 22.0% 89. Information is believed reliable. or otherwise without prior written permission.Profitability & Stability: Harbin Wright Quality Rating Profitability & Stability Rating Electric.Wright Quality Rating Analyses\Profitability & Stability Wright Quality Rating . or transmitted for commercial purposes. mechanical. in any form or by any means. All Rights Reserved. Inc. 250 .6% Profit Rate of Earnings on Equity Capital .2% 16. no pages on this site may be reproduced. stored in a retrieval system.5% -4. but accuracy.2% Copyright ©2000-2011 Distributed by Wright Investors' Service.657. Inc.

CAA CAA Wright Quality Rating Growth Rating Normal Earnings Growth Cash Earnings Growth Cash Earnings Stability Index Earned Equity Growth Dividend Growth Operating Income Growth Assets Growth Sales/Revenues Growth 20 20 20. electronic. recording. stored in a retrieval system.0% Copyright ©2000-2011 Distributed by Wright Investors' Service.0% 91. no pages on this site may be reproduced. Inc. Electric.0% 25.0% 25.Corporate Growth: Harbin Figures are expressed on a Per Share Basis.0% 0. 251 .0% 25. or otherwise without prior written permission. All Rights Reserved. but accuracy.Wright Quality Rating Analyses\Corporate Growth Wright Quality Rating . Except for quotations by established news media.3% 22. Information is believed reliable. completeness and opinions are not guaranteed. mechanical. or transmitted for commercial purposes.0% 25. Inc. in any form or by any means. photocopying.

to serve as a basis for fairness opinion.com $17. There were eight and three putative stockholder class action complaints filed in Nevada and New York.72 to $473-494M and $2. Inc.34A $0.93. (3) During the go-shop period from November 2010 to January 2011. In general. (000) Book Value/Share: Dividend/Yield: Risk Profile: Maxim Group FYE: December 1Q 2Q 3Q 4Q FY Maxim Group FYE: December 2009A: GAAP 2010A: GAAP 2011E: GAAP 2012E: GAAP LT Earnings Growth Maxim Group FYE: December 1Q 2Q 3Q 4Q FY Consensus-First Call FYE: December 1Q 2Q 3Q 4Q FY Echo He. We believe that this is one more step towards a successful LBO.63 $0.82 . (5) On May 10.8A $122. Major documents filed together with 13E-3 are a Preliminary Proxy Statement for a special shareholder meeting.60 NA Medium Revenues ($M) 2011E 2012E $103. Morgan Stanley contacted 73 parties.77 22. 2011 Closing Price (7/13/11): 12-Month Target Price: 52-Week Range: Market Cap (MM): Shares O/S (MM): Float (MM): Shares Short (MM): Avg.66 $0.$25.50 $0.12 $2. respectively. (4) The company twice revised down its financial outlook. including a $400M Facility Agreement with China Development Bank. Chairman Mr.4 16. which was completed in early February 2011 and also served as the judgment basis to Morgan Stanley and Lazard Frères.48 $0. SEC is likely to approve the merger transaction.4 31. creates buying opportunities.62 $0.78 (212) 895-3718 Maxim Group LLC 405 Lexington Avenue New York. and the merger enables the minority shareholders to realize their value of investment. reducing 2011 revenue and EPS estimates from $578M and $3.56 $24 $5.58 $0.4 $131. respectively.67 Quarterly EPS 2011E 2012E $0.2 $2. which are 3% and 34% above our current estimates. Mr. currently ~30% between the share price and the LBO offering price. In our view.6 Current Current EPS P/E $0.8 9.70 $0. in April and June 2011.6 $150. both the Special Committee and the board of HRBN believe the current merger and merger agreement are fair to HRBN’s minority shareholders.05 $551. One further step towards LBO.74 Harbin Electric. both Morgan Stanley and Lazard Frères conducted their own due diligence in November 2010 and April 2011.0 $140.34A $0.46 7.maximgrp. which will likely close by the year end. In our opinion the persistent gap.6 10% .67 6.7 $123. Vol. respectively. Yang and Abax Global. three remained to date. That said.1 $112. with 16 entered in non-disclosure agreements.66 $0.68 Current 2012E $0. Our Buy rating and $24 price target is mainly based on a favorable outcome of HRBN’s LBO. Yang agreed to pay Baring Private Equity Asia $500.70 $0.14 $2. Opinions of Morgan Stanley and Lazard Frères regarding the fairness of the transaction. HRBN likely has fulfilled all required documents for SEC review. Reiterate Buy and $24 price target Yesterday. $2. The Preliminary Proxy disclosed more details in the LBO process: (1) Acting as the financial advisors to HRBN.15% GAAP Quarterly EPS Current 2011E $0. and a definitive Merger Agreement. 2011. NY 10174 – www. (HRBN – Nasdaq – $17.851 $19. The company has filed motions to dismiss one and intends to defend itself in others. respectively.80-$2.2 $2. PhD ehe@maximgrp.66 $0.4 $470.EQUITY RESEARCH COMPANY UPDATE China July 14.74 $2. MD. HRBN filed schedule 13E-3 with the SEC together with a Preliminary Proxy Statement.58 $0.7 $547. (2) HRBN’s special committee engaged Ernst & Young to conduct a detailed accounting and tax due diligence.8 1. After consolidation or voluntary dismissal.56) Buy 13E-3 and preliminary proxy filed. and Limited Guarantee that the buyer group.000 for Baring to waive its right of providing 10% of the LBO financing.14 8. Some previously filed documents were also attached.8 $2.2 $134. we believe HRBN needs to solve its litigations before closing the transaction. are liable to $30M termination fee payable to HRBN if they fail to complete the merger.com SEE PAGES 4-6 FOR IMPORTANT DISCLOSURES AND DISCLAIMERS 252 . Equity Commitment by Abax Global.

28 32.5x 13.08 $ 5.0x 4.9x 22.2x 0.2x 18.9x 56.3x 18.8x 6.30 1.30 0.12 0.7x 49.6x 10.20 $ $ $ $ $ $ 0.488 Regal Beloit RBC $ 67.18 0.27 7.1x 10.8x 5.93 $ 3.59 $ 11.8x 15.003 Cummins CMI $ 105.2x 13.87 $ 4.57 $ 3.46 $ 2.603 Smith AO AOS $ 41.94 $ 11.10 $ -$ $ $ $ $ $ $ 1.05 0.04 0.17 1.04 0.10 $ 59.73 $ 5.42 1.0x 10.2x -6.7x China Mainland Listed China Motor Companies Xiangtan Electric 600416-SH $ 1.093 Average Source: Thomson One.213 334 167 $ $ $ $ $ 0.08 0.8x 15.6x 8.51 1.3x 83.6x 25.7x 28.276 Franklin Electric FELE $ 47.32 -1.0x 18.7x 3.2x 6.3x 11. Bloomberg and Maxim Group estimates.5x 10.769 Emerson Electric EMR $ 56.10 1.7x 20.04 0.5x 2.2x 18.6x US/International Motor Companies Siemens SI $ 132. Materia CHOP SORL Auto Parts SORL Average HK Listed China Motor Companies Harbin Power Equipment 1133-HK Shanghai Electric Group 2727-HK Dongfang Electric Group 1072-HK Chongqing Machinery & E2722-HK Shanghai Prime Machine 2345-HK Average $ $ $ $ $ $ $ $ $ 215 76 295 286 30 184 281 168 98 $ -$ $ $ $ $ $ $ 1.4x 8.154 $ 294 $ 1.8x 3.72 $ 29.4x 12.1x 27.05 0.89 21.6x 24.8x 31.81 $ 1.05 $ 4.58 $ 5.10 1.98 Average $ 1.95 1.1x 20.90 Zhejiang Founder Motor 002196-SZ $ 2.55 5.3x 13.10 $ 2.70 1.67 7.78 4.1x 5.3x 13.00 $ 1.794 ABB ABB $ 26. $ 6.71 BroadOcean 002249-SZ $ 3.32 $ 1.08 $ 5.3x 12.7x 13.12 0.57 0.69 $ 3.00 n/a -$ 2.0x Maxim Group LLC 2 253 . Inc.27 $ 3.3x 15.03 0.3x 18.02 5.83 $ 1.93 $ 8. (HRBN) Exhibit 1.1x 14.06 $ -$ $ $ $ $ $ $ 1.3x 7.2x 4.6x 17.8x 4.1x 5.165 $ 6.93 7.02 $ $ $ $ $ 0.6x 15.02 10.93 1.5x 14.9x 4.7x 20.23 0.1x $ $ $ $ $ 1.34 $ 5.03 0.499 $ 438 $ 10.888 Magna International MGA $ 52.1x 10.08 0.06 $ 42.Harbin Electric.2x 11. HRBN – Comparable Companies 7/13 Company Harbin Electric TKR HRBN Price $ 17.9x 9.0x 5.2x 10.6x 6.11 0.17 $ 4.50 Jiangte Electric Motor 002176-SZ $ 4.87 $ 1.22 $ $ $ $ $ 820 1.3x 12.17 1.4x 9.902 Rockwell Automation ROK $ 83.12 0.7x 15.21 0.0x 4.2x 14.0x 16.67 7.20 1.50 3.920 Lear Corporation LEA $ 53.25 $ 2.26 1.78 0.56 LAST $ $ $ $ $ $ $ $ $ 7.47 $ 2.14 $ 114.03 0.4x 3.59 $ 9.59 1.11 0.14 $ 2.49 0.2x 24.6x Chinese Industrial Companies China Automotive CAAS A-Power APWR FushiCopperweld FSIN Lihua International LIWA Shengdatech SDTH Wonder Auto WATG ChemSpec CPC China Gerui Adv.7x 29.15 0.5x 12.40 0.6x 43.38 2.34 $ 3.1x 10.4x 47.2x 13.07 MktCap (mm) $ 551 EPS P/E __________________________________________________ 10A 11E 12E 10A 11E 12E $ 2.223 Illinois Tool Works ITW $ 57.1x -20.2x -16.61 $ 2.60 $ 5.5x 88.1x 71.04 0.7x 16.28 $ 2.20 0.4x 9.3x 6.5x 11.4x 12.50 $ 10.44 $ 6.500 1.03 0.05 0.02 $ $ $ $ $ 0.25 n/a $ 2.9x 20.49 0.8x 4.04 Shanghai Electric Group 601727-SH $ 1.2x 8.08 0.4x 1.42 n/a $ 2.8x 18.04 0.3x 8.27 0.9x 17.630 $ $ $ $ $ $ 0.6x 0.24 $ $ $ $ -$ 0.96 0.2x 19.6x 4.03 Dongfang Electric Group 600875-SH $ 3.7x 4.05 1.11 $ 4.8x -6.42 7.07 0.71 $ 20.1x 12.06 0.09 $ 1.1x -14.01 1.

28 $ 23.4 10.48 Source: Company reports and Maxim Group estimates.8 2009 Full Yr 1Q10 31-Mar 2Q10 30-Jun 3Q10 30-Sep 4Q10 31-Dec 2010 Full Yr 1Q11 31-Mar 2Q11E 30-Jun 3Q11E 30-Sep 4Q11E 31-Dec 2011E Full Yr 2012E Full Yr $ 4.1 19.8 11% 16.5) 11.1 40.0 31.0) 0.1 31.4) 0.8) 0.7% (4.2 15% 20.48 100.4 6.1 18.6) 88.4% 2.35 $ 0.7 67.3% 1.3% 1.5 31.5% (0.1 42.3 27.2) 19.3% (1.0) 0.6% (7.4 $ 109.4 (1.8% 79.1% 19.8) 12.0% 25.1 0.3 0.1% 25.4 29.7 19.3% 21.2 (14.2) 3.2 6.0% 9.3 31.8) 19.83 $ 0.1 14.6 23.4% (4.0% 18.0) (73.0 -1% 28.7% (1.3 125.0%) 0% 15% 2% 10% 28% 15% 14% 14% 13% 14% 15% 13% 12% 12% 13% 12% 22.14 $ 54% -13% 2.9% (0.8 105.9 (8%) 25.1 33.0 0.0 76.7) 14.77 $ 31% (35.3 0.30 1.0% 16.7 107% 39% 14% 3% 31% -3% 10% 15% 30% 13% 19% 0% 21% 22% 21% 22% 22% 21% 23% 22% 23% 22% 23% 45.6 (6.80 31.4) 17.6% 1.7 258.7 $ 547.9% 25.4 157% 23% 32% $ 44.2 21.5 (7.57 $ 0.2 31.8 26% 15.01 $ 0.0% 6.6 48.2 (28%) 18.1 61.1 31.44 $ 2.11 $ 0.3 31.4% 12.49 $ 0.2 (3.3 135.1) 34.8% 6.6% 1.3% 5.4%) (40.46 $ 0.0 (16.0 (4.8) (73.5% 0.2 43.Weihai Y/Y Growth % of Total Rev Rotary Motors .6 18.3) (24. Inc.3 31.4 31.2 15.5 11.5% 1.0% (11.4) 93.8) 55.1% (3.8) (75.44 $ 2.7 35.8 31.6) (6.4 84% 45.0 (4.2 (15%) 29.3 18. net Interest expense.4 77.4 $ 106. Maxim Group LLC 3 254 .4 48.7 17.66 $ 82% 0.4 50% 21.4 0.77 $ 1.3% 6.9) 3.1 25.6) 10.5% (7.6 350% 48.6% (1.3 11.9) 6.7) 21.7 77% 31.1 -14% 29.3 58.7% 1.0% 10.9% (0.7) (4.8 25.3% (1.1% (42.1 6.8 36.3) 7.5 14.3 (1.51 37.6 137% 19.0 (21.7% (8.8 62% 25.0% 0.7% (38.8% (1.3 (1.8 291% 18.4) (87.9 0.9 (2.9% 10.1 31.8 1.9% (0.9) (1.5 23.5 0.4) 8.3 6.Xi'an Y/Y Growth % of Total Rev Revenues Y/Y Growth Cost of sales Gross profit Y/Y Growth Gross Margin R&D As % of Rev G&A As % of Rev Total operating expenses Income from operations Y/Y Growth Operating Margin Other income (expenses).9) 32.7) (4.9) 8.3 76.1% 7.5 46% 39.4% (20.5 155.1% 17.9 13% 6% 11% 12% 11% 3% 15% 20% 25% 16% 18% 0% 0% 20% 43% 42% 45% 47% 44% 45% 46% 48% 47% 46% 47% 65.1 (7.9) 25.5 (12.2 6.6 31.7 62.0 $ 131.0 0.7 93.67 $ 0.0) 16.3 47.5 (4.7) 11.6 17.2% (11.7 36.4) 84.8) 26.4 0.2% (10.9 -10% 28.4 31.3 31.7%) 7.2 $ 123.8% (0.1) 0.9 24% 20.7 15.2 (40.7 246% 26.9 NM 16.8 94.1 2.0 0.68 2.8 (47.7) 1.0 1.7) 20.2) 1.3% (0.2) 28.0% 25.4 13.15 $ 0.3 0.0 34.6) (94.0 44.7 (1.2) 15.1) 0.0 30.6 135.0% 13.2) 27.1 31.1) (290.99 $ 1.1 (1.3 47.6% 15.4% (1.7) (70.4) 7.7%) 14.2 13.3 19.9 0.0% 84.1) 1.3) 9.8 (4.6%) 6% 12% 24% 10% 16% (33.5 31.7) 109.8% 7.4 35.4 31.8 0.2 $ 426.4%) 10.4 48.9 0.8 $ 112.0 333% 42.3) (146.3% 19.3 43.4 0.3 (0.3) 1.63 $ 0.3 31.2 19% 18% 71.3% 0.83 74.3 20.9% (0.6% 17.4) 0.3 -12% 14.2% (11.3 6.8 0. net Total other income (expense) Income before income taxes Provision for income taxes Tax Rate Net income before noncontrolling intere Minority interests As % of net income Net income Y/Y Growth Net Margin Foreign currency translation adjustmen Comprehensive income Weighted average shares outstanding Basic Diluted EPS (to controlling interest) Basic Diluted Y/Y Growth D&A Share-based compensation EBITDA EBITDA margin Exchange Rate (RMB/US$) $ $ 2004 Full Yr 2005 Full Yr 2006 Full Yr 2007 Full Yr 36.6% 76.2 (1.0 2.0% 10.0 (2.4 0.7 6.7 227% 33.3% 6.5 2.3 16.48 $ NM -25% 221% (47.5% 84.9) 9.4 31.9 23.1) (75.1 20.5 (3.6%) 13.82 $ NM 2.7) 19.6) 0.5) 3.3 (0.7% (10.4 65% 49.9 (2.3 16.66 $ 0.0 10.3 19.8% (15.1) (0.54 0.3 0.3% (5. HRBN-Income Statement (In millions except per shr) Revenue Drivers: Linear Motors Y/Y Growth % of Total Rev Specialty Micro-Motors Y/Y Growth % of Total Rev Rotary Motors .6 $ 387% (12.3) 1.5% 1.9% 5.2) 1.0) 1.7% (14.8% 5.6% 8.6) (80.7% (7.1 28.6) (0.3% (46.7% 12.8) 27.5) 15.25 $ 0.9% 67.5) 4.6% (7.0) 24.8) 20.6 25.1) 16.8) 1.84 0.6% (1.66 $ 68% 3.8% (0.7 (0.1 (1.0% 2.7 NM 24.3 0.1) 11.7 71% 20.0% 5.36 60.5 125.0 20.8% (39.1) (4.2 6.6 52.84 33.4 0.4 0.6 (3.2 $ 105.1) 15.5 46.2 0.0% (8.1 (4.0% 16.60 105.9) (1.6) 0.0 0.6) (69.47 $ 0.1 19.9 15.8) 25.7) (391.19 $ 0.0 0.9) 30.4 218.0% 84.0% (9.0% 19.4 $ 71% (20.3 51.6 23.36 0.5 21% 28.2 0.1) (335.4 69% 16.4 $ 120.8 (0.3 25.2% 23.3% (10.5) 29.9 16.3) 15.76 19.1% 5.2 17.9 188.8 15.2 1.9 11.5) 7.1 0.0) 106.3 (41%) 15.7 2.2% 6.7 -31% 12.5 $ 105.0% 15.3% 67.9 166% 78% 81% -18% 51% -4% (3.2 6.9 0.84 18.8) 16.0% (9.4% 1.4 31.8% (14.3 14.0 42.4 18.8% (3.5 $ $ 0.6 $ 470.2 21.3% (6.5% (45.6 47.3 31.0% 2.4) 0.2% (10.0% 18.1 219% 26.5 0.0% 15.34 $ 0.5 16.1% 22.0) 27.4% (1.2 (2.8 24.7% 8.8 0.57 $ 0.6) 13.6 100% 30.0% 21. (HRBN) Exhibit 2.0) 7.1) 1.68 $ 2.6 61% 34.6 31.3) 18.3) 2.6 62% 85% 85% 243% 175% 133% -1% 91% (1.84 35.1% 10.57 23.1 31.5 35% 41% 33.0% 67.3 22% 27% 40.3 30.2) 10.6 (23%) 8.1% 0.7 15% 28.0 60.8 60% 74% 18% -14% 27% -3% -10% 0% 20% 1% 12% 56% 19% 19% 18% 16% 18% 19% 16% 16% 16% 16% 16% 18.9 1.7% 2.1 2.8 31.9% (18.7 90.0% 19.9 2.2 15.8% (41.4) 2.0) 0.6% 2.3 31.3) 5.3 17.0 19.7) 21.5 23.9 49.91 $ 53% (10%) 2.2) (6.9) (0.9) 15.5 40.8) 22.0) 9.3) 1.8 (0.36 0.3% 7.5% (10.1) 9.8 20.7 70% 48.4 21.3) 2.8%) 3.7% 20.9 (7.9 (0.63 $ 10% 2.6 2008 Full Yr 49.4 -5% 18.7) 23.2 6.9 27.4 45% 28.2 86.5% (1.8) 0.6 (39.2% (0.0% 1.2) 20.3 175% 33.4 29.1 (3.0% 21.0) 0.3 31.0% 6.67 25% 14.1% 0.Harbin Electric.07 1.2 6.7) 8.2) 25.4) 15.1) 9.9% (13.1 (3.7 1.3% (2.3 67% 21.9) (1.5 $ 103.6% 0.9 68% 20.68 $ 2.8 85% 28% 27.4 5% 28.9 (4.8 $ 223.

including the firm’s total revenues. Inc. sum of the parts analysis and discounted cash flow.9% * Relative to Nasdaq Composite. An Under Review (UR) rating represents a stock that the Firm has temporarily placed under review due to a material change.0% Expected Performance* Buy Hold Sell Expected total return of 15% or more over next 12 months Expected total return of plus or minus 14% over next 12 months Expected total negative return of at least 15% over next 12 months with Rating 65.0% 0. Furthermore. (HRBN) DISCLOSURES Source: Investars. Individual sector analysis.Harbin Electric. a portion of which is generated by investment banking activities. Maxim Group makes a market in Harbin Electric. Inc. no part of my compensation was. attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer. Maxim Group LLC 4 255 . earnings expectations or sales growth as they relate within an industry group or to the broader market. in the next 3 months. enterprise value/sales. I. The research analyst(s) primarily responsible for the preparation of this research report have received compensation based upon various factors.com Maxim Group LLC Stock Rating System As of: % of Coverage Universe 7/14/2011 % of Ratings that Firm received Banking fees 24. Inc.3% 7. price/book ratio. or will be directly or indirectly related to the specific recommendation or views expressed in this research report. Maxim Group expects to receive or intends to seek compensation for investment banking services from Harbin Electric. Echo He. Valuation Methods: One or more of the following valuation methods are used by Maxim Group analysts in making a ratings or price projection: Analysis of companies P/E ratio.0% 0. is.8% 26.

the price volatility is expected to be significant with the possibility that the investment could eventually be worthless. the company’s ability to recruit and retain competent personnel. Accordingly. Maxim Group LLC 5 256 . (3) Raw material price increases. (2) Slowdown of Chinese economy. balance sheet concerns. High – Fundamental Criteria: This is a risk rating assigned to companies having below-average revenue and earnings visibility. changes in investor sentiment regarding the specific company or industry. but are not limited to. rating include: (1) Failure of the proposed LBO to be completed. the company’s failure to achieve our earnings and revenue estimates. both price volatility and fundamental risk are expected to approximate the industry average. and/or a short operating history. Low – Fundamental Criteria: This is a risk rating assigned to companies that may have above-average revenue and earnings visibility. product obsolescence. Speculative stocks may not be suitable for a significant class of individual investors. Speculative – Fundamental Criteria: This is a risk rating assigned to early-stage companies with minimal to no revenues. fundamental risk is expected to be above the industry. Accordingly. For a complete discussion of the risk factors that could affect the market price of the company’s shares. (4) High competition in industrial motor market. Medium – Fundamental Criteria: This is a risk rating assigned to companies that may have average revenue and earnings visibility.Harbin Electric. and is fairly liquid. Accordingly. High-risk stocks may not be suitable for a significant class of individual investors. both price volatility and fundamental risk are expected to be below the industry. lack of earnings. negative cash flow. (HRBN) Price Target Risks: Investment risks associated with the achievement of the price target include. and (6) Potential equity issuance. positive cash flow. Investment Risks: Aside from general market and other economic risks. Price volatility: The price volatility of companies falling within this category is expected to be above the industry. risks particular to our Harbin Electric. and is fairly liquid. Accordingly. RISK RATINGS Risk ratings take into account both fundamental criteria and price volatility. unforeseen macroeconomic and/or industry events that adversely impact demand for the company’s products and services. Inc. refer to the most recent form 10-Q or 10-K that the company has filed with the SEC. and low market cap or public float. Inc. (5) Difficulties of developing linear motor market. changing competitive pressures and adverse market conditions. fundamental risk is expected to be significantly above the industry. Price Volatility: Because of the inherent fundamental criteria of the companies falling within this risk category. positive cash flow.

This publication is confidential for the information of the addressee only and may not be reproduced in whole or in part. is made regarding future performance. Investors must make their own determination as to the appropriateness of an investment in any securities referred to herein. Investors in securities such as ADRs. the information presented in this report. Inc. ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST Maxim Group LLC 6 257 . views and analytical methods of the analysts who prepared them and Maxim is under no obligation to ensure that such other reports are brought to the attention of any recipient of this report. Indeed. (HRBN) DISCLAIMERS Some companies that Maxim Group LLC follows are emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. The price. except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to Maxim. in such circumstances. the potential losses may exceed the amount of initial investment and. This communication is neither an offer to sell nor a solicitation of an offer to buy any securities mentioned herein. based on their specific investment objectives. Securities recommended. but Maxim makes no representation as to their accuracy or completeness. Past performance should not be taken as an indication or guarantee of future performance. copies circulated. financial status and risk tolerance. you may be required to pay more money to support these losses. Information.Harbin Electric. This report is not to be relied upon in substitution for the exercise of independent judgment. The value of securities is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities. Those reports reflect the different assumptions. and (2) are subject to investment risks. offered or sold by Maxim: (1) are not insured by the Federal Deposit Insurance Company. (2) are not deposits or other obligations of any insured depository institution. and no representation or warranty. opinions and estimates contained in this report reflect a judgment at its original date of publication by Maxim and are subject to change without notice. the values of which are influenced by currency volatility. effectively assume this risk. express or implied. Information and opinions presented in this report have been obtained or derived from sources believed by Maxim to be reliable. without the prior written consent of Maxim Group. and reach different conclusions from. The securities discussed in Maxim Group LLC research reports may not be suitable for some investors. other reports that are inconsistent with. including the possible loss of principal invested. or disclosed to another party. value of and income from any of the securities mentioned in this report can fall as well as rise. LLC (“Maxim”). Maxim may have issued. and may in the future issue. in the case of some investments. Maxim accepts no liability for loss arising from the use of the material presented in this report.

electronic. without the prior permission of the publisher. 258 . No part of this publication may be reproduced.com Company Report Harbin Electric. Vega Block The 'V' Park. The facts of this report are believed to be correct at the time of publication but cannot be guaranteed.the home of business information Prepared by the Company and Market Intelligence Unit at Datamonitor e:cpqueries@datamonitor. recording or otherwise. stored in a retrieval system or transmitted in any form by any means. photocopying.17. Please note that the findings. Datamonitor Ltd.com Datamonitor Asia Pacific Level 46. Plot No. This publication is available on a single user license only. NY 10016 USA t: +1 212 686 7400 e: usinfo@datamonitor.com Datamonitor India. Madhapur 500-081 Andhra Pradesh. Middle East and Asia 8th Floor. Inc. A Single-User License allows clients to place purchased report on one (1) computer system and NOT make use of the report on a corporate computer network. India t: +91 406 672 9500 e: ininfo@datamonitor. NASDAQ (HRBN) July 5. 2 Park Street Sydney. As such Datamonitor can accept no liability whatever for actions taken based on any information that may subsequently prove to be incorrect. NSW 2000 Australia t: +61 2 8705 6900 e: apinfo@datamonitor. mechanical. All Rights Reserved. 2011 © Datamonitor. whose accuracy we are not always in a position to guarantee.com OUR MAIN OFFICES: Datamonitor Americas 245 Fifth Avenue 4th Floor New York.com Datamonitor Europe 119 Farringdon Road London EC1R 3DA t: +44 207 551 9000 e: euroinfo@datamonitor. conclusions and recommendations that Datamonitor delivers will be based on information gathered in good faith from both primary and secondary sources.

and industrial rotary motors for use in agricultural equipment and medical devices.datamonitor. and Chief Operating Officer.Company Snapshot Company Snapshot Reference Code : 732345C1-017F-413B-A6A3-C3DF193F55EB Harbin Electric.com Industry: Industrial Goods and Machinery Overview Harbin Electric is involved in manufacturing a range of electric motors.430 people.harbinelectric. automobile specialty micro-motors for automobile interior applications.3 million in fiscal 2010. Its product line includes linear motors (LMs). Key Employees Employee Name Lanxiang Gao Tianfu Yang Job Title Director.8 million in fiscal 2010. and Corporate Secretary Chief Technology Officer Board Executive Board Executive Board Christy Y Shue Senior Management Kanenori Okawa Senior Management Company Report.6 million in 2009. an increase of 67. Its net profit was $76. The company's operating profit was $93. 9 Ha Ping Xi Lu Ha Ping Lu Ji Zhong Qu Harbin Kai Fa Qu Harbin 150060 China Publication Date: July 2011 Phone: 86 451 8611 6757 Website: www. Inc.5 million in the fiscal year ended December 2010. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 2 www.1% over 2009. as compared to the net profit of $19.com 259 . It is headquartered in Harbin. and employs around 4. The company recorded revenues of $426. Finance and Investor Relations. an increase of 91% over 2009. China. Shanghai Tech-Full Chairman and Chief Executive Officer Executive Vice President. The company primarily operates in China and the US.

YTD*2011) Harbin Electric.com 260 .45 million private placement 11 Oct 2010 19 Oct 2009 05 Aug 2009 15 Jul 2008 26 Jun 2008 Recent Developments Date Nov 23.: Deal Activity by Deal Type (2007 .datamonitor.: Recent Deal Activity Tianfu Yang and Abax Global Capital to acquire remaining 59. Inc.Company Snapshot Financial Deals Activity Overview Harbin Electric. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 3 www. Inc.4% stake in Harbin Electric Harbin Electric acquires Xi'an Simo Motor Harbin Electric raises $100 million through public offering Harbin Electric acquires Weihai Hengda Electric Motor Harbin Electric completes $49. 2010 Headline Harbin Electric enters into term loan facility agreement with CDB Category Corporate loans/ other capital raising Company Report.

: Top Financial Advisors __________________________________________ 22 Harbin Electric.: Major Products and Services ___________________________________ 13 Harbin Electric.: Overview and Key Facts ________________________________________ 7 Harbin Electric.: Locations and Subsidiaries _____________________________________ 15 Harbin Electric.: Private Equity and Ownership ___________________________________ 26 Harbin Electric. Inc. Inc. Inc.: Advisors_____________________________________________________ 22 Harbin Electric. Inc. Inc.: Capital Raising _______________________________________________ 24 Harbin Electric.: Key Employee Biographies ______________________________________ 9 Harbin Electric. Inc. Inc.Table of Contents Table of Contents Company Snapshot __________________________________________________________________ 2 Table of Contents ____________________________________________________________________ 4 Harbin Electric. Inc. Inc. Inc.: Company Analysis ________________________________________________ 17 Harbin Electric. Inc.: Top Deals 2007 -YTD*2011 ______________________________________ 21 Harbin Electric.: Targets and Partners __________________________________________ 20 Harbin Electric. Inc.: Company History _____________________________________________ 14 Harbin Electric. Inc.: Overview ______________________________________________________ 7 Harbin Electric. Inc. Inc. Inc.com 261 . Inc.: News and Events Summary _____________________________________ 27 Harbin Electric.: Corporate Financial Deals Activity ___________________________________ 18 Harbin Electric. Inc.: Business Description __________________________________________ 17 Harbin Electric. Inc.: Financial Deals _______________________________________________ 27 Appendix __________________________________________________________________________ 28 Contact Us ____________________________________________________________________ 28 Methodology ___________________________________________________________________ 28 About Datamonitor ______________________________________________________________ 29 Company Report.: Top Legal Advisors _____________________________________________ 22 Harbin Electric. Inc.datamonitor. Inc. Inc.: Partnership __________________________________________________ 25 Harbin Electric.: Key Employees ________________________________________________ 8 Harbin Electric.: Recent Developments _____________________________________________ 27 Harbin Electric.: Key Facts _____________________________________________________ 7 Harbin Electric. Inc.: Mergers and Acquisitions ______________________________________ 23 Harbin Electric. Inc. Inc.: Financial Deals Overview _______________________________________ 18 Harbin Electric.: Key Competitors ______________________________________________ 16 Harbin Electric. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 4 www.

Inc.YTD*2011) ___________________________ 23 Table 13: Harbin Electric. Inc. Inc. Inc.: Legal Advisor Ranking by Value (US$m) __________________________________ 22 Table 11: Harbin Electric. Inc.datamonitor.: Partnership Trend by Deal Type (2007 . Inc. Inc. Inc. Inc. Inc. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 5 www.: M&A Average Deal Size .YTD*2011) _________ 26 Table 20: Harbin Electric.com 262 .: Deal Activity by Deal Type .Volume (TTM) _________________________________ 18 Table 6: Harbin Electric.: Capital Raising by Deal Type (2007 .: Key Employees _________________________________________________________ 8 Table 3: Harbin Electric.: Capital Raising Volume and Value Trend (2007 . Inc.: News and Events Summary _____________________________________________ 27 Table 21: Harbin Electric.Value (US$m) ____________________________________ 19 Table 8: Harbin Electric.YTD*2011) _____________________ 25 Table 17: Harbin Electric. Inc.: Partnership Volume and Value Trend (2007 . Inc.: Financial Advisor Ranking by Value (US$m) _______________________________ 22 Table 12: Harbin Electric.: Locations and Subsidiaries ______________________________________________ 15 Table 4: Harbin Electric.Table of Contents List of Tables Table 1: Harbin Electric.: Deal Activity by Deal Type .: Private Equity and Ownership Volume and Value Trend (2007 .: Key Facts ______________________________________________________________ 7 Table 2: Harbin Electric.YTD*2011) _______________________ 19 Table 7: Harbin Electric.YTD*2011) ______ 26 Table 19: Harbin Electric.: Top Deals 2007 -YTD*2011 _______________________________________________ 21 Table 10: Harbin Electric.: M&A Volume and Value Trend (2007 .YTD*2011) ____________________________ 24 Table 16: Harbin Electric. Inc.Volume (2007 .YTD*2011) __________________________ 25 Table 18: Harbin Electric. Inc. Inc. Inc.YTD*2011) _____________________________ 23 Table 14: Harbin Electric.: Targets and Partners ___________________________________________________ 20 Table 9: Harbin Electric.: Financial Deals _______________________________________________________ 27 Company Report.: M&A Activity by Geography (2007 .: Key Competitors _______________________________________________________ 16 Table 5: Harbin Electric.YTD*2011) __________________ 24 Table 15: Harbin Electric.: Private Equity and Ownership Volume by Deal Type (2007 . Inc. Inc. Inc. Inc.

Inc.YTD*2011) ___________________________ 23 Figure 5: Harbin Electric.: M&A Average Deal Size .Table of Contents List of Figures Figure 1: Harbin Electric.Volume (2007 .com 263 . Inc. Inc. Inc. Inc.: M&A Volume and Value Trend (2007 .YTD*2011) __________________________ 25 Figure 10: Harbin Electric. Inc.YTD*2011) ________ 26 Company Report.: Private Equity and Ownership Volume by Deal Type (2007 .: Private Equity and Ownership Volume and Value Trend (2007 .: Capital Raising Volume and Value Trend (2007 .: M&A Activity by Geography (2007 . Inc.datamonitor. Inc.: Capital Raising by Deal Type (2007 .: Partnership Volume and Value Trend (2007 .YTD*2011) _____________________ 25 Figure 9: Harbin Electric.: Deal Activity by Deal Type .YTD*2011) __________________ 24 Figure 7: Harbin Electric.Value (US$m) ___________________________________ 19 Figure 4: Harbin Electric.YTD*2011) ____________________________ 24 Figure 8: Harbin Electric.: Deal Activity by Deal Type .: Partnership Trend by Deal Type (2007 . Inc. Inc.YTD*2011) _____ 26 Figure 11: Harbin Electric.Volume (TTM) _________________________________ 18 Figure 2: Harbin Electric.YTD*2011) _____________________________ 23 Figure 6: Harbin Electric. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 6 www.YTD*2011) ______________________ 19 Figure 3: Harbin Electric. Inc.

Inc. as compared to the net profit of $19. Harbin Electric.com 264 . The company recorded revenues of $426. The company's operating profit was $93.: Overview and Key Facts Harbin Electric. an increase of 91% over 2009. Its net profit was $76.: Overview Harbin Electric is involved in manufacturing a range of electric motors.430 December Industrial Goods and Machinery NASDAQ (HRBN) DATAMONITOR Company Report. an increase of 67.com 427 4. It is headquartered in Harbin.: Company Overview Harbin Electric.8 million in fiscal 2010.datamonitor. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 7 www. and employs around 4. Inc.harbinelectric.: Key Facts Corporate Address: 9 Ha Ping Xi Lu Ha Ping Lu Ji Zhong Qu Harbin Kai Fa Qu Harbin 150060 Country: Phone: Web Address: Turnover (US$m): Employees: Financial Year End: Industry: Primary Stock Exchange (Ticker): SOURCE: DATAMONITOR China 86 451 8611 6757 www.430 people. automobile specialty micro-motors for automobile interior applications.3 million in fiscal 2010. Inc.: Key Facts Table 1: Harbin Electric. and industrial rotary motors for use in agricultural equipment and medical devices.1% over 2009.6 million in 2009. Its product line includes linear motors (LMs). Inc. Inc. China.5 million in the fiscal year ended December 2010. The company primarily operates in China and the US.Table of Contents Harbin Electric.

Table of Contents Harbin Electric.: Key Employees Employee Name Lanxiang Gao Job Title Director. and Chief Operating Officer. Shanghai Tech-Full Chairman and Chief Executive Officer Executive Vice President. Inc. Inc. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 8 www. Shanghai Tech-Full Vice President Chief Financial Officer Independent Director Board Executive Board Age 58 Since 2007 Tianfu Yang Executive Board 49 2005 Christy Y Shue Senior Management Kanenori Okawa Senior Management 2007 Shaotang Chen Senior Management 2007 Suofei Xu Tianli Yang Zedong Xu Boyd Plowman Senior Management Senior Management Senior Management Non Executive Board Non Executive Board Non Executive Board Non Executive Board 41 67 2005 2005 2009 Ching Chuen Chan Independent Director 75 2005 David Gatton Independent Director 57 2005 Yunyue Ye SOURCE:DATAMONITOR Independent Director 59 2006 DATAMONITOR Company Report. Finance and Investor Relations.datamonitor. Research and Development.: Key Employees Table 2: Harbin Electric.com 265 . Advanced Automation Group Vice President. and Corporate Secretary Chief Technology Officer Director.

Yang has been the Chairman and Chief Executive Officer at Harbin Tech Full Industry. She graduated from Zhejiang University. Mr. and Chief Operating Officer. From 2003. Ms. and Corporate Secretary Salary (US$): 147. From 2000. Finance and Investor Relations. Shue was Manager. From 1986 to 1988. Ms. She worked as an Engineer at Shanghai No. Investor Relations at International Paper. She holds a PhD in Chemistry from Purdue University and an MBA in Finance business from the Stern School of Business. Shue is an Executive Vice President. Shanghai Tech-Full Since: 2007 Age: 58 Tianfu Yang Mr. Board: Senior Management Job Title: Executive Vice President. Yang has been the Chairman and Chief Executive Officer at Harbin Electric since 2005. Gao managed a development and production project of office automation motors in collaboration with Sankyo Seiki of Japan for 10 years and served as the Senior Engineer. Prior to joining the company.Table of Contents Harbin Electric. New York University.com 266 . China. From 1988 to 1991. he has been the Chairman and Chief Executive Officer at Harbin Tech Full Electric. He graduated from Zhejiang University with a Masters degree in Electric Motor Automation and Control. Finance and Investor Relations. she was the Vice President and a Senior Investor Relations Consultant at Christensen. Inc. Mr.470 Since: 2005 Age: 49 Christy Y Shue Ms.21 Research Institute. and Corporate Secretary at Harbin Electric. China with a major in Electrical Engineering. Yang is also the National People's Representative at City of Harbin. Gao has been a Director and Chief Operating Officer. Shanghai Tech-Full Electric. Prior to joining Christensen. he was the President at Hong Kong Property Management Development. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 9 www.datamonitor. Mr.100 Company Report. Yang was the President at Hong Kong Lianfa Real Estate Company. he was the President at Helongjiang Cultural Development Company and Guangzhou Subsidiary Company. he was the President at Harbin Tianheng Wood Industry Manufacture. From 1991 to 1994. From 1994 to 2000. Board: Executive Board Job Title: Director. since 2007. a subsidiary of Harbin Electric. She earned her Bachelor of Science degree from Sichuan University. Board: Executive Board Job Title: Chairman and Chief Executive Officer Salary (US$): 26.: Key Employee Biographies Lanxiang Gao Ms.

Mr. Since 2000. Board: Senior Management Job Title: Director. Mr. From 1997 to 2001.com 267 . From 1991 to 1997. From 2003 to 2008. Research and Development. Mr. Since 2003. a subsidiary of the company. Advanced Automation Group. Okawa worked at Industrial Far East and held various positions including serving as the President from 1978 to 1997. including Chief Administration Officer. From 1973 to 1997. Xu worked as the Section Chief for system allocation reform at Harbin Economic System Reform Committee. Shanghai Tech-Full Tianli Yang Mr. He graduated in 1988 from Fudan University with a BA in Law. a subsidiary of Harbin Electric. he has been the Staff Research Engineer at Delphi Research Labs. he was Senior Research Engineer for Mechatronics Group at Delphi Research Labs. Dr. Research and Development. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 10 www.Yang has been the Vice President at Harbin Tech Full Industry. he was an Investment Manager at Shenzhen Capital Group. Yang has been the Vice President at Harbin Electric since 2005. Chen has been a Director. he was the Vice President at Harbin Tech Full Electric. From 2001 to 2003. Mr. he worked at Guangfa Securities as a Project Manager. he was employed in the China State Construction Engineering Corporation in various positions. From 2001 to 2003. Xu was the Vice President at Harbin Tech Full Industry. From 2000 to 2007. Chen was Senior Research Engineer in the Electrical and Electronics Department at General Motors NAO Research and Development Center. From 1995 to 1999. From 1997 to 2007. Xu is the Vice President. Company Report. Okawa has been the Chief Technology Officer at Harbin Electric since 2007. He graduated in 1995 from University of Wisconsin-Madison with a PhD in Electrical Engineering. Yang graduated from Helongjiang University in 1985 with a BA in Chinese Language and Literature. he was Chief Technology Advisor at Nittoku Engineering. Shanghai Tech-Full.datamonitor. He began his career with Ikegami Tuusinki after he graduated in 1971 with a BS in Electrical Engineering. From 2003 to 2008. he was the Vice President at Harbin Tech Full Electric. Board: Senior Management Job Title: Vice President. Chen was Delphi Research Labs Chief Scientist at Delphi Energenix Center. Mr. since 2007. Board: Senior Management Job Title: Chief Technology Officer Since: 2007 Shaotang Chen Dr. Dr.Table of Contents Kanenori Okawa Mr. Advanced Automation Group Since: 2007 Suofei Xu Mr. From 1985 to 2000. From 1999 to 2000.

Mr. Inc. Mr. He is an Honorary Professor at Hong Kong University's Department of Electrical and Electronics Engineering.882 Since: 2005 Zedong Xu Mr. Prior to that. Plowman served as a Director and Chairman of the Audit Committee at Corporate Insurance and Reinsurance Company Limited (CIRCL). Xu has been the Chief Financial Officer at Harbin Electric since 2005. Plowman held numerous leadership positions including Controller. Mr. Since 2000. the Chinese Academy of Engineering. From 1998 to 2000. Board: Non Executive Board Job Title: Independent Director Since: 2009 Age: 67 Ching Chuen Chan Mr. Board: Senior Management Job Title: Chief Financial Officer Salary (US$): 15.com 268 . Xu graduated in 1992 from Harbin Electrical Engineering College with a BA in Project Management. Mr. Xu has been the Chief Financial Officer at Harbin Tech Full Industry. During his second stint with Fleetwood. Chan is a Fellow at the Royal Academy of Engineering.Table of Contents Board: Senior Management Job Title: Vice President Salary (US$): 15. he has been the Chief Financial Officer at Harbin Tech Full Electric. He holds a bachelor's degree from Utah State University and was a certified public accountant. where he was employed from 1969 to 1987 and from 1997 to 2008. Mr. a Bermuda-based company reinsuring risks for captive insurance companies. he was employed as the Chief Financial Officer at Harbin WanDa Electrical Home Appliances. Chan has been an Independent Director at Harbin Electric since 2005. During his career with Fleetwood. he served as an Executive Vice President and Chief Financial Officer until his retirement in 2008. Treasurer.882 Since: 2005 Age: 41 Boyd Plowman Mr. Plowman has been an Independent Director at Harbin Electric since 2009. From 1996 to 1998. He also served as the President and Chief Executive Officer at Lee & Associates.datamonitor. he was a Financial Manager at Harbin High Technology Torch Daya Real Estate. UK. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 11 www. From 2003 until present. the Ukraine Academy of Engineering Company Report. He is the retired Executive Vice President and Chief Financial Officer at Fleetwood Enterprises. and Financial Vice President.

Table of Contents Sciences and a Fellow and Vice President at Hong Kong Academy of Engineering Sciences. Board: Non Executive Board Job Title: Independent Director Since: 2005 Age: 57 Yunyue Ye Mr. Gatton has been an Independent Director at Harbin Electric since 2005. Ye also currently serves as a Director at Aerospace Electric and Electrical Motor Institute of Zhejiang University and a Director at Linear Motor Institute of the Chinese Electro-technical Society. Mr. Board: Non Executive Board Job Title: Independent Director Since: 2006 Age: 59 Company Report. where he has taught for the past seven years. Since 1985. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 12 www. Mr. he has served as the Chairman and President of Development Initiatives. He holds a BA from Cornell College and a Master's degree from Harvard University. He is currently a Professor in Electrical Engineering at Zhejiang University. He was also Council Member at China Electro-technical Society. Ye has been an Independent Director at Harbin Electric since 2006. Mr.datamonitor. Board: Non Executive Board Job Title: Independent Director Since: 2005 Age: 75 David Gatton Mr. organizations. Gatton advises cities. public and private partnerships and marketing initiatives. Ye graduated from Zhejiang University in 1978.com 269 . He graduated from Tsing Hua University in 1959 with a Master of Science degree in Electrical Engineering and obtained his PhD in 1982 from University of Hong Kong. and companies on business development strategies.

July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 13 www. The company's key products and brands include the following: Linear motors: Flat linear motors Cylindrical linear motors Specialty micro-motors for automobile applications Industrial rotary motors: High and low voltage motors AC (alternating current) motors DC (direct current) motors Speed control motors Brands: Simo Motor Wenbao Moto Company Report.datamonitor. Inc.: Major Products and Services Harbin Electric is a manufacturer of a range of electric motors.com 270 .Table of Contents Harbin Electric.

Ltd. In the same year. the Torch Subsidiary changed its name to Advanced Electric Motors. In 2006. a Cayman Islands exempted company with limited liability.. Harbin Electric entered into an agreement and plan of merger ('Merger Agreement') with Tech Full Electric Company Limited (parent). In 2009.com 271 . The company changed the name of its subsidiary Weihai Hengda Electric Motor Co. wholly owned indirectly by Mr.. In 2008. ('Transportation').. The company began trading on the NASDAQ Global Market under the ticker symbol 'HRBN' in 2007.. Harbin Electric was listed on OTC Bulletin Board by reverse merger with Torch under the symbol 'HRBN'.. Ltd. ('Moulds') and Xi'an Tech Full Simo Transportation Co. Tianfu Yang. subsidiary of the company. In June 2010. Ltd. TFI was merged with and into a subsidiary of Torch (Torch Subsidiary). Ltd (Simo Motor). Ltd. Ltd. Inc. Ltd. Harbin Electric. Harbin Electric established a subsidiary Advanced Automation Group. In the same year.. in 2009.datamonitor. In June 2011. Inc. Simo Motor sold the outstanding equity of Tianjin Simo Electric Co. HTFE exchanged all outstanding stock of HTFE for stock of Tech Full International and HTFE thereby became a subsidiary of TFI. China. Xi'an Tech Full Simo Moulds Co... the company's Chairman and Chief Executive Officer. In the same year. in 2005.. Simo Motor. Tech Full International changed its name to Tech Full Holdings. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 14 www. Xi'an Simo A'Da Motor Co. the company established a subsidiary. ('Imports and Exports'). Subsequently. Ltd. ('A'Da Motor'). to engage in the business of providing travel and concierge services. the company acquired Harbin Taifu Auto Electric. Ltd.Table of Contents Harbin Electric.: Company History Harbin Electric was incorporated in 2003 as Harbin Tech Full Technology Development Co. the company formed Harbin Tech Full Electric (HTFE) was founded. and Torch was renamed Harbin Electric in 2005. Harbin Electric acquired Xi'an Simo Motor Incorporation (Group) and changed its name to Xi'an Tech Full Simo Motor Co. In the same year. ('Science and Technology') and Xi'an Simo Imports and Exports Co. acquired Hengda Electric Motor and Wendeng Second Electric Motor Factory. a manufacturer of automobile specialty micro-motors in China. Tech Full International (TFI). In the same year. In 2004. through its subsidiary Harbin Tech Full Electric. Ltd. In the same year. an industrial rotary motor business in Harbin. to Weihai Tech Full Simo Motor Co. Harbin Electric formed Shanghai Tech Full Electric to develop and manufacture automobile specialty micro-motors and their components and accessories in China. Xi'an Simo Science and Technology Development Co. ('Electric'). Company Report.. a Nevada corporation and a wholly-owned by parent. In the same month. ('Lamination'). and Tech Full Electric Acquisition. Tech Full Holdings changed its name to Advanced Electric Motors.. Ltd. purchased 100% of the outstanding equity of Xi'an Tech Full Lamination Co..

Inc.com 272 . Delaware United States Harbin Tech Full Electric Co. Inc.. LLC. Delaware United States Shanghai Tech Full Electric Co.. Inc. Ltd. Ltd Shanghai China Xi'an Tech Full Simo Motor Co.Table of Contents Harbin Electric. Ltd.datamonitor.: Locations and Subsidiaries Advanced Electric Motors. China Weihai Tech Full Simo Motor Co. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 15 www. China SOURCE: DATAMONITOR DATAMONITOR Company Report. Ltd... Harbin China Advanced Automation Group.: Locations and Subsidiaries Table 3: Harbin Electric.

Inc. Inc.datamonitor. General Electric Company SOURCE: DATAMONITOR Franklin Electric Co. Nidec Corporation DATAMONITOR Company Report. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 16 www.Table of Contents Harbin Electric.: Key Competitors Table 4: Harbin Electric.com 273 .: Key Competitors Emerson Electric Co. Inc..

medical devices.. and mass transportation and freight transportation systems. Inc. manufactures primarily medium to large sized industrial rotary motors. and large-sized motors and some specialized motors such as high/low voltage motors and speed control motors. supply. force. a wholly owned subsidiary of the company. navigation and hi-tech fields. Its industrial rotary motors are widely used for trains. precision instrument and machinery. or non-moving component.: Company Analysis Harbin Electric. material industry. The company currently operates the following four manufacturing facilities in China: Harbin Tech Full Electric Co. rather than cylindrical. power generation systems... but the stator. The company sells its LMs to a broad range of customers in China and in the US. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 17 www. but also to certain international markets. The company markets industrial rotary motors under brands 'Simo Motor' manufactured by Xi'an Tech Full Simo and 'Wenbao Motor' manufactured by Weihai Tech Full. (Shanghai Tech Full). (Xi'an Tech Full Simo). aviation.000 square meters of land and manufactures linear motors and linear motor integrated systems. is located in the Shanghai Zhuqiao Airport Industrial Zone with 40.: Business Description Harbin Electric is engaged in the design. HVAC. and Xi'an Tech Full Simo Motor Co. Ltd. medium. chemical industry. packaging industries. a wholly owned subsidiary of the company. office equipment. is located in the government-designated Development Zone in the city of Harbin with approximately 50. specialty micro-motors.: Company Analysis Harbin Electric. a wholly owned subsidiary of the company. Ltd. is flat. power plants. Weihai Tech Full Simo Motor Co. producing linear. rather than rotational. and industrial rotary motors. a wholly owned subsidiary of the company. construction industry. LMs operate on the same physical principles as a traditional motor. Company Report.datamonitor. The company sells its products principally in China. Inc. (Weihai Tech Full). and industrial rotary motors. The company supplies these products to domestic customers and also exports them to OEM suppliers in North America. and value-added products. Harbin Electric offers three major product lines: linear motors (LMs) and integrated systems. agricultural machineries. heavy machineries. including those involved in the energy industry. and service a wide range of electric motors including linear motors. food processing.. steel processing. Shanghai Tech Full Electric Co. Inc.Harbin Electric. (Harbin Tech Full). factory automation. Harbin Electric offers a wide range of industrial rotary motors including small.com 274 . develop. manufacture.800 square meters of land and manufactures specialty micro-motors. Xi'an Tech Full Simo is located in Xi'an city's Economy and Technology Development Zone and occupies approximately 200.000 square meters of land.000 square meters of land and primarily manufactures small to medium sized industrial rotary motors. is located in Weihai with approximately 150. specialty micromotors. Ltd. Specialty micro-motors are used for various automation functions for automotives. Ltd. and consumer electronics.

com 275 . Inc.Harbin Electric.: Financial Deals Overview Figure 1: Harbin Electric.Volume (TTM) Deal Type Acquisition Partnership Corporate Venturing Capital Raising Divestments Private Equity SOURCE: DATAMONITOR Deal Volume 1 DATAMONITOR SOURCE: DATAMONITOR DATAMONITOR Company Report. Inc. Inc.datamonitor. Inc.: Corporate Financial Deals Activity Harbin Electric.: Deal Activity by Deal Type . July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 18 www.: Corporate Financial Deals Activity Harbin Electric. Inc.Volume (TTM) Table 5: Harbin Electric.: Deal Activity by Deal Type .

Inc.: Deal Activity by Deal Type . Pship = Partnership. Inc. Inc.Value (US$m) SOURCE: DATAMONITOR DATAMONITOR SOURCE: DATAMONITOR DATAMONITOR Table 6: Harbin Electric.YTD*2011) Figure 3: Harbin Electric. Inc.: M&A Average Deal Size .: M&A Average Deal Size Value (US$m) Year 2007 Deal Volume 1 1 1 Average Deal Size (US$m) 11 54 DATAMONITOR 2008 2009 2010 2011 SOURCE: DATAMONITOR - SOURCE: DATAMONITOR DATAMONITOR *ACQ = Acquisition.: Corporate Financial Deals Activity Figure 2: Harbin Electric.datamonitor.Volume (2007 . DIV = Divestment.YTD*2011) Deal Type ACQ CR CV DIV Pship PE Total 2007 1 1 2 2008 1 2 3 2009 1 1 2 2010 1 1 2011 - Table 7: Harbin Electric. CR = Capital Raising. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 19 www. PE =Private Equity & Ownership Company Report.Volume (2007 . Inc. CV = Corporate Venturing.Harbin Electric.: Deal Activity by Deal Type .com 276 .

Inc.. Inc. 2007 Apr 13. 2009 - Harbin Electric acquires Weihai Hengda Electric Acquisition Motor Harbin Electric acquires Harbin Taifu Auto Electric Harbin forms joint venture with Shelton Technology LLC Acquisition Jul 15.) (China) Weihai Hengda Electric Motor Co. 2007 11 Partnership - DATAMONITOR Company Report.Target/Partner (Country) Xi'an Tech Full Simo Motor Co. Ltd. Inc.Harbin Electric.datamonitor.: Corporate Financial Deals Activity Harbin Electric.: Targets and Partners Harbin Electric.. 2008 54 Jul 12. Ltd. Inc. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 20 www. (China) Shelton Technology LLC (United States) SOURCE:DATAMONITOR Deal Headline Deal Type Deal Date Deal Value (US$m) Harbin Electric acquires Xi'an Simo Motor Acquisition Oct 19.com 277 .. (formerly Xi’an SIMO Motor. (China) Harbin Taifu Auto Electric Co. Ltd. Inc.: Targets and Partners Table 8: Harbin Electric.

datamonitor.com 278 ..: Top Deals 2007 -YTD*2011 Table 9: Harbin Electric.Harbin Electric. Inc.: Corporate Financial Deals Activity Harbin Electric. Inc. Inc. Ltd. Inc.4% stake in Harbin Electric Deal Date Deal Status Deal Type 11 Oct 2010 Announced Private Equity 446 Harbin Electric acquires Xi'an Simo Motor 19 Oct 2009 Completed Acquisition - Harbin Electric raises $100 million through public offering Harbin Electric acquires Weihai Hengda Electric Motor Harbin Electric completes $49. (formerly Xi’an SIMO Motor. (China) Weihai Hengda Electric Motor Co.) (China) Harbin Electric. Inc.5 million private placment Harbin Electric acquires Harbin Taifu Auto Electric Harbin forms joint venture with Shelton Technology LLC 05 Aug 2009 Completed IPO 100 15 Jul 2008 Completed Acquisition 54 26 Jun 2008 Completed Private Placement Private Placement 49 26 Jun 2008 Completed 50 12 Jul 2007 Completed Acquisition 11 13 Apr 2007 Announced Partnership - SOURCE:DATAMONITOR DATAMONITOR Company Report. (China) Harbin Taifu Auto Electric Co. Ltd. (China) Harbin Electric. (China) Harbin Electric. Inc..: Top Deals 2007 -YTD*2011 Target/Partner (Country) Harbin Electric. Inc. Ltd. Inc.45 million private placement Harbin Electric completes $49. (China) Shelton Technology LLC (United States) Deal Value (US$m) Deal Headline Tianfu Yang and Abax Global Capital to acquire remaining 59. (China) Xi'an Tech Full Simo Motor Co.. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 21 www.

datamonitor. Dunn & Crutcher LLP Loeb & Loeb LLP Reed Smith LLP SOURCE:DATAMONITOR Deal Volume 1 1 1 Deal Value (US$m) 223 223 11 DATAMONITOR Harbin Electric. LLC Houlihan Lokey. Inc.: Top Financial Advisors Table 11: Harbin Electric. Inc.Harbin Electric. Inc.: Advisors Harbin Electric. Incorporated ROTH Capital Partners..: Corporate Financial Deals Activity Harbin Electric. Inc. Inc.: Financial Advisor Ranking by Value (US$m) Company Name Lazard Freres & Co. Inc. SOURCE:DATAMONITOR Deal Volume 1 1 1 1 1 Deal Value (US$m) 223 223 100 54 DATAMONITOR Company Report. Inc. LLC Morgan Stanley & Co.com 279 . Houlihan Lokey Howard & Zukin Financial Advisors..: Top Legal Advisors Table 10: Harbin Electric. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 22 www. Inc.: Legal Advisor Ranking by Value (US$m) Company Name Gibson.

datamonitor.YTD*2011) Year 2007 2008 2009 2010 2011 SOURCE: DATAMONITOR Table 13: Harbin Electric.YTD*2011) SOURCE: DATAMONITOR DATAMONITOR SOURCE: DATAMONITOR DATAMONITOR Table 12: Harbin Electric. Inc. Inc. Inc.: M&A Activity by Geography (2007 .: Mergers and Acquisitions Figure 4: Harbin Electric.YTD*2011) Geography Asia-Pacific Europe Middle East and Africa North America South and Central America SOURCE: DATAMONITOR Deal Volume 1 1 1 - Deal Value (US$m) 11 54 DATAMONITOR Deal Volume 3 DATAMONITOR Company Report.Harbin Electric.com 280 .: M&A Activity by Geography (2007 . Inc.: M&A Volume and Value Trend (2007 .: Corporate Financial Deals Activity Harbin Electric.: M&A Volume and Value Trend (2007 . Inc. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 23 www. Inc.YTD*2011) Figure 5: Harbin Electric.

: Capital Raising Figure 6: Harbin Electric.datamonitor.: Capital Raising by Deal Type (2007 . Inc. Inc.Harbin Electric.YTD*2011) Figure 7: Harbin Electric. Inc. Inc.: Capital Raising Volume and Value Trend (2007 .com 281 .: Capital Raising by Deal Type (2007 . July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 24 www. Inc.: Corporate Financial Deals Activity Harbin Electric.: Capital Raising Volume and Value Trend (2007 .YTD*2011) SOURCE: DATAMONITOR DATAMONITOR SOURCE: DATAMONITOR DATAMONITOR Table 14: Harbin Electric. Inc.YTD*2011) Year 2007 2008 2009 2010 2011 SOURCE: DATAMONITOR Table 15: Harbin Electric.YTD*2011) Deal Type Private Placement Public Offering SOURCE: DATAMONITOR Deal Volume 2 1 - Deal Value (US$m) 99 100 DATAMONITOR Deal Volume 2 1 DATAMONITOR Company Report.

Harbin Electric.YTD*2011) SOURCE: DATAMONITOR DATAMONITOR SOURCE: DATAMONITOR DATAMONITOR Table 16: Harbin Electric.: Partnership Trend by Deal Type (2007 .YTD*2011) Deal Type Joint Venture SOURCE: DATAMONITOR Year 2007 2008 2009 2010 2011 Deal Volume 1 - Deal Volume 1 DATAMONITOR SOURCE: DATAMONITOR Company Report.: Partnership Trend by Deal Type (2007 . Inc. Inc.: Partnership Figure 8: Harbin Electric. Inc. Inc. Inc.: Corporate Financial Deals Activity Harbin Electric.: Partnership Volume and Value Trend (2007 .YTD*2011) Figure 9: Harbin Electric.: Partnership Volume and Value Trend (2007 . Inc. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 25 www.datamonitor.com 282 .YTD*2011) Deal Value (US$m) DATAMONITOR Table 17: Harbin Electric.

Harbin Electric.YTD*2011) SOURCE: DATAMONITOR DATAMONITOR SOURCE: DATAMONITOR DATAMONITOR Table 18: Harbin Electric.: Private Equity and Ownership Figure 10: Harbin Electric.: Private Equity and Ownership Volume by Deal Type (2007 . Inc.: Private Equity and Ownership Volume and Value Trend (2007 .YTD*2011) Deal Type Private Equity SOURCE: DATAMONITOR Deal Volume 1 - Deal Value (US$m) 446 DATAMONITOR Deal Volume 1 DATAMONITOR Company Report.: Corporate Financial Deals Activity Harbin Electric. Inc.: Private Equity and Ownership Volume by Deal Type (2007 . Inc. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 26 www.datamonitor.YTD*2011) Year 2007 2008 2009 2010 2011 SOURCE: DATAMONITOR Table 19: Harbin Electric. Inc.com 283 .: Private Equity and Ownership Volume and Value Trend (2007 YTD*2011) Figure 11: Harbin Electric. Inc. Inc.

: News and Events Summary Date HeadLine Harbin Electric enters into term loan facility agreement with CDB Harbin Electric. as lender pursuant to which CDB will provide a $35 million loan facility and an RMB100 million loan facility to the company. Hong Kong Branch.: Recent Developments Harbin Electric. a developer and manufacturer of electric motors in China. or CDB. Corporate loans/ other capital raising Category Nov 23. as lender pursuant to which CDB will provide a $35 million loan facility and an RMB100 million loan facility to the company.datamonitor. Inc. Company Report. Inc. has entered into a term loan facility agreement with China Development Bank Corporation. has entered into a term loan facility agreement with China Development Bank Corporation.Harbin Electric.: Recent Developments Harbin Electric.: Financial Deals Table 21: Harbin Electric. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 27 www.. Inc.: News and Events Summary Table 20: Harbin Electric. Inc..: Financial Deals Publication Date Headline Harbin Electric enters into term loan facility agreement with CDB Harbin Electric. or CDB. 2010 SOURCE: DATAMONITOR DATAMONITOR *YTD – The period beginning January 1st of the current year up until today's date. a developer and manufacturer of electric motors in China. Inc. Inc. 2010 SOURCE: DATAMONITOR DATAMONITOR Harbin Electric. Inc.com 284 . Corporate loans/ other capital raising Category Nov 23. Inc. Hong Kong Branch.

com For further information on Datamonitor and our range of business information services please visit www.com Methodology Datamonitor company reports are prepared under an established and tested methodology which ensures proper checks and controls to capture and validate the quality and accuracy of data.com 285 . If you have further requirements feedback please contact us at: cpqueries@datamonitor.datamonitor. The information is primarily sourced through: • • • • • • • Company Annual Reports Company Analyst Relations Company websites SEC filings (10-K.Appendix Appendix Contact Us We hope that the data and analysis in this brief will help you make informed and imaginative business decisions. 10-Q etc) Media releases Investor’s presentations Datamonitor proprietary databases Company Report. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 28 www. 20-F.datamonitor.

Sourcing. Canberra. The Datamonitor Group's consulting team offers a customized research and analysis service. Dubai. The Datamonitor Group’s research and analysis products are compiled by an extensive global network of researchers. Energy & Sustainability. and has 20 regional offices in Manchester. Boston. Logistics & Express. Datamonitor is headquartered in London. Beijing. Canandaigua and Silicon Valley. Durban. Hyderabad. This is further supported and substantiated by our global primary research team engaged in producing original analysis covering key verticals. Taipei.000 business including company websites. Hong Kong. Datamonitor delivers independent data. in-house analysts and industry specialists. Scranton.com 286 . New York. our market intelligence products and services ensure that you will achieve your desired commercial goals by giving you the insight you need to best respond to your competitive environment. Sydney. Chicago. addressing specialized research requirements of clients. We combine our industry knowledge and experience to assist over 6000 of the world’s leading companies in making better strategic and operational decisions Delivered online via our user-friendly web platforms. July 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 29 www. Technology and Telecoms industries. analysis and opinion across the Automotive. key business publications and stock market sites round-the-clock to provide you with powerful business insights and real time updates. We monitor more than 75. As a world-leading provider of premium global business information. Tokyo. Retail. We collect our own data through an extensive global network using audited methodologies.Appendix About Datamonitor The Datamonitor Group is an independent. Pharmaceutical & Healthcare. premium business information and market analysis company that assists clients with operational and strategic decision-making. Company Report. Seoul.datamonitor. Hull. Financial Services. Consumer Packaged Goods. Melbourne. Paris.

Inc.com Americas 245 5th Avenue 4th Floor New York. Middle East & Africa 119 Farringdon Road London EC1R 3DA United Kingdom t: +44 20 7551 9000 f: +44 20 7551 9090 e: euroinfo@datamonitor.datamonitor.com Europe. NY 10016 USA t: +1 212 686 7400 f: +1 212 686 2626 e: usinfo@datamonitor.Harbin Electric. Company Profile Publication Date: 5 Jul 2011 www. NSW 2000 Australia t: +61 2 8705 6900 f: +61 2 8088 7405 e: apinfo@datamonitor.com 287 .com Asia Pacific Level 46 2 Park Street Sydney.

conclusions and recommendations that Datamonitor delivers will be based on information gathered in good faith from both primary and secondary sources. Datamonitor provides clients with unbiased expert analysis and in depth forecasts for six industry sectors: Healthcare. market growth and pricing. mechanical. Energy. whose accuracy we are not always in a position to guarantee. ABOUT DATAMONITOR Datamonitor is a leading business information company specializing in industry analysis. As such Datamonitor can accept no liability whatever for actions taken based on any information that may subsequently prove to be incorrect. photocopying. The company serves the world's largest 5000 companies. Through its proprietary databases and wealth of expertise. Harbin Electric.000 companies. and Hong Kong.Harbin Electric. electronic. profiles give you the most important qualitative and quantitative summary information you need . All Rights Reserved. While they do not contain the highly detailed breakdowns found in premium reports. Datamonitor plc. competitors and products. Technology. © Datamonitor Page 2 288 . Datamonitor's premium reports are based on primary research with industry panels and consumers.including predictions and forecasts. and Financial Services. and regional offices in New York. We gather information on market segmentation. 2. Automotive.500 industries and 50 countries. providing top-level information on 10. Consumer Markets. Datamonitor maintains its headquarters in London. Frankfurt. helping you create new business opportunities and ideas. The company also advises clients on the impact that new technology and eCommerce will have on their businesses. Please note that the findings. No part of this publication may be reproduced. without the prior permission of the publisher. Inc. industry and country profiles complements our premium products. The facts of this profile are believed to be correct at the time of publication but cannot be guaranteed. recording or otherwise. Inc. stored in a retrieval system or transmitted in any form by any means. Our experts then interpret this data to produce detailed forecasts and actionable recommendations. Our series of company.

................................................................................................................................................................14 Locations and Subsidiaries...........5 History.......... © Datamonitor Page 3 289 .....................9 Major Products and Services.................................................................................... Inc..................................................8 Key Employee Biographies.....................Harbin Electric...............4 Business Description.....................................................................................................................................4 Key Facts.............................................................................................................................. Inc..................................................................................................................15 Harbin Electric................ TABLE OF CONTENTS TABLE OF CONTENTS Company Overview....................................6 Key Employees...........................13 Top Competitors...........................

430 people. as compared to the net profit of $19. It is headquartered in Harbin.5 million in the fiscal year ended December 2010.8 million in fiscal 2010.Harbin Electric. Inc.3 million in fiscal 2010.harbinelectric. Its product line includes linear motors (LMs). and industrial rotary motors for use in agricultural equipment and medical devices. Company Overview COMPANY OVERVIEW Harbin Electric is involved in manufacturing a range of electric motors.6 million in 2009. The company recorded revenues of $426. automobile specialty micro-motors for automobile interior applications. Inc.430 HRBN Harbin Electric. an increase of 67. 9 Ha Ping Xi Lu Ha Ping Lu Ji Zhong Qu Harbin Kai Fa Qu Harbin 150060 CHN 86 451 8611 6757 Phone Fax Web Address http://www. China.4 (USD Mn) Financial Year End Employees NASDAQ Ticker December 4.1% over 2009.com Revenue / turnover 426. Its net profit was $76. The company's operating profit was $93. © Datamonitor Page 4 290 . and employs around 4. an increase of 91% over 2009. KEY FACTS Head Office Harbin Electric. Inc. The company primarily operates in China and the US.

factory automation. Its industrial rotary motors are widely used for trains. Inc. Ltd. a wholly owned subsidiary of the company. including those involved in the energy industry.000 square meters of land and primarily manufactures small to medium sized industrial rotary motors. rather than cylindrical. The company sells its products principally in China. Xi’an Tech Full Simo is located in Xi’an city’s Economy and Technology Development Zone and occupies approximately 200. (Shanghai Tech Full). and service a wide range of electric motors including linear motors. Ltd. Ltd. and industrial rotary motors. steel processing. manufacture. Weihai Tech Full Simo Motor Co. Harbin Electric offers a wide range of industrial rotary motors including small. supply. manufactures primarily medium to large sized industrial rotary motors. producing linear. HVAC. medical devices. and large-sized motors and some specialized motors such as high/low voltage motors and speed control motors. Specialty micro-motors are used for various automation functions for automotives. Harbin Electric offers three major product lines: linear motors (LMs) and integrated systems.Harbin Electric. a wholly owned subsidiary of the company. Ltd. (Harbin Tech Full). is located in the Shanghai Zhuqiao Airport Industrial Zone with 40. and value-added products.. precision instrument and machinery.000 square meters of land. The company currently operates the following four manufacturing facilities in China: Harbin Tech Full Electric Co. a wholly owned subsidiary of the company. and industrial rotary motors. a wholly owned subsidiary of the company. is flat.800 square meters of land and manufactures specialty micro-motors. The company markets industrial rotary motors under brands ’Simo Motor’ manufactured by Xi’an Tech Full Simo and ’Wenbao Motor’ manufactured by Weihai Tech Full. aviation. and Xi’an Tech Full Simo Motor Co. agricultural machineries. and consumer electronics. is located in the government-designated Development Zone in the city of Harbin with approximately 50. rather than rotational. Inc.. Shanghai Tech Full Electric Co. specialty micro-motors. and mass transportation and freight transportation systems. Harbin Electric. force.. office equipment. © Datamonitor Page 5 291 . specialty micro-motors. The company sells its LMs to a broad range of customers in China and in the US. Business Description BUSINESS DESCRIPTION Harbin Electric is engaged in the design. LMs operate on the same physical principles as a traditional motor. power generation systems. is located in Weihai with approximately 150. or non-moving component. power plants. but the stator..000 square meters of land and manufactures linear motors and linear motor integrated systems. (Xi’an Tech Full Simo). chemical industry. navigation and hi-tech fields. food processing. The company supplies these products to domestic customers and also exports them to OEM suppliers in North America. material industry. (Weihai Tech Full). medium. construction industry. but also to certain international markets. heavy machineries. packaging industries. develop.

In 2004. Ltd. subsidiary of the company. to Weihai Tech Full Simo Motor Co. the company established a subsidiary. Harbin Electric. Tech Full Holdings changed its name to Advanced Electric Motors.. In 2008. Tech Full International changed its name to Tech Full Holdings. in 2005. ('A’Da Motor'). Tech Full International (TFI). Inc. Harbin Electric formed Shanghai Tech Full Electric to develop and manufacture automobile specialty micro-motors and their components and accessories in China. and Torch was renamed Harbin Electric in 2005. History HISTORY Harbin Electric was incorporated in 2003 as Harbin Tech Full Technology Development Co. the Torch Subsidiary changed its name to Advanced Electric Motors. Ltd. Harbin Electric was listed on OTC Bulletin Board by reverse merger with Torch under the symbol ‘HRBN’. HTFE exchanged all outstanding stock of HTFE for stock of Tech Full International and HTFE thereby became a subsidiary of TFI.. TFI was merged with and into a subsidiary of Torch (Torch Subsidiary). Harbin Electric acquired Xi’an Simo Motor Incorporation (Group) and changed its name to Xi’an Tech Full Simo Motor Co. purchased 100% of the outstanding equity of Xi’an Tech Full Lamination Co. Subsequently.. through its subsidiary Harbin Tech Full Electric. Xi’an Tech Full Simo Moulds Co. Xi’an Simo A’Da Motor Co. ('Moulds') and Xi’an Tech Full Simo Transportation Co. In the same year.. In the same year. China. The company changed the name of its subsidiary Weihai Hengda Electric Motor Co. in 2009. ('Lamination'). acquired Hengda Electric Motor and Wendeng Second Electric Motor Factory. the company formed Harbin Tech Full Electric (HTFE) was founded. Harbin Electric established a subsidiary Advanced Automation Group. an industrial rotary motor business in Harbin. The company began trading on the NASDAQ Global Market under the ticker symbol ‘HRBN’ in 2007. Ltd..Harbin Electric. In the same year... Ltd. Ltd. In June 2010. In the same year. In the same year. Ltd (Simo Motor). Simo Motor. the company acquired Harbin Taifu Auto Electric. to engage in the business of providing travel and concierge services.. ('Transportation'). Inc. © Datamonitor Page 6 292 . In the same year. In 2009. Ltd. a manufacturer of automobile specialty micro-motors in China. Harbin Electric. In 2006. Ltd.

.. and Tech Full Electric Acquisition. History In the same month. Inc. Inc. ('Science and Technology') and Xi’an Simo Imports and Exports Co.Harbin Electric. Ltd. ('Imports and Exports'). Xi’an Simo Science and Technology Development Co... Inc. a Cayman Islands exempted company with limited liability. In June 2011. Harbin Electric. Ltd. Ltd. ('Electric'). the company’s Chairman and Chief Executive Officer. a Nevada corporation and a wholly-owned by parent. Harbin Electric entered into an agreement and plan of merger ('Merger Agreement') with Tech Full Electric Company Limited (parent). Tianfu Yang. wholly owned indirectly by Mr. © Datamonitor Page 7 293 . Simo Motor sold the outstanding equity of Tianjin Simo Electric Co.

Advanced Automation Group Harbin Electric. Key Employees KEY EMPLOYEES Name Tianfu Yang Lanxiang Gao Ching Chuen Chan David Gatton Yunyue Ye Boyd Plowman Zedong Xu Kanenori Okawa Tianli Yang Christy Y Shue Job Title Chairman and Chief Executive Officer Director.Harbin Electric. Shanghai Tech-Full Senior Management Director. Finance and Investor Relations. Inc. and Corporate Secretary Board Executive Board Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Senior Management Senior Management Senior Management Senior Management Compensation 26470 USD 15882 USD 15882 USD 147100 USD Suofei Xu Shaotang Chen Vice President. and Chief Operating Officer. Inc. Research and Senior Management Development. Shanghai Tech-Full Independent Director Independent Director Independent Director Independent Director Chief Financial Officer Chief Technology Officer Vice President Executive Vice President. © Datamonitor Page 8 294 .

Gao has been a Director and Chief Operating Officer. he has been the Chairman and Chief Executive Officer at Harbin Tech Full Electric.Harbin Electric. He graduated from Zhejiang University with a Masters degree in Electric Motor Automation and Control. From 1988 to 1991. he was the President at Helongjiang Cultural Development Company and Guangzhou Subsidiary Company. Mr. China with a major in Electrical Engineering. Mr. Yang was the President at Hong Kong Lianfa Real Estate Company. since 2007. From 2000. From 1991 to 1994. She graduated from Zhejiang University. the Harbin Electric. UK. Chan has been an Independent Director at Harbin Electric since 2005. Yang has been the Chairman and Chief Executive Officer at Harbin Electric since 2005.21 Research Institute. Mr. a subsidiary of Harbin Electric. Shanghai Tech-Full Electric. Yang is also the National People’s Representative at City of Harbin. Key Employee Biographies KEY EMPLOYEE BIOGRAPHIES Tianfu Yang Board: Executive Board Job Title: Chairman and Chief Executive Officer Since: 2005 Age: 49 Mr. From 1986 to 1988. From 2003. Gao managed a development and production project of office automation motors in collaboration with Sankyo Seiki of Japan for 10 years and served as the Senior Engineer. Yang has been the Chairman and Chief Executive Officer at Harbin Tech Full Industry. and Chief Operating Officer. She worked as an Engineer at Shanghai No. Mr. Ching Chuen Chan Board: Non Executive Board Job Title: Independent Director Since: 2005 Age: 75 Mr. Inc. Lanxiang Gao Board: Executive Board Job Title: Director. Ms. © Datamonitor Page 9 295 . Shanghai Tech-Full Since: 2007 Age: 58 Ms. Inc. he was the President at Harbin Tianheng Wood Industry Manufacture. From 1994 to 2000. He is an Honorary Professor at Hong Kong University’s Department of Electrical and Electronics Engineering. the Chinese Academy of Engineering. Chan is a Fellow at the Royal Academy of Engineering. he was the President at Hong Kong Property Management Development.

public and private partnerships and marketing initiatives. Mr. He holds a BA from Cornell College and a Master’s degree from Harvard University. Key Employee Biographies Ukraine Academy of Engineering Sciences and a Fellow and Vice President at Hong Kong Academy of Engineering Sciences.Harbin Electric. He was also Council Member at China Electro-technical Society. Ye graduated from Zhejiang University in 1978. Treasurer. Mr. He is currently a Professor in Electrical Engineering at Zhejiang University. Inc. He also served as the President and Chief Executive Officer at Harbin Electric. Ye also currently serves as a Director at Aerospace Electric and Electrical Motor Institute of Zhejiang University and a Director at Linear Motor Institute of the Chinese Electro-technical Society. Boyd Plowman Board: Non Executive Board Job Title: Independent Director Since: 2009 Age: 67 Mr. Plowman held numerous leadership positions including Controller. he has served as the Chairman and President of Development Initiatives. Inc. He is the retired Executive Vice President and Chief Financial Officer at Fleetwood Enterprises. and Financial Vice President. Since 1985. During his career with Fleetwood. Gatton has been an Independent Director at Harbin Electric since 2005. organizations. During his second stint with Fleetwood. where he has taught for the past seven years. Mr. Inc. he served as an Executive Vice President and Chief Financial Officer until his retirement in 2008. Ye has been an Independent Director at Harbin Electric since 2006. Plowman has been an Independent Director at Harbin Electric since 2009. Mr. David Gatton Board: Non Executive Board Job Title: Independent Director Since: 2005 Age: 57 Mr. where he was employed from 1969 to 1987 and from 1997 to 2008. Yunyue Ye Board: Non Executive Board Job Title: Independent Director Since: 2006 Age: 59 Mr. and companies on business development strategies. Gatton advises cities. He graduated from Tsing Hua University in 1959 with a Master of Science degree in Electrical Engineering and obtained his PhD in 1982 from University of Hong Kong. © Datamonitor Page 10 296 .

Since 2000. © Datamonitor Page 11 297 . He holds a bachelor's degree from Utah State University and was a certified public accountant. he was employed in the China State Construction Engineering Corporation in various positions. Inc. he was Chief Technology Advisor at Nittoku Engineering. Xu has been the Chief Financial Officer at Harbin Electric since 2005. Kanenori Okawa Board: Senior Management Job Title: Chief Technology Officer Since: 2007 Mr.Harbin Electric. From 1997 to 2007. From 1998 to 2000. Tianli Yang Board: Senior Management Job Title: Vice President Since: 2005 Mr. Christy Y Shue Harbin Electric. From 1985 to 2000. Mr. From 2003 until present. Mr. Mr. including Chief Administration Officer. Inc. Mr. a Bermuda-based company reinsuring risks for captive insurance companies. Xu graduated in 1992 from Harbin Electrical Engineering College with a BA in Project Management. From 1973 to 1997. From 1996 to 1998. Key Employee Biographies Lee & Associates. Yang graduated from Helongjiang University in 1985 with a BA in Chinese Language and Literature. he was employed as the Chief Financial Officer at Harbin WanDa Electrical Home Appliances.Yang has been the Vice President at Harbin Tech Full Industry. Since 2000. Prior to that. Okawa worked at Industrial Far East and held various positions including serving as the President from 1978 to 1997. Zedong Xu Board: Senior Management Job Title: Chief Financial Officer Since: 2005 Age: 41 Mr. Since 2003. Plowman served as a Director and Chairman of the Audit Committee at Corporate Insurance and Reinsurance Company Limited (CIRCL). he was the Vice President at Harbin Tech Full Electric. Yang has been the Vice President at Harbin Electric since 2005. Xu has been the Chief Financial Officer at Harbin Tech Full Industry. Okawa has been the Chief Technology Officer at Harbin Electric since 2007. he has been the Chief Financial Officer at Harbin Tech Full Electric. He began his career with Ikegami Tuusinki after he graduated in 1971 with a BS in Electrical Engineering. he was a Financial Manager at Harbin High Technology Torch Daya Real Estate. Mr. Mr.

Chen has been a Director. Advanced Automation Group Since: 2007 Dr. Research and Development. Prior to joining Christensen. Dr. he has been the Staff Research Engineer at Delphi Research Labs. From 2000 to 2007. Inc. Shanghai Tech-Full. Inc. Finance and Investor Relations. From 2001 to 2003. From 2003 to 2008. Mr. Shue was Manager. He graduated in 1988 from Fudan University with a BA in Law. Research and Development. China. From 1999 to 2000. Suofei Xu Board: Senior Management Job Title: Vice President. he was an Investment Manager at Shenzhen Capital Group. and Corporate Secretary Ms. and Corporate Secretary at Harbin Electric. Harbin Electric. Xu worked as the Section Chief for system allocation reform at Harbin Economic System Reform Committee. a subsidiary of Harbin Electric. From 2003 to 2008. From 1991 to 1997. he was Senior Research Engineer for Mechatronics Group at Delphi Research Labs. Key Employee Biographies Board: Senior Management Job Title: Executive Vice President. she was the Vice President and a Senior Investor Relations Consultant at Christensen. Finance and Investor Relations. She holds a PhD in Chemistry from Purdue University and an MBA in Finance business from the Stern School of Business. From 1995 to 1999. New York University. Chen was Senior Research Engineer in the Electrical and Electronics Department at General Motors NAO Research and Development Center. Ms. Shue is an Executive Vice President. Chen was Delphi Research Labs Chief Scientist at Delphi Energenix Center. Xu was the Vice President at Harbin Tech Full Industry. From 1997 to 2001. he was the Vice President at Harbin Tech Full Electric. © Datamonitor Page 12 298 . Xu is the Vice President. Dr. Investor Relations at International Paper. Mr. a subsidiary of the company. since 2007. Shaotang Chen Board: Senior Management Job Title: Director. Prior to joining the company. She earned her Bachelor of Science degree from Sichuan University. Shanghai Tech-Full Mr. Advanced Automation Group. From 2001 to 2003. he worked at Guangfa Securities as a Project Manager. He graduated in 1995 from University of Wisconsin-Madison with a PhD in Electrical Engineering.Harbin Electric.

© Datamonitor Page 13 299 . Inc. The company’s key products and brands include the following: Linear motors: Flat linear motors Cylindrical linear motors Specialty micro-motors for automobile applications Industrial rotary motors: High and low voltage motors AC (alternating current) motors DC (direct current) motors Speed control motors Brands: Simo Motor Wenbao Motor Harbin Electric. Major Products and Services MAJOR PRODUCTS AND SERVICES Harbin Electric is a manufacturer of a range of electric motors. Inc.Harbin Electric.

Franklin Electric Co. Inc. Top Competitors TOP COMPETITORS The following companies are the major competitors of Harbin Electric. Emerson Electric Co.Harbin Electric.. Inc. Inc. Inc. General Electric Company Nidec Corporation Harbin Electric. © Datamonitor Page 14 300 .

Ltd Shanghai CHN Weihai Tech Full Simo Motor Co. Ltd.. CHN Harbin Electric.. © Datamonitor Page 15 301 .. 9 Ha Ping Xi Lu Ha Ping Lu Ji Zhong Qu Harbin Kai Fa Qu Harbin 150060 CHN P:86 451 8611 6757 http://www. Locations and Subsidiaries LOCATIONS AND SUBSIDIARIES Head Office Harbin Electric. LLC. Harbin CHN Xi’an Tech Full Simo Motor Co.com Other Locations and Subsidiaries Advanced Electric Motors. Inc.. Ltd.Harbin Electric.harbinelectric. Inc. Ltd. Delaware USA Shanghai Tech Full Electric Co. CHN Advanced Automation Group. Inc. Delaware USA Harbin Tech Full Electric Co. Inc.

Peers . The trend in Harbin Electric. Inc. All Rights Reserved.Pairs Quality Drivers Pages 5 to 7 .Nominal Rates . Inc.Sentiment Summary Due Diligence Report Highlights Conclusions Page 9 Harbin Electric.Management .Risk . Inc.Price Valuation Pages 7 to 8 . has been depreciating over the past 2 weeks. Inc. Harbin Electric. were calculated in relation to the entire population of 4198 United States-listed companies rated today. 302 .Rating determinants Benchmarks Pages 3 to 5 . 1 © 2009 Marques Mendes & Associados Lda (MM&A). Report Date 2011-06-28 Basics Pages 1 to 3 . is an above average quality company with a negative outlook.Attractiveness . When compared to its closest peer. fair value exchange rate against its closest rated-competitor.Competitors .Fair value rates Market Pages 8 to 9 . Hydrogenics Corporation (USA). Inc. Please read disclaimer in page 10.Harbin Electric. StockMarks Ratings Total Quality Classical Business Management Price Volability Outperformance SMT SMC SMB SMM SMP SMV SMO Summary StockMarks Ratings for Harbin Electric. see page 10.Highlights .Business .StockMarks . has medium business growth and is run by efficient management. For an explanation of each rating.Sector . using a scale from 0 (worst) to 100 (best).Profile . American Superconductor Corporation. shows similar undervaluation and is more likely to outperform the market. Harbin Electric. Inc.

's registered activity is in the Electrical Components & Equipment industry. The table above gives a profile of the company.900 52-Week Range: 5. All Rights Reserved. depicted in the chart below.42 times earnings. Inc.1420 Data as of Market Close: 2011-06-28 Harbin Electric. 2 © 2009 Marques Mendes & Associados Lda (MM&A). Inc.’s long-term investment attractiveness rating (Total StockMark or SMT). Inc. The chart below shows the movements of the Total Quality StockMark (SMT) and share price expressed as indexes since we began rating the company. Summary Due Diligence Report Company Profile Ticker Company Sector Industry Exchange HRBN Harbin Electric.'s share price has fallen considerably in the last quarter. 303 . is driven by price attractiveness.82 . Inc. While Harbin Electric. Please read disclaimer in page 10.05 Market Capitalization (M): 496.’s Quality StockMarks? Harbin Electric. Industrials Electrical Components & Equipment NASDAQ Current Stock Price: 15. It is a mid-cap stock currently trading at a multiple of 7. the company's longterm investment rating (chart above) decreased over the same period. Inc. Inc.8880 EPS: 2. What determines Harbin Electric.25.Harbin Electric.

88 for United Stateslisted companies. This rating ranks Harbin Electric. Inc.Harbin Electric. Volatility. Although the scale from 0 to 100 is in itself meaningful. Management. financial and market-positioning factors such as size (see page 5). All Rights Reserved. 304 . followed by a comparison of the company’s overall long-term investment attractiveness rating (Total StockMark or SMT) in relation to its sector (chart below). Inc. Inc. Inc. Inc. Inc. Price. First. Harbin Electric. selected because of similarity of business. Summary Due Diligence Report An important question to ask is whether Harbin Electric. Outperformance. placing Harbin Electric.’s underlying long-term fundamentals justify the steep decline in the company's share price. Ratings showing a positive trend: Total. We can examine this issue using the StockMarks framework. above the SMT average of 50. Ratings showing a negative trend: Business. How do the Harbin Electric. for benchmarking purposes we need to define a few relevant reference groups. Inc. currently has an overall long-term investment attractiveness rating (Total StockMark or SMT) of 65. Classic. 3 © 2009 Marques Mendes & Associados Lda (MM&A). fourth when compared to ten of its closest peers. currently has an overall quality rating significantly above the average of its sector. namely competitors. Please read disclaimer in page 10. correlated stocks and value investing peers. in the chart on the right. we compare the company’s trend for each rating.'s ratings rank among selected benchmark groups? StockMarks™ ratings were calculated in relation to the total of 4198 United States-listed companies rated today. Recent rating trends: Harbin Electric.

The closest competitor. Inc. PWER Power-One.0 75..11 0. AOS A. readers should use a chart to compare the prices of the chosen pair... Therefore. Inc. In general.0 75.’s market share of 0. However. American Superconductor Competitor 1 AMSC Cor. a 100% market share does not mean that the company has no competitors in the industry. which may be more significant.01 4.36 1. HEV Ener1. Competitor 2 Competitor 3 Competitor 4 Competitor 5 Competitor 6 Competitor 7 Competitor 8 Competitor 9 Competitor 10 HYGS NJ Hydrogenics Corporation (USA) Nidec Corporation (ADR) FELE Franklin Electric Co.2% compared to Harbin Electric..18 0.95 0. The success of pair trading strategies depends on the investor’s ability to forecast the convergence path. convergence itself may only happen if the two companies are not diverging in a fundamental way. PLNR Planar Systems. Smith Corporation AZZ BEZ AZZ Incorporated Baldor Electric Company JELC Johnson Electric Holdings Y (. 305 . pair trading requires degrees of similarity above 70%. Textron Inc.’s competitors were selected based on the registration industry. Harbin Electric...0 75.3% and a market share of 0. Inc. Inc.0 75. is the closest stock for pair trading with a similarity index of 75%. Inc. total revenue and market capitalization among rated companies..Harbin Electric. O.0 66.0 58 33 53 80 43 75 52 66 65 60 44 39 21 37 79 25 55 40 64 30 50 66 59 43 51 57 48 70 44 46 77 50 67 67 69 71 67 69 68 71 68 66 69 HRBN Harbin Electric.7 0.0 75.0 75.19 0.. All Rights Reserved. Inc. Manitowoc Company. Inc.’s best rank among competitors is second for the Management Efficiency (SMM) rating.2% (See table on the right).’s relative position the following tables show the ratings of similar companies for these benchmark groups. sector and trading volumes. American Superconductor Corporation has a similarity index of 83. Inc.0 75.0 75. These do not include non-listed companies and foreign competitors. Harbin Electric.0 75. Inc. GrafTech International Ltd.15 0. AEIS Advanced Energy Industries.. Similarly. we calculated the industry market share only in relation to rated companies. Investors can evaluate this possibility by comparing the StockMarks quality ratings shown in the second table below.20 83. CRTP China Ritar Power Corp. In relation to its highest correlated stocks (for pair trading) Harbin Electric. Inc. Inc. Inc. Inc. MIC Macquarie Infrastructure Co.0 75. defined on the basis of market correlation. To assess the recent convergence/divergence trend..0 75. However. to assess pair trading convergence it is also important to consider Harbin Electric. 4 © 2009 Marques Mendes & Associados Lda (MM&A).86 0.3 75.7 66.. Inc.0 75. SADIF subscribers may draw such chart by choosing option 3 in the Due Diligence Section.03 0. TEX Terex Corporation GTLS Chart Industries.0 75. Benchmark group: Industry Competitors Ticker Company Company Name Similarity Industry SMT SMB SMM % Share % 0.0 75. China Ritar Power Corp. GNK TXT GTI MTW Genco Shipping & Trading Li.’s worst ranking. which is sixth for the Price Attractiveness (SMP) rating. Benchmark group: Pair Trading Ticker Company Pair 1 Pair 2 Pair 3 Pair 4 Pair 5 Pair 6 Pair 7 Pair 8 Pair 9 Pair 10 Company Name Similarity SMT SMB SMM SMP % 65 75.’s best rank is third for the Management Efficiency (SMM) rating.16 65 62 37 65 48 69 50 68 65 24 57 44 44 61 50 27 67 27 75 49 30 26 66 62 18 59 56 51 58 51 60 16 72 SMP 67 66 72 67 66 66 67 53 66 74 66 HRBN Harbin Electric. Please read disclaimer in page 10. Summary Due Diligence Report To quickly assess Harbin Electric.0 75.

How good is the Harbin Electric. 5 © 2009 Marques Mendes & Associados Lda (MM&A). Inc. which was -0. Inc.0 43. We selected also a group of investment peers in terms of longterm operational and financial similarities. Peer Analysis Ticker Company Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 HRBN HYGS AMSC FELE NJ AOS BEZ JELCY HEV MIC GLW At this stage. indicating that the company's longterm business growth rates are significantly below the sector average of United States-listed companies. Among this group shown in the table above on the right.’s ratings in comparison to its top two peers. Harbin Electric. Inc.3 51.0 51. 306 . Nevertheless. Summary Due Diligence Report Likewise.085 in relation to its closest pair. Please read disclaimer in page 10. Inc. Inc.7 41. Smith Corporation Baldor Electric Company Johnson Electric Holdings (ADR) Ener1. Hydrogenics Corporation (USA) American Superconductor Corporation Franklin Electric Co. some investors may find it useful to read the Due Diligence Reports for these peers or competitors. we need to look further into its determinants by examining each quality rating separately. not all companies have a degree of similarity greater than the minimum of 50% recommended for reliable benchmarking. Nidec Corporation (ADR) A. All Rights Reserved.’s business? Benchmark group: Investment Peers Company Name Harbin Electric. Inc. currently has a Business StockMark (SMB) of 44. Harbin Electric. The radar chart above provides a synopsis of all of Harbin Electric.0 50.Harbin Electric. O. Harbin Electric. Inc. Because of the stringency of the criteria used.8 42. has medium business quality growth. is an above average quality company with a negative outlook. Inc. Macquarie Infrastructure Company LLC Corning Incorporated 56.0 50.’s best rank is second for the Management Efficiency (SMM) rating.0 50. Inc.0 50. we should note the lastmonth price divergence.7 Similarity % SMT SMB SMM SMP 65 37 62 48 65 69 68 65 24 60 70 44 61 44 27 50 67 75 49 30 50 44 66 18 62 56 59 51 51 60 16 50 75 67 72 66 66 67 66 53 66 74 69 66 The overall conclusion is that Harbin Electric.

sometimes a small temporary decline or rise may not be attributed to a change in efficiency but are instead the result of large shifts in investment/disinvestment. We can assess whether the Harbin Electric. Harbin Electric. correctly priced? With the recent steep decline in Harbin Electric. 307 . despite the importance of management efficiency. Inc. Inc. Also. with that of its closest competitor. in place as it takes a few quarters before its impact is shown in the company financials. is growing at a slower pace than its industry. Is Harbin Electric. seventh in terms of growth in relation to its ten closest peers. Please read disclaimer in page 10. the second highest of its quality sub-ratings. American Superconductor Corporation. The decline in the sales elasticity pushed this indicator below the average. Inc.08 times higher. Management Classification Grid For a descriptive classification of management efficiency based on an interval scale. American Superconductor Corporation. Comparing the management efficiency of Harbin Electric. Harbin Electric. Inc. Finally.Harbin Electric. is in fact undervalued by looking at the company's Price Attractiveness StockMark (SMP). has efficient management The Management StockMark (SMM) measures the ability of a company's management to transform gross margins into earnings per share. suggesting that Harbin Electric. The previous chart shows the movements in the SMB and the ratings of the three indicators used in the calculation of the business rating. investors should not neglect other more subjective management attributes such as integrity and business savvy. Inc. Inc. 6 © 2009 Marques Mendes & Associados Lda (MM&A).’s business rating is 1. All Rights Reserved.’s rating is 1. the possibility of the company's shares being oversold increases. we use the following five categories: Category First Class Efficient Average Mediocre Inefficient SMM Rating 90-100 55-89 40-54 20-39 0-19 The assessment of the management efficiency trend needs to be qualified by taking into account how long the incumbent management has been The chart above shows the movements of the SMM and the rating's three determinants. Inc.Harbin Electric. reveals that Harbin Electric. Inc. which are beyond the scope of this report.02 times higher than that of its closest competitor. The sales elasticity indicator compares the long-term revenue growth of the company to other companies in its industry. Summary Due Diligence Report This rating places Harbin Electric. Based on its fundamentals. The SMB's recent fall was not primarily due to a decline in the rating of the company's sales elasticity. Inc. currently has a SMM of 66.’s share price. Inc. Inc.

is already undervalued and with a trend towards more undervaluation. Inc. The fair value exchange rate of Harbin Electric. 308 . All Rights Reserved. Harbin Electric. we can check the exchange rate at which the stock is trading in relation to its top competitors and peers.Harbin Electric. over-estimate or underestimate the premium/discount relative to intrinsic value. indicating that the market is undervaluing Harbin Electric. 7 © 2009 Marques Mendes & Associados Lda (MM&A). First. investors should assess if it is diverging or converging in relation to a fair valuation (SMP between 4555). currently has a Price StockMark of 67. Please read disclaimer in page 10. indicating that it may remain undervalued or overvalued for long periods. we can observe that Harbin Electric.’s stock in relation to its closest competitor American Superconductor Corporation is depreciating. Summary Due Diligence Report The SMP takes into account both fundamental and technical indicators to arrive at a rating of the attractiveness of a company's stock to long term investors at its current price. On this count. Investors need to consider the most recent absolute value of the SMP and its determinants together with the SMP trend. Second. to verify if the stock is caught at a stationary level. A chart of the SMP and the ratings of some of the company's key price valuation multiples is shown above. Inc. Inc. To see if this situation is unique to the company. Inc. Inc. The valuation of stock-for-stock offers in M&A transactions is quite complex when shareholders of the acquirer and the target company hold significantly different views on the intrinsic value of their companies.’s long-term fundamentals. The nominal stock exchange rate as given by current market prices (shown in the chart below) may be misleading if markets. as they often do.

an increase (decrease) in the rate of exchange means that Harbin Electric. By adjusting the nominal rates by the relative SMPs we obtain the fair value exchange rate. For instance. measured in index form. The market risk The analysis of market risk is done through the Volatility StockMark (SMV) rating. Please read disclaimer in page 10. Comparing the volatility rating of the Harbin Electric. Therefore.. 309 . 8 © 2009 Marques Mendes & Associados Lda (MM&A). Inc..97 times lower. we see that it is 0.Harbin Electric. This rating combines the previous year price variance and price level with longterm market correlation in a way that we can interpret it in the usual scale of 0 (worst) to 100 (best). which estimates the degree of over or undervaluation at any level of the market premium or discount. All Rights Reserved. we may minimize the problem and bypass the need to estimate intrinsic values by adjusting the nominal stock exchange rates with our Price Attractiveness StockMark (SMP). Inc. The rates quoted give us the number of benchmark shares that we could buy with one share of Harbin Electric. Unfortunately. in relation to some of its benchmark stocks. we can observe that in relation to the first competitor the trend during the last quarter has been towards appreciation. The chart on the left shows the evolution of the fair value exchange rates for Harbin Electric. fair value stock exchange rates are shown in the previous page: The trend in the fair value exchange rates shown above is relevant not only to adjust valuations but also to assess the price outlook for Harbin Electric. Current nominal rates vs. Inc. the estimation of intrinsic values is a very challenging task. with its closest competitor. Inc. American Superconductor Corporation. which is currently at 75. However. Inc. Summary Due Diligence Report Warren Buffett popularized the idea that many air-for-assets risky acquisitions take place during bull markets because overvalued acquirer’s can afford to overpay because they are in effect using stock as if it was counterfeit money. is appreciating (depreciating).. Inc.

to be a good long-term investment.Harbin Electric. Hydrogenics Corporation (USA). we can see that it is deteriorating. the rating is more useful when we compare its evolution to the trend in stock price. Summary Due Diligence Report Although relevant in itself. we believe Harbin Electric. Please read disclaimer in page 10. Conclusions The company's share price in the past year has been hit hard. Overall. Harbin Electric. It is also important to observe the trend in the volatility of SMV because this provides a good indication about the stickiness of short term price movements. reveals a company with an above average quality and medium long-term business growth. While. All Rights Reserved. is positive and is deteriorating No due diligence is complete without considering the market sentiment in relation to Harbin Electric. we use the Outperformance StockMark (SMO). Inc. Inc. Inc. The likelihood of Harbin Electric. Inc. American Superconductor Corporation. Inc.. We can observe that Harbin Electric. When compared to its closest peer. Harbin Electric. Looking at its trend in the chart on the left. in a scale from 0 (worst) to 100 (best). A StockMarks analysis of Harbin Electric. Harbin Electric. but we believe that its underlying fundamentals will determine the stocks long-term performance.’s market risk outlook is mixed. The market sentiment in relation to Harbin Electric. For this. shows similar undervaluation and is more likely to outperform the market. Inc. 310 . because this is paramount in determining the stock’ s performance in the short to medium-term. This rating combines the company's past quarter price dynamics with its market risk and total quality. The chart on the previous page shows both in an index form. 9 © 2009 Marques Mendes & Associados Lda (MM&A). Inc.’s SMO is currently at 77. Inc. which measures the likelihood of the company to outperform the market in the near term. if compared to its first competitor. shows similar undervaluation and is equally likely to outperform the market. stock to outperform the market – as measured by the Outperformance StockMark (SMO) – is well above average with a rating of 77 / 100. Inc. The risk associated with holding the shares – as measured by the Volatility StockMark (SMV) – is well below average with a rating of 75 /100. Inc.

Management and Price. © 2009 Marques Mendes & Associados Lda (MM&A). Summary Due Diligence Report The StockMarks™ Ratings Classical StockMark (SMC) Short-medium term attractiveness rating combining SMT and SMP. The data contained within this report is not warranted to be accurate or complete. The author of this article does not hold a position in any of the companies featured within this report. the SMV and the SMT. Outperformance StockMark (SMO) The likelihood of a stock to outperform the market based on the valuation of the company. Portugal. sales elasticity and sales growth rate. Business StockMark (SMB) A company's business quality based on variables including: operating margin. Marques Mendes & Associados Lda. Total Quality StockMark (SMT) The overall long-term investment-attractiveness of a company based on a combined three dimensional analysis of three sub-ratings: Business. Inc. price to sales per share and price to earnings per share. 17 – 3830-176 Ilhavo.Harbin Electric. This report is only intended as a summary of SADIF's stock ratings and not a recommendation for stock purchase or sale. earnings per employee and the earnings growth rate. Volatility StockMark (SMV) Risk of the stock based on numerous historical analyses of stock price and market correlation. Rua Domingos F. Price StockMark (SMP) A company's price quality rating in terms of undervaluation reflected by valuation measures such as price to book. Redistribution of this report without explicit permission is strictly prohibited. Ph: (+ 351)234 322 037 Email: research@sadifanalytics. All logos are the copyright property of their respective companies and are used here only to aid the reader in identification of the subject of the article. This report is for information purposes only and is not a solicitation or advice to buy or sell any security. Management StockMark (SMM) A company's management quality based on the following key indicators: return on assets.com 10 311 . All Rights Reserved. Pinto Basto.

Yang’s shares much lower than then market value. the letter of intend for the $400M term loan was issued by China Development Bank (CDB) when HRBN’s buying group.0 $140. Chairman Mr.8A $122.8 1. specific contract terms were negotiated and the June 9 Facility Agreement was the result of the negotiation and a binding agreement of $400M term loan. it is more convenient for CDB to access Mr. The $50M term loans ($35M and RMB100M) issued by CDB last November was to HRBN and not included in the $400M facility.99 $24 $5.S. NY 10174 – www.0 $2. CDB has required Mr. including Corporate Documents. The $400M Facility Agreement dated June 9.58 $0.05 $470. is a binding agreement not a letter of intend. Target Share Pledge is a document that Tech Full pledges its entire equity interest in HRBN after the completion of the acquisition as the loan collateral. Yang pledged 7M shares of HRBN he owns to collateralize the loan.67 5. it is a rather standard practice for a Chinese state-owned bank like CDB to give a large discount on any assets taken as loan collateral.14 7. we have concluded several important points. one important type of Finance Documents required by CDB was Security Documents.EQUITY RESEARCH COMPANY UPDATE China June 28.48 $0.58 $0.70 $0. Vol. This extra collateral is where the Personal Guarantee comes into play.5 $2. Our Buy rating and $24 price target is mainly based on a favorable outcome of HRBN’s LBO. Legal Opinions.63 $0.66 $0. Second. whether the current agreement is binding and how it is structured. Yang.1 $2.99) Some explanations on HRBN’s Reiterate Buy and $24 price target debt Buy financing.4 $470.7 $547.78 (212) 895-3718 Maxim Group LLC 405 Lexington Avenue New York.82 .14 $2.12 $2. Yang and his wife’s personal assets as extra collateral in case the assets/equity interest of HRBN are not sufficient for the loan value.6 Current Current EPS P/E $0.62 $0.A. here the shareholders are mainly HRBN’s Chairman Mr. Abax Global Capital (Abax) and a few other member of HRBN’s top management file a 13-D to SEC on May 2. Overall.66 $0. That said the utilization of the loan is subject to fulfillment of all required documents. U. Finance Documents.67 Quarterly EPS 2011E 2012E $0.com $14. Inc.2 $134.60 NA Medium Revenues ($M) 2011E 2012E $103.34A $0. As far as we understand. 2011 indicating the secure of such debt financing.46 6.68 Current 2012E $0. 2011 Closing Price (6/27/11): 12-Month Target Price: 52-Week Range: Market Cap (MM): Shares O/S (MM): Float (MM): Shares Short (MM): Avg. PhD ehe@maximgrp.7 $123. In addition.74 Harbin Electric.4 $131. In our view. or the acquisition vehicle. (000) Book Value/Share: Dividend/Yield: Risk Profile: Maxim Group FYE: December 1Q 2Q 3Q 4Q FY Maxim Group FYE: December 2009A: GAAP 2010A: GAAP 2011E: GAAP 2012E: GAAP LT Earnings Growth Maxim Group FYE: December 1Q 2Q 3Q 4Q FY Consensus-First Call FYE: December 1Q 2Q 3Q 4Q FY Echo He.74 $2. Borrow Share Mortgage is a document that the shareholders of Tech Full Electric Company Limited (Tech Full).8 9. which mainly include the Borrower Share Mortgage and the Target Share Pledge.50 $0. As far as we understand.6 10% .615 $19. Acquisition Agreement and Regulatory Approval.70 $0. Recently we received large number of investor inquiries about HRBN’s debt financing.maximgrp. the wide gap between the current share price and the LBO offering price creates buying opportunities. MD. Yang’s personal assets as he is a Chinese citizen than a foreign issuer’s assets as HRBN is registered in Nevada. In our view. Yang. Mr.7 31. After reading through the details in the SEC documents.com SEE PAGES 4-6 FOR IMPORTANT DISCLOSURES AND DISCLAIMERS 312 . in particular. The $400M term loan from CDB is mainly collateralized by HRBN’s equities. $2. (HRBN – Nasdaq – $14.4 16.77 19.66 $0.$25. pledge their entire equity interest in Tech Full as the loan collateral. a reason why it seems CDB valued Mr.1 $112. we expect SEC is likely to approve the merger transaction in a few months. 2011.15% GAAP Quarterly EPS Current 2011E $0.6 $150. Since that time.34A $0.

11 0.1x 27.9x 7.42 1.89 21.8x -19.08 $ 5.10 $ 2.47 Shanghai Electric Group 601727-SH $ 1.03 0.0x 5.00 $ 114.62 $ 5.0x 16.6x Maxim Group LLC 2 313 .9x 18.8x 25.249 Franklin Electric FELE $ 45.01 $ 57.6x Chinese Industrial Companies China Automotive CAAS A-Power APWR FushiCopperweld FSIN Lihua International LIWA Shengdatech SDTH Wonder Auto WATG ChemSpec CPC China Gerui Adv.1x 9.6x 11.08 $ 4.7x China Mainland Listed China Motor Companies Xiangtan Electric 600416-SH $ 1.27 0.7x 26.6x 15.17 $ 4.8x 63.6x 3.7x 3.7x 20.0x 3.464 Smith AO AOS $ 40.3x 10.01 $ 5.8x 4.Harbin Electric.6x 16.04 0.2x -4.48 -1.41 BroadOcean 002249-SZ $ 3.048 Average Source: Thomson One. Materia CHOP SORL Auto Parts SORL Average HK Listed China Motor Companies Harbin Power Equipment 1133-HK Shanghai Electric Group 2727-HK Dongfang Electric Group 1072-HK Chongqing Machinery & E2722-HK Shanghai Prime Machine 2345-HK Average $ $ $ $ $ $ $ $ $ 249 76 213 236 37 184 256 155 78 $ -$ $ $ $ $ $ $ 1.6x 76.75 $ 27.06 Dongfang Electric Group 600875-SH $ 3.4x 1. $ 6. Bloomberg and Maxim Group estimates.404 $ 6.9x 8.05 0.14 $ 11.94 $ 8.489 $ $ $ $ $ $ 0.5x 3.1x 3.2x 18.42 n/a $ 2.96 0.1x 14.8x 18.34 $ 3.23 1.3x 11.7x 13.18 Jiangte Electric Motor 002176-SZ $ 3.67 6.08 0.4x 4. (HRBN) Exhibit 1.244 Magna International MGA $ 50.3x 9.11 0.60 $ 1.1x 12.40 0.39 $ 1.5x US/International Motor Companies Siemens SI $ 132.364 $ 377 $ 10.50 $ 10.1x 3.46 $ 2.708 Rockwell Automation ROK $ 81.5x 13.08 3.3x 23.88 Zhejiang Founder Motor 002196-SZ $ 2.9x 13.87 $ 4.7x $ $ $ $ $ 1.58 $ 5.4x 39.6x 4.99 LAST $ $ $ $ $ $ $ $ $ 9.1x 13.3x 13.95 1.5x -4.259 328 159 $ $ $ $ $ 0.21 $ $ $ $ $ 799 1.2x 6.0x 17.1x 10.04 0.20 1.23 0.1x 48.59 1.1x 14.69 $ 3.08 0.20 $ $ $ $ $ $ 0.69 $ 5.02 $ $ $ $ $ 0.20 1.0x 9.2x 10.30 1.2x 4.06 0.04 $ 1.4x 5.1x 71.03 0.273 Emerson Electric EMR $ 53.2x 17.24 $ $ $ $ -$ 0.03 0.12 0.2x 4.60 $ 9.87 $ 1.8x 43.6x 5.0x 28.9x 8.05 1.7x 3.0x 20.8x 19.4x 6.05 0.06 $ -$ $ $ $ $ $ $ 1.51 1.9x 10.18 0.12 0.14 0.08 0.07 $ 2.53 3.01 $ 2.0x 14.02 10.42 7.6x 11.5x 18.5x 18.7x 9. Inc.97 n/a -$ 2.20 0.5x 1.17 1.9x 11.30 0.8x -16.5x 15.18 0.5x 12.9x 3.68 5.38 2.56 $ 3.56 $ 5.6x 16.71 6.7x 10.4x 13.02 $ $ $ $ $ 0.70 1.39 $ 19.573 Illinois Tool Works ITW $ 54.6x 7.1x 16.05 $ 4.384 Regal Beloit RBC $ 64.49 0.573 1.9x 2.09 $ 1.3x 15.44 $ 5.01 1.27 $ 3.8x 12.87 $ 40. HRBN – Comparable Companies 6/27 Company Harbin Electric TKR HRBN Price $ 14.71 4.2x 8.16 0.04 0.28 1.10 1.11 $ -$ $ $ $ $ $ $ 1.46 $ 2.6x 12.8x 11.05 0.12 1.23 n/a $ 2.70 0.04 MktCap (mm) $ 470 EPS P/E __________________________________________________ 10A 11E 12E 10A 11E 12E $ 2.11 0.3x 31.4x 3.29 31.07 0.04 0.147 $ 261 $ 1.90 Average $ 1.9x 12.25 $ 2.14 $ 2.6x 44.8x 10.04 0.672 ABB ABB $ 25.94 $ 11.93 $ 1.78 0.03 0.91 $ 3.6x -14.511 Cummins CMI $ 97.571 Lear Corporation LEA $ 51.29 8.6x 22.8x 22.1x 7.67 5.0x 17.0x 1.

4 13.6 25.8 2009 Full Yr 1Q10 31-Mar 2Q10 30-Jun 3Q10 30-Sep 4Q10 31-Dec 2010 Full Yr 1Q11 31-Mar 2Q11E 30-Jun 3Q11E 30-Sep 4Q11E 31-Dec 2011E Full Yr 2012E Full Yr $ 4.3 31.2) (6.1) 9.7% 2.8% (0.48 100.63 $ 0.47 $ 0.3 6.1% (3.0 42.8) 55.2 15.9 166% 78% 81% -18% 51% -4% (3.3 31.2) 15.Harbin Electric.1% 0.3) 1.4 $ 120.0% 19.3) 18.0 (4.5 $ $ 0.3 30.2 6.0) 16.5) 29.3 -12% 14.0) 24.4) (87.6 (23%) 8.7% (4.8) 19.2) 27.3 51.4) 0.5% (1.3 0.2 15.3 43.4 84% 45.1 18.7 246% 26.14 $ 54% -13% 2.4 0.1 61.2 (1.3 20.7% (7.7) 14.0) 7.84 0.7% (8.3% (1.2) 1.25 $ 0.9 (0.6 31.0 2.1 (4.9 2.3 135.2 21.0 34.7% (10.2 (15%) 29.8) 0.6 (3.7) 20.4% 12.5 35% 41% 33.8) 27.7) (4.6 18.3% 6.0% 6.0% 84.1% 22.9) 30.7) (70.8% 7.4 $ 71% (20.9 1.8 31.9 188.5) 4.9) (1.6) (6.1% (42.1 40.9% (18.4 $ 106.3 31.8 $ 223.0% (9.2 21.8 94.8% (1.3 (41%) 15.9) 9.1 2.6) (80.7%) 7.8) (75.1 31.2) 20.1 19.1) 1.1 (1.8) 26.4 6.6 31.9) 15.7 70% 48.3 (0.2% (10.1 25.4 29.7 36.0 31.1) (4.6% (1.7 71% 20.3 (1.8 105.7 107% 39% 14% 3% 31% -3% 10% 15% 30% 13% 19% 0% 21% 22% 21% 22% 22% 21% 23% 22% 23% 22% 23% 45.1) (75.6% 2.0% 19.1 6.4 29.6 (39.2% (11.1 31.8% (15.0 0.07 1.2 1.7 NM 24.0% (8.3 17.5 (7.1) 16.2) 1.6) 13.5 40.8 $ 112.3 76.49 $ 0.8% (41.9% (0.1 (1.4 48.3% (0.1% 17.8% 6.28 $ 23.0 (16.2) 10.8% 79.6 61% 34.6% 76.8 (0.7 -31% 12.48 $ NM -25% 221% (47.8 25.3% 0.6) 10.6 52.3 31.5 46% 39.3) 2.3) 15.0% 18.1) 0.6% 8.0 0.0% 6.0) 9.3 27.9% (0.6 23.0% 16.5 155.8 0.9% (0.36 0.2% (0.6 23.3 47.9% 67.9) (0.4 21.0% 25.6 2008 Full Yr 49.3% 21.7) 1.4 -5% 18.6 17.3 11. net Total other income (expense) Income before income taxes Provision for income taxes Tax Rate Net income before noncontrolling intere Minority interests As % of net income Net income Y/Y Growth Net Margin Foreign currency translation adjustmen Comprehensive income Weighted average shares outstanding Basic Diluted EPS (to controlling interest) Basic Diluted Y/Y Growth D&A Share-based compensation EBITDA EBITDA margin Exchange Rate (RMB/US$) $ $ 2004 Full Yr 2005 Full Yr 2006 Full Yr 2007 Full Yr 36.8 20.3 6.5% (7.6 48.2 0.7) 8.67 25% 14.9) (1.2 6.4 $ 109.7) 23.1 19.1) 0.9 (8%) 25.9 NM 16.6 100% 30.9% (13.4 0.9 23.4 218.7) (4.2 (2.6% (7.83 $ 0.0 0.8 (0.6 (6.4) 7.3) (24.6% (7.7% (38.9) 6.66 $ 0.3 0.8 0.9) (1.0 10.84 33.11 $ 0.0 30.4) 17.7) (391.2 (3.4 157% 23% 32% $ 44.5 16.84 35.36 60.4% (1.7) 11.8 11% 16.7 15% 28.2 43.2 $ 123.4 35.35 $ 0.3 18.3% (10.0% 10.6 137% 19.1) 1.4 10.0 0.0% 16.8) (73.0% 2.2 $ 426.76 19.6) 0.6% 17.4%) 10.3 31.2 15% 20.5 0.5) 15.1) 11.9 0.5% (0.2) 28.1 14.9) 8.4) 15.3 22% 27% 40.4 48.3) 1.4) 84.3 58. Inc.5% 1.2% 23.3% (5. net Interest expense.7 2.7) 21.4 65% 49.7 258.6% (1.3 19.7 (0.8 291% 18.9 (2.1) (0.8 26% 15.4 0.2 6.5 (3.6% 1.9% (0.8 15.3% 19.3% 6.9 (4.7 77% 31.0% 1.1 42.6) 0.01 $ 0.66 $ 68% 3.7% 8.68 2.4 45% 28.6) (0.19 $ 0.6% 1.1) 15.6%) 13.7 227% 33.8% (14.44 $ 2.4 50% 21.4) 0.5% (45.8) 12.4% 2.7% (14.4 31.6 $ 470.5% 84.4) 8.2 0.0 60.5 31.7 67.4% 1.9 11.4 31.8) 22.51 37.8 60% 74% 18% -14% 27% -3% -10% 0% 20% 1% 12% 56% 19% 19% 18% 16% 18% 19% 16% 16% 16% 16% 16% 18.1% 0.0) 0.1 31.9 16.36 0.5 (4.77 $ 31% (35.8) 1.8 85% 28% 27.0% (11.5 2.2) 19.0% (9.9 (2.8) 16.1 219% 26.5 (12.8% (3.0% 9.5) 11.4 77.6 $ 387% (12.9 0.9 24% 20.0 0.3 0.0) 27.99 $ 1.0% 2.1 28.0 1.3% 1.3% (2.9 27.0) 1.48 Source: Company reports and Maxim Group estimates.68 $ 2.5) 3.2% 6.3 0.8 (4.7 6.9 13% 6% 11% 12% 11% 3% 15% 20% 25% 16% 18% 0% 0% 20% 43% 42% 45% 47% 44% 45% 46% 48% 47% 46% 47% 65.4 31.0% 21.7 $ 547.8 0.5 $ 103.8 31.3 175% 33.8) 20.1) 9.1 (3.3% (6.6% 0.8 36.0 76.9) 25.8) 25.2 31.3% 7.5) 7.3 125.Xi'an Y/Y Growth % of Total Rev Revenues Y/Y Growth Cost of sales Gross profit Y/Y Growth Gross Margin R&D As % of Rev G&A As % of Rev Total operating expenses Income from operations Y/Y Growth Operating Margin Other income (expenses).34 $ 0.7 1.83 74.3) (146.0) 0.0% 25.2) 25.3 14.8 24.5% (10.63 $ 10% 2.7) 19.9 0.2 6.8% (0.7) 21.1 -14% 29.7 (1.3 16.1) (290.9 15.5 23.1 31.3) 7.7 17.3) 2.82 $ NM 2.2 86.1 31.7% 1. (HRBN) Exhibit 2.7 90.5 0.1% 25.6 47.0 $ 131.5 23.4) 93.3 67% 21.0 -1% 28.7 93.4% (4.8% (39.3 0.0) (73.8 (47.6) (94.6 350% 48.0) 106.0) 0.0 333% 42.67 $ 0.77 $ 1.5 125.8 62% 25.1% 19.7% 20.4) 2.4 (1.2 13.4 18.9 (7.0% 5.0 19.0% 18.1) (335.7 15.0% 0.44 $ 2.15 $ 0.2) 3.30 1.6% 15.2 19% 18% 71.2 6.3% (1.4 31.3% (46.2 (28%) 18.5 11.9 0.1 0.1% 7.5 $ 105.54 0.3 (1.9 49. Maxim Group LLC 3 314 .0% 21.2 17.7 62.3 16.2 6.4 5% 28.9 -10% 28.68 $ 2.3 31.4% (20.1 0.0 (21.3) 1.9% 25.4 69% 16.6%) 6% 12% 24% 10% 16% (33.4 0.5 46.1 2.8 1.0% 15.1) 34.1% 5.3) 5.5% 0.4 0.0) 0.9% 5.60 105.6) (69.46 $ 0.7 35.57 23.0 (2.7% (1.3% 5.4% (1.2 (14.3 47.9 68% 20.3 31.5% 1.6 135.5 14.4 0.3 25.8%) 3.2 (40.0 44.4%) (40.2% (10.1% 10.0% 84.57 $ 0.0% 10.1 33.7% 12.1 20.9) 32.7) 109.7%) 14.80 31.6) 88.4) 0.0%) 0% 15% 2% 10% 28% 15% 14% 14% 13% 14% 15% 13% 12% 12% 13% 12% 22.0% 67.6 62% 85% 85% 243% 175% 133% -1% 91% (1.3% 67.5 21% 28.8% 5.3) 9.2 $ 105.5 31.66 $ 82% 0.0% 15.2% (11.3% 1.7 19.3 31.8) 0.4 31.3 19.9) 3.9% 10.91 $ 53% (10%) 2.0% 13.0 20.3 (0.57 $ 0.Weihai Y/Y Growth % of Total Rev Rotary Motors . HRBN-Income Statement (In millions except per shr) Revenue Drivers: Linear Motors Y/Y Growth % of Total Rev Specialty Micro-Motors Y/Y Growth % of Total Rev Rotary Motors .1 (7.84 18.1 (3.0 (4.

Maxim Group expects to receive or intends to seek compensation for investment banking services from Harbin Electric.3% 7. Inc. Furthermore. no part of my compensation was.9% * Relative to Nasdaq Composite. (HRBN) DISCLOSURES Source: Investars.0% Expected Performance* Buy Hold Sell Expected total return of 15% or more over next 12 months Expected total return of plus or minus 14% over next 12 months Expected total negative return of at least 15% over next 12 months with Rating 65. An Under Review (UR) rating represents a stock that the Firm has temporarily placed under review due to a material change.com Maxim Group LLC Stock Rating System As of: % of Coverage Universe 6/28/2011 % of Ratings that Firm received Banking fees 24. Price Target Risks: Investment risks associated with the achievement of the price target include.0% 0.0% 0. but are not limited to. Inc. in the next 3 months. Valuation Methods: One or more of the following valuation methods are used by Maxim Group analysts in making a ratings or price projection: Analysis of companies P/E ratio. is. price/book ratio. unforeseen macroeconomic Maxim Group LLC 4 315 . sum of the parts analysis and discounted cash flow. a portion of which is generated by investment banking activities. enterprise value/sales.Harbin Electric. attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer. or will be directly or indirectly related to the specific recommendation or views expressed in this research report. Echo He. Maxim Group makes a market in Harbin Electric. the company’s failure to achieve our earnings and revenue estimates. Inc. including the firm’s total revenues. earnings expectations or sales growth as they relate within an industry group or to the broader market.8% 26. Individual sector analysis. I. The research analyst(s) primarily responsible for the preparation of this research report have received compensation based upon various factors.

and (6) Potential equity issuance. rating include: (1) Failure of the proposed LBO to be completed. and low market cap or public float. For a complete discussion of the risk factors that could affect the market price of the company’s shares. both price volatility and fundamental risk are expected to be below the industry. fundamental risk is expected to be above the industry. (HRBN) and/or industry events that adversely impact demand for the company’s products and services. refer to the most recent form 10-Q or 10-K that the company has filed with the SEC. both price volatility and fundamental risk are expected to approximate the industry average. (2) Slowdown of Chinese economy. and is fairly liquid. and is fairly liquid. balance sheet concerns. positive cash flow. Low – Fundamental Criteria: This is a risk rating assigned to companies that may have above-average revenue and earnings visibility. changes in investor sentiment regarding the specific company or industry. fundamental risk is expected to be significantly above the industry. positive cash flow. Speculative – Fundamental Criteria: This is a risk rating assigned to early-stage companies with minimal to no revenues. Accordingly. Price Volatility: Because of the inherent fundamental criteria of the companies falling within this risk category. Investment Risks: Aside from general market and other economic risks. Inc. negative cash flow. Inc. lack of earnings. product obsolescence. Medium – Fundamental Criteria: This is a risk rating assigned to companies that may have average revenue and earnings visibility. DISCLAIMERS Maxim Group LLC 5 316 . High-risk stocks may not be suitable for a significant class of individual investors. Price volatility: The price volatility of companies falling within this category is expected to be above the industry. Accordingly. (3) Raw material price increases. Accordingly. the price volatility is expected to be significant with the possibility that the investment could eventually be worthless. changing competitive pressures and adverse market conditions. Accordingly. risks particular to our Harbin Electric. RISK RATINGS Risk ratings take into account both fundamental criteria and price volatility. the company’s ability to recruit and retain competent personnel. (5) Difficulties of developing linear motor market.Harbin Electric. and/or a short operating history. High – Fundamental Criteria: This is a risk rating assigned to companies having below-average revenue and earnings visibility. Speculative stocks may not be suitable for a significant class of individual investors. (4) High competition in industrial motor market.

in the case of some investments. the values of which are influenced by currency volatility. The securities discussed in Maxim Group LLC research reports may not be suitable for some investors. opinions and estimates contained in this report reflect a judgment at its original date of publication by Maxim and are subject to change without notice. Securities recommended. and no representation or warranty. The value of securities is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities.Harbin Electric. and reach different conclusions from. Indeed. This publication is confidential for the information of the addressee only and may not be reproduced in whole or in part. except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to Maxim. The price. or disclosed to another party. offered or sold by Maxim: (1) are not insured by the Federal Deposit Insurance Company. in such circumstances. effectively assume this risk. is made regarding future performance. value of and income from any of the securities mentioned in this report can fall as well as rise. This report is not to be relied upon in substitution for the exercise of independent judgment. you may be required to pay more money to support these losses. Inc. other reports that are inconsistent with. Investors must make their own determination as to the appropriateness of an investment in any securities referred to herein. Past performance should not be taken as an indication or guarantee of future performance. including the possible loss of principal invested. Investors in securities such as ADRs. ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST Maxim Group LLC 6 317 . express or implied. Those reports reflect the different assumptions. Information and opinions presented in this report have been obtained or derived from sources believed by Maxim to be reliable. the potential losses may exceed the amount of initial investment and. Maxim accepts no liability for loss arising from the use of the material presented in this report. but Maxim makes no representation as to their accuracy or completeness. financial status and risk tolerance. without the prior written consent of Maxim Group. Maxim may have issued. copies circulated. LLC (“Maxim”). and may in the future issue. the information presented in this report. based on their specific investment objectives. and (2) are subject to investment risks. Information. (2) are not deposits or other obligations of any insured depository institution. (HRBN) Some companies that Maxim Group LLC follows are emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. This communication is neither an offer to sell nor a solicitation of an offer to buy any securities mentioned herein. views and analytical methods of the analysts who prepared them and Maxim is under no obligation to ensure that such other reports are brought to the attention of any recipient of this report.

the home of business information Prepared by the Company and Market Intelligence Unit at Datamonitor e:cpqueries@datamonitor. NY 10016 USA t: +1 212 686 7400 e: usinfo@datamonitor. without the prior permission of the publisher. recording or otherwise.com Datamonitor India. As such Datamonitor can accept no liability whatever for actions taken based on any information that may subsequently prove to be incorrect. All Rights Reserved. Plot No. Datamonitor Ltd.com OUR MAIN OFFICES: Datamonitor Americas 245 Fifth Avenue 4th Floor New York. Inc. mechanical. 2 Park Street Sydney. This publication is available on a single user license only. conclusions and recommendations that Datamonitor delivers will be based on information gathered in good faith from both primary and secondary sources.17. photocopying. NASDAQ (HRBN) June 9. 2011 © Datamonitor. electronic. Madhapur 500-081 Andhra Pradesh. Please note that the findings.com Company Report Harbin Electric. whose accuracy we are not always in a position to guarantee. 318 . Middle East and Asia 8th Floor. stored in a retrieval system or transmitted in any form by any means. The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. A Single-User License allows clients to place purchased report on one (1) computer system and NOT make use of the report on a corporate computer network. No part of this publication may be reproduced. India t: +91 406 672 9500 e: ininfo@datamonitor.com Datamonitor Asia Pacific Level 46. NSW 2000 Australia t: +61 2 8705 6900 e: apinfo@datamonitor. Vega Block The 'V' Park.com Datamonitor Europe 119 Farringdon Road London EC1R 3DA t: +44 207 551 9000 e: euroinfo@datamonitor.

an increase of 62. June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 2 www. The company recorded revenues of $223. The company primarily operates in China and the US. Key Employees Employee Name Lanxiang Gao Tianfu Yang Job Title Director and Chief Operating Officer. Inc.6 million in fiscal 2009. Its net profit was $19. 9 Ha Ping Xi Lu Ha Ping Lu Ji Zhong Qu Harbin Kai Fa Qu Harbin 150060 China Publication Date: June 2011 Phone: 86 451 8611 6757 Website: www.8% over 2008.2 million in the fiscal year ended December 2009.8 million in fiscal 2009. The company's operating profit was $55.4% over 2008.6% compared to 2008. automobile specialty micro-motors for automobile interior applications. an increase of 84. a decrease of 22. Its product line includes linear motors (LMs). and industrial rotary motors for use in agricultural equipment and medical devices. It is headquartered in Harbin. and employs around 2.com Industry: Industrial Goods and Machinery Overview Harbin Electric is involved in manufacturing a range of electric motors.com 319 .Company Snapshot Company Snapshot Reference Code : 732345C1-017F-413B-A6A3-C3DF193F55EB Harbin Electric.harbinelectric.datamonitor. Shanghai Tech-Full Chairman and Chief Executive Officer Executive Vice President. China.000 people. and Corporate Secretary Chief Technology Officer Board Executive Board Executive Board Christy Y Shue Senior Management Kanenori Okawa Senior Management Company Report. Finance and Investor Relations.

June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 3 www. Inc.YTD*2011) Harbin Electric.9% stake in Harbin Electric Harbin Electric acquires Xi'an Simo Motor Harbin Electric raises $100 million through public offering Harbin Electric acquires Weihai Hengda Electric Motor Harbin Electric completes $49. Inc.datamonitor.: Recent Deal Activity Tianfu Yang and Baring Private Equity to acquire remaining 69.Company Snapshot Financial Deals Activity Overview Harbin Electric.45 million private placement 11 Oct 2010 19 Oct 2009 05 Aug 2009 15 Jul 2008 26 Jun 2008 Recent Developments Date Nov 23.com 320 . 2010 Headline Harbin Electric enters into term loan facility agreement with CDB Category Corporate loans/ other capital raising Company Report.: Deal Activity by Deal Type (2007 .

Inc.com 321 .: Major Products and Services ___________________________________ 14 Harbin Electric.: Financial Deals _______________________________________________ 26 Appendix __________________________________________________________________________ 27 Contact Us ____________________________________________________________________ 27 Methodology ___________________________________________________________________ 27 About Datamonitor ______________________________________________________________ 28 Company Report. Inc.: Recent Developments _____________________________________________ 26 Harbin Electric.: Overview and Key Facts ________________________________________ 7 Harbin Electric. Inc.: Key Facts _____________________________________________________ 7 Harbin Electric.: Company History _____________________________________________ 15 Harbin Electric.: News and Events Summary _____________________________________ 26 Harbin Electric.: Targets and Partners __________________________________________ 19 Harbin Electric.: Top Legal Advisors _____________________________________________ 21 Harbin Electric. Inc. Inc.Table of Contents Table of Contents Company Snapshot __________________________________________________________________ 2 Table of Contents ____________________________________________________________________ 4 Harbin Electric. Inc.: Top Financial Advisors __________________________________________ 21 Harbin Electric.: Advisors_____________________________________________________ 21 Harbin Electric.: Key Employee Biographies ______________________________________ 9 Harbin Electric.: Company Analysis ________________________________________________ 16 Harbin Electric. June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 4 www.: Financial Deals Overview _______________________________________ 17 Harbin Electric. Inc. Inc. Inc. Inc.: Capital Raising _______________________________________________ 23 Harbin Electric.: Partnership __________________________________________________ 24 Harbin Electric. Inc. Inc. Inc.datamonitor.: Corporate Financial Deals Activity ___________________________________ 17 Harbin Electric.: Key Employees ________________________________________________ 8 Harbin Electric. Inc.: Business Description __________________________________________ 16 Harbin Electric. Inc. Inc.: Private Equity and Ownership ___________________________________ 25 Harbin Electric. Inc. Inc.: Mergers and Acquisitions ______________________________________ 22 Harbin Electric.: Top Deals 2007 -YTD*2011 ______________________________________ 20 Harbin Electric. Inc. Inc. Inc.: Overview ______________________________________________________ 7 Harbin Electric. Inc. Inc.

: Deal Activity by Deal Type .: Deal Activity by Deal Type .: Partnership Trend by Deal Type (2007 . Inc. Inc. Inc.YTD*2011) _____________________ 24 Table 15: Harbin Electric.datamonitor.: M&A Average Deal Size .Table of Contents List of Tables Table 1: Harbin Electric.: Legal Advisor Ranking by Value (US$m) ___________________________________ 21 Table 9: Harbin Electric. Inc.YTD*2011) __________________ 23 Table 13: Harbin Electric. Inc. Inc.: Private Equity and Ownership Volume and Value Trend (2007 .: M&A Volume and Value Trend (2007 .: Private Equity and Ownership Volume by Deal Type (2007 .Volume (TTM) _________________________________ 17 Table 4: Harbin Electric. Inc.Volume (2007 .: Key Employees _________________________________________________________ 8 Table 3: Harbin Electric. Inc.: Top Deals 2007 -YTD*2011 _______________________________________________ 20 Table 8: Harbin Electric.Value (US$m) ____________________________________ 18 Table 6: Harbin Electric. Inc.YTD*2011) _________ 25 Table 18: Harbin Electric.: Financial Advisor Ranking by Value (US$m) ________________________________ 21 Table 10: Harbin Electric.YTD*2011) ______ 25 Table 17: Harbin Electric.YTD*2011) ___________________________ 22 Table 11: Harbin Electric.YTD*2011) _______________________ 18 Table 5: Harbin Electric. June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 5 www. Inc.YTD*2011) ____________________________ 23 Table 14: Harbin Electric. Inc. Inc.: Capital Raising Volume and Value Trend (2007 .com 322 . Inc.: M&A Activity by Geography (2007 .: Capital Raising by Deal Type (2007 .: Partnership Volume and Value Trend (2007 . Inc. Inc.YTD*2011) _____________________________ 22 Table 12: Harbin Electric. Inc.: Key Facts ______________________________________________________________ 7 Table 2: Harbin Electric.: News and Events Summary _____________________________________________ 26 Table 19: Harbin Electric. Inc.: Financial Deals _______________________________________________________ 26 Company Report. Inc.: Targets and Partners ___________________________________________________ 19 Table 7: Harbin Electric. Inc.YTD*2011) __________________________ 24 Table 16: Harbin Electric.

Volume (TTM) _________________________________ 17 Figure 2: Harbin Electric.: Deal Activity by Deal Type . Inc.: Private Equity and Ownership Volume and Value Trend (2007 .YTD*2011) ________ 25 Company Report.YTD*2011) _____________________ 24 Figure 9: Harbin Electric.datamonitor. Inc.: Partnership Trend by Deal Type (2007 .YTD*2011) __________________________ 24 Figure 10: Harbin Electric.: Private Equity and Ownership Volume by Deal Type (2007 .: Deal Activity by Deal Type . Inc.com 323 . Inc.YTD*2011) _____________________________ 22 Figure 6: Harbin Electric.Value (US$m) ___________________________________ 18 Figure 4: Harbin Electric.YTD*2011) __________________ 23 Figure 7: Harbin Electric.: Capital Raising by Deal Type (2007 . Inc. Inc. Inc.: M&A Average Deal Size .: M&A Activity by Geography (2007 .: M&A Volume and Value Trend (2007 .: Partnership Volume and Value Trend (2007 .Volume (2007 .YTD*2011) _____ 25 Figure 11: Harbin Electric.YTD*2011) ______________________ 18 Figure 3: Harbin Electric. June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 6 www. Inc.YTD*2011) ____________________________ 23 Figure 8: Harbin Electric.: Capital Raising Volume and Value Trend (2007 . Inc. Inc.YTD*2011) ___________________________ 22 Figure 5: Harbin Electric.Table of Contents List of Figures Figure 1: Harbin Electric. Inc.

Inc.000 December Industrial Goods and Machinery NASDAQ (HRBN) DATAMONITOR Company Report. Inc.datamonitor. The company recorded revenues of $223. Inc. It is headquartered in Harbin. a decrease of 22.com 223 2.8% over 2008. an increase of 62.: Company Overview Harbin Electric.000 people. The company's operating profit was $55. China. The company primarily operates in China and the US. automobile specialty micro-motors for automobile interior applications. and industrial rotary motors for use in agricultural equipment and medical devices.com 324 . Harbin Electric. Its net profit was $19.4% over 2008.8 million in fiscal 2009.2 million in the fiscal year ended December 2009.6% compared to 2008. an increase of 84.6 million in fiscal 2009. Inc. and employs around 2.Table of Contents Harbin Electric.harbinelectric. Its product line includes linear motors (LMs).: Key Facts Corporate Address: 9 Ha Ping Xi Lu Ha Ping Lu Ji Zhong Qu Harbin Kai Fa Qu Harbin 150060 Country: Phone: Web Address: Turnover (US$m): Employees: Financial Year End: Industry: Primary Stock Exchange (Ticker): SOURCE: DATAMONITOR China 86 451 8611 6757 www.: Overview and Key Facts Harbin Electric. June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 7 www.: Overview Harbin Electric is involved in manufacturing a range of electric motors. Inc.: Key Facts Table 1: Harbin Electric.

Inc.: Key Employees Employee Name Lanxiang Gao Job Title Director and Chief Operating Officer. Shanghai Tech-Full Vice President Chief Financial Officer Director Board Executive Board Age 57 Since 2007 Tianfu Yang Executive Board 48 2005 Christy Y Shue Senior Management 46 Kanenori Okawa Senior Management 2007 Shaotang Chen Senior Management 2007 Suofei Xu Tianli Yang Zedong Xu Boyd Plowman Senior Management Senior Management Senior Management Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board 46 40 66 2005 2005 2009 Ching Chuen Chan Director 75 2005 David Gatton Director 56 2005 Patrick McManus Director 55 2005 Yunyue Ye SOURCE:DATAMONITOR Director 58 2006 DATAMONITOR Company Report. and Corporate Secretary Chief Technology Officer Director. Shanghai Tech-Full Chairman and Chief Executive Officer Executive Vice President.com 325 . Research and Development. Finance and Investor Relations. June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 8 www. Advanced Automation Group Vice President.: Key Employees Table 2: Harbin Electric.Table of Contents Harbin Electric. Inc.datamonitor.

Inc. Yang has been the Chairman and Chief Executive Officer at Harbin Tech Full Industry. Yang has been the Chairman and Chief Executive Officer at Harbin Electric since 2005.com 326 . China with a major in Electrical Engineering. he has been the Chairman and Chief Executive Officer at Harbin Tech Full Electric. Gao has been a Director and Chief Operating Officer. Shanghai Tech-Full Since: 2007 Age: 57 Tianfu Yang Mr.21 Research Institute. China.: Key Employee Biographies Lanxiang Gao Ms. New York University. Finance and Investor Relations. Shue was Manager. he was the President at Hong Kong Property Management Development. he was the President at Helongjiang Cultural Development Company and Guangzhou Subsidiary Company. He graduated from Zhejiang University with a Masters degree in Electric Motor Automation and Control. Finance and Investor Relations. She graduated from Zhejiang University. Board: Senior Management Job Title: Executive Vice President. Prior to joining the company. Ms. Prior to joining Christensen. and Corporate Secretary at Harbin Electric. From 2000. From 1988 to 1991. a subsidiary of Harbin Electric. Mr. Investor Relations at International Paper. Ms. he was the President at Harbin Tianheng Wood Industry Manufacture.Table of Contents Harbin Electric. From 2003. From 1991 to 1994. Shue is the Executive Vice President.datamonitor. since 2007. Yang was the President at Hong Kong Lianfa Real Estate Company. Board: Executive Board Job Title: Director and Chief Operating Officer. From 1994 to 2000. and Corporate Secretary Age: 46 Company Report. Mr. she was a Vice President and a Senior Investor Relations Consultant at Christensen. She worked as an Engineer for Shanghai No. She earned her Bachelor of Science degree from Sichuan University. June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 9 www. Gao managed a development and production project of office automation motors in collaboration with Sankyo Seiki of Japan for 10 years and served as the Senior Engineer. Yang is also the National People's Representative of the City of Harbin. Mr. From 1986 to 1988. Shanghai Tech-Full Electric. Board: Executive Board Job Title: Chairman and Chief Executive Officer Since: 2005 Age: 48 Christy Y Shue Ms. She holds a PhD in Chemistry from Purdue University and an MBA in Finance business from the Stern School of Business.

From 2001 to 2003. Yang has been the Vice President at Harbin Electric since 2005. From 2003 until 2008. From 1985 to 2000. Okawa has been the Chief Technology Officer at Harbin Electric since 2007. he was an Investment Manager for Shenzhen Capital Group. From 1997 to 2007. Xu worked as the Section Chief for system allocation reform of the Harbin Economic System Reform Committee. he was Chief Technology Advisor at Nittoku Engineering. Board: Senior Management Company Report. including Chief Administration Officer. he has been the Staff Research Engineer for Delphi Research Labs. June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 10 www. a subsidiary of the company. Advanced Automation Group. Since 2003. Dr. he worked at Guangfa Securities as a Project Manager. From 2003 until 2008. Since 2000. He began his career with Ikegami Tuusinki after he graduated in 1971 with a BS in Electrical Engineering. he was Senior Research Engineer for Mechatronics Group of Delphi Research Labs.datamonitor. Shanghai Tech-Full Tianli Yang Mr. Xu was the Vice President at Harbin Tech Full Industry.Table of Contents Kanenori Okawa Mr. Okawa worked for the Industrial Far East and held various positions including serving as the President from 1978 to 1997.com 327 . Mr. From 2000 to 2007. Chen has been the Director. Research and Development. From 1999 to 2000. Research and Development. From 1997 to 2001. Dr. Mr. he was employed in the China State Construction Engineering Corporation in various positions. Board: Senior Management Job Title: Vice President. From 1995 to 1999. Mr. he was the Vice President at Harbin Tech Full Electric. Mr. he was the Vice President at Harbin Tech Full Electric. a subsidiary of Harbin Electric since 2007. From 1991 to 1997.Yang has been the Vice President at Harbin Tech Full Industry. Yang graduated from Helongjiang University in 1985 with a BA in Chinese Language and Literature. Xu is the Vice President. From 1973 to 1997. Advanced Automation Group Since: 2007 Suofei Xu Mr. Board: Senior Management Job Title: Director. Shanghai Tech-Full. He graduated in 1988 from Fudan University with a BA in Law. Board: Senior Management Job Title: Chief Technology Officer Since: 2007 Shaotang Chen Dr. Mr. From 2001 to 2003. Chen was Senior Research Engineer in the Electrical and Electronics Department of General Motors NAO Research and Development Center. Chen was Delphi Research Labs Chief Scientist for Delphi Energenix Center. He graduated in 1995 from University of Wisconsin-Madison with a PhD in Electrical Engineering.

a Bermuda-based company reinsuring risks for captive insurance companies. Xu graduated in 1992 from Harbin Electrical Engineering College with a BA in Project Management. Inc. He is an Honorary Professor at Hong Kong University's Department of Electrical and Electronics Engineering. he was employed as the Chief Financial Officer at Harbin WanDa Electrical Home Appliances.Table of Contents Job Title: Vice President Since: 2005 Age: 46 Zedong Xu Mr. During his career with Fleetwood. During his second stint with Fleetwood. Chan is a Fellow of the Royal Academy of Engineering. From 1996 to 1998.com 328 . June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 11 www. he has been the Chief Financial Officer at Harbin Tech Full Electric. and Financial Vice President. Board: Senior Management Job Title: Chief Financial Officer Since: 2005 Age: 40 Boyd Plowman Mr. where he was employed from 1969 until 1987 and from 1997 until 2008. He graduated from Tsing Hua University in 1959 with a Master of Science degree in Electrical Engineering and obtained his PhD in 1982 from University of Hong Kong. He also served as President and Chief Executive Officer at Lee & Associates. From 1998 to 2000. he served as Executive Vice President and Chief Financial Officer until his retirement in 2008. Company Report. He holds a bachelor's degree from Utah State University and was a certified public accountant. Board: Non Executive Board Job Title: Director Since: 2009 Age: 66 Ching Chuen Chan Mr. Treasurer. Since 2000. Prior to that. Mr. From 2003 until present. the Ukraine Academy of Engineering Sciences and a Fellow and Vice President of Hong Kong Academy of Engineering Sciences.datamonitor. He is the retired Executive Vice President and Chief Financial Officer at Fleetwood Enterprises. Plowman served as a Director and Chairman of the Audit Committee at Corporate Insurance and Reinsurance Company Limited (CIRCL). UK. Mr. the Chinese Academy of Engineering. Mr. Mr. Xu has been the Chief Financial Officer at Harbin Electric since 2005. he was a Financial Manager at Harbin High Technology Torch Daya Real Estate. Mr. Plowman has been a Director at Harbin Electric since October 2009. Xu has been the Chief Financial Officer at Harbin Tech Full Industry. Chan has been a Director at Harbin Electric since 2005. Plowman held numerous leadership positions including Controller.

Ye has been a Director at Harbin Electric since 2006. Since 1985.com 329 . June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 12 www. Board: Non Executive Board Job Title: Director Company Report. Ye graduated from Zhejiang University in 1978. He brings over 25 years of experience in business. organizations. and was a Professor of Business and Finance at Salem State College in Massachusetts. McManus has been a Director at Harbin Electric since 2005. Mr. finance and law to Harbin Electric.Table of Contents Board: Non Executive Board Job Title: Director Since: 2005 Age: 75 David Gatton Mr. Ye also currently serves as Director at the Aerospace Electric and Electrical Motor Institute of Zhejiang University and Director of the Linear Motor Institute of the Chinese Electro-technical Society. where he has taught for the past seven years. and companies on business development strategies.datamonitor. Board: Non Executive Board Job Title: Director Since: 2005 Age: 55 Yunyue Ye Mr. Mr. public/private partnerships and marketing initiatives. Mr. Mr. He started his career in business at the General Electric Company in 1979. Gatton advises cities. he has served as the Chairman and President of Development Initiatives. He was also Council Member of the China Electro-technical Society. He is currently a Professor in Electrical Engineering at Zhejiang University. Gatton has been a Director at Harbin Electric since 2005. McManus was elected a Member and Trustee of the Executive Committee of the US Conference of Mayors. He holds a Juris Doctorate from Boston College Law School and an MBA from Suffolk University. Mr. Board: Non Executive Board Job Title: Director Since: 2005 Age: 56 Patrick McManus Mr. He holds a BA from Cornell College and a Master's degree from Harvard University. While serving the City of Lynn as its Mayor. McManus has been a Certified Public Accountant since 1985.

com 330 .Table of Contents Since: 2006 Age: 58 Company Report.datamonitor. June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 13 www.

Table of Contents Harbin Electric. The company's key products include the following: Linear motors: Flat linear motors Cylindrical linear motors Specialty micro-motors for automobile applications Industrial rotary motors: High/low voltage motors AC (alternating current) motors DC (direct current) motors Speed control motors Company Report.com 331 .: Major Products and Services Harbin Electric is a manufacturer of a range of electric motors. June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 14 www. Inc.datamonitor.

Harbin Electric was listed on OTC Bulletin Board by reverse merger with Torch under the symbol 'HRBN'. and Torch was renamed Harbin Electric in 2005. In 2004. in 2005..com 332 . Harbin Electric acquired Xi'an Simo Motor Incorporation (Group) and changed its name to Xi'an Tech Full Simo Motor Co. to Weihai Tech Full Simo Motor Co. In the same year. in June 2009.: Company History Harbin Electric was incorporated in 2003 as Harbin Tech Full Technology Development Co. a manufacturer of automobile specialty micro-motors in China. In October 2009. Ltd.. Harbin Electric formed Shanghai Tech Full Electric to develop and manufacture automobile specialty micro-motors and their components and accessories in China. In 2006. In the same year. In the same year.. Inc. the company acquired Harbin Taifu Auto Electric. an industrial rotary motor business in Harbin.. the company established a subsidiary. In the same year. Harbin Electric established a subsidiary Advanced Automation Group. China. TFI was merged with and into a subsidiary of Torch (Torch Subsidiary). Ltd. The company began trading on the NASDAQ Global Market under the ticker symbol 'HRBN' in 2007. Tech Full International (TFI). Tech Full Holdings changed its name to Advanced Electric Motors. The company changed the name of its subsidiary Weihai Hengda Electric Motor Co. In the same year. HTFE exchanged all outstanding stock of HTFE for stock of Tech Full International and HTFE thereby became a subsidiary of TFI. through its subsidiary Harbin Tech Full Electric. the Torch Subsidiary changed its name to Advanced Electric Motors. Ltd. Tech Full International changed its name to Tech Full Holdings.datamonitor. Subsequently. In 2008. In 2007. the company formed Harbin Tech Full Electric (HTFE) was founded.Table of Contents Harbin Electric. acquired Hengda Electric Motor and Wendeng Second Electric Motor Factory. Ltd. to engage in the business of providing travel and concierge services. Company Report. Harbin Electric. June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 15 www.

aviation and navigation. windows. The company operates in China and the US. small.: Company Analysis Harbin Electric. The company sells its products primarily in China. It offers controller automation and other special motors. packaging industries and mass transportation systems. and large-sized motors with output power. blower. factory automation. compressor. building and construction materials industry. The company's product line includes: linear motors (LMs) and integrated application systems.com 333 . Xi'an Simo Motor. over 450 categories and more than 8. steel rolling. agriculture and food industry. Inc. among others.Harbin Electric. The company provides its LMs to a range of customers including oil services. Harbin. Harbin Tech Full Electric. Advanced Automation Group and Shanghai Tech Full Electric. The linear motors and integrated application systems include flat linear motors. Company Report. The company manufactures specialty micro-motors for a range of automobile applications including car seats. Its products are used in the machine tool. logistic applications such as baggage sorting machines. Simo Motor develops and manufactures a range of industrial motors including some 28 series. The company's other subsidiaries include Advanced Electric Motors. specialty micromotors.: Business Description Harbin Electric is a manufacturer of electric motors. It offers industrial rotary motors that provide solutions for electrical driving systems. June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 16 www. Europe and Asia as well as in Africa. power supply. railway liner motor system and other integrated system. The company supplies these products to domestic customers and also exports them to original equipment manufacturers (OEM) suppliers in North America. medium. transportation. and industrial rotary motors. Southeast Asia and the Middle East.: Company Analysis Harbin Electric. and door locks. doors. oil pump system. Weihai. Inc.000 models of high and low voltage. pump. and Shanghai. Harbin Electric provides industrial rotary motors through its subsidiary.datamonitor. food processing. and gas pedals. Inc. North America. cylindrical linear motors. The company operates four manufacturing facilities in China located in Xi'an.

Inc.: Corporate Financial Deals Activity Harbin Electric.Volume (TTM) Deal Type Acquisition Partnership Corporate Venturing Capital Raising Divestments Private Equity SOURCE: DATAMONITOR Deal Volume 1 DATAMONITOR SOURCE: DATAMONITOR DATAMONITOR Company Report. Inc.datamonitor.com 334 .Volume (TTM) Table 3: Harbin Electric.: Financial Deals Overview Figure 1: Harbin Electric. Inc. Inc.: Deal Activity by Deal Type . Inc.Harbin Electric.: Corporate Financial Deals Activity Harbin Electric.: Deal Activity by Deal Type . June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 17 www.

Inc.: Deal Activity by Deal Type .: M&A Average Deal Size . Inc.: Corporate Financial Deals Activity Figure 2: Harbin Electric. PE =Private Equity & Ownership Company Report.Volume (2007 . CV = Corporate Venturing.YTD*2011) Deal Type ACQ CR CV DIV Pship PE Total 2007 1 1 2 2008 1 2 3 2009 1 1 2 2010 1 1 2011 - Table 5: Harbin Electric.: Deal Activity by Deal Type . DIV = Divestment. CR = Capital Raising. Inc.com 335 .: M&A Average Deal Size Value (US$m) Year 2007 Deal Volume 1 1 1 Average Deal Size (US$m) 11 54 DATAMONITOR 2008 2009 2010 2011 SOURCE: DATAMONITOR - SOURCE: DATAMONITOR DATAMONITOR *ACQ = Acquisition. Inc.YTD*2011) Figure 3: Harbin Electric.datamonitor.Harbin Electric. June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 18 www.Value (US$m) SOURCE: DATAMONITOR DATAMONITOR SOURCE: DATAMONITOR DATAMONITOR Table 4: Harbin Electric. Inc. Pship = Partnership.Volume (2007 .

.Target/Partner (Country) Xi'an Tech Full Simo Motor Co.: Targets and Partners Table 6: Harbin Electric. (formerly Xi’an SIMO Motor. Ltd.) (China) Weihai Hengda Electric Motor Co.datamonitor. 2007 11 Partnership - DATAMONITOR Company Report. Inc. June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 19 www.: Targets and Partners Harbin Electric.. Ltd.. Inc. (China) Shelton Technology LLC (United States) SOURCE:DATAMONITOR Deal Headline Deal Type Deal Date Deal Value (US$m) Harbin Electric acquires Xi'an Simo Motor Acquisition Oct 19. Inc. Inc.com 336 . Inc. 2007 Apr 13.Harbin Electric. Ltd. (China) Harbin Taifu Auto Electric Co.: Corporate Financial Deals Activity Harbin Electric. 2009 - Harbin Electric acquires Weihai Hengda Electric Acquisition Motor Harbin Electric acquires Harbin Taifu Auto Electric Harbin forms joint venture with Shelton Technology LLC Acquisition Jul 15. 2008 54 Jul 12.

Inc. (China) Xi'an Tech Full Simo Motor Co.5 million private placment Harbin Electric acquires Harbin Taifu Auto Electric Harbin forms joint venture with Shelton Technology LLC 05 Aug 2009 Completed IPO 100 15 Jul 2008 Completed Acquisition 54 26 Jun 2008 Completed Private Placement Private Placement 49 26 Jun 2008 Completed 50 12 Jul 2007 Completed Acquisition 11 13 Apr 2007 Announced Partnership - SOURCE:DATAMONITOR DATAMONITOR Company Report. Inc. Inc..com 337 .) (China) Harbin Electric. (China) Harbin Electric. Inc.Harbin Electric. June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 20 www. Inc. (China) Harbin Electric. (China) Harbin Taifu Auto Electric Co.datamonitor.: Top Deals 2007 -YTD*2011 Table 7: Harbin Electric. (China) Shelton Technology LLC (United States) Deal Value (US$m) Deal Headline Tianfu Yang and Baring Private Equity to acquire remaining 69. Ltd. Inc. Ltd. Inc..: Top Deals 2007 -YTD*2011 Target/Partner (Country) Harbin Electric. Ltd. (China) Weihai Hengda Electric Motor Co.9% stake in Harbin Electric Deal Date Deal Status Deal Type 11 Oct 2010 Announced Private Equity 746 Harbin Electric acquires Xi'an Simo Motor 19 Oct 2009 Completed Acquisition - Harbin Electric raises $100 million through public offering Harbin Electric acquires Weihai Hengda Electric Motor Harbin Electric completes $49.45 million private placement Harbin Electric completes $49.. Inc. (formerly Xi’an SIMO Motor.: Corporate Financial Deals Activity Harbin Electric.

Harbin Electric. Inc. Inc. Inc.: Financial Advisor Ranking by Value (US$m) Company Name Morgan Stanley ROTH Capital Partners.: Corporate Financial Deals Activity Harbin Electric.com 338 .: Top Financial Advisors Table 9: Harbin Electric.: Legal Advisor Ranking by Value (US$m) Company Name Reed Smith LLP SOURCE:DATAMONITOR Deal Volume 1 Deal Value (US$m) 11 DATAMONITOR Harbin Electric. SOURCE:DATAMONITOR Deal Volume 1 1 1 1 Deal Value (US$m) 746 100 54 DATAMONITOR Company Report. Inc. June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 21 www. LLC Houlihan Lokey. Inc.: Advisors Harbin Electric. Houlihan Lokey Howard & Zukin Financial Advisors. Inc. Inc.: Top Legal Advisors Table 8: Harbin Electric.datamonitor. Inc.

Inc. Inc. Inc.: M&A Activity by Geography (2007 .datamonitor. Inc. Inc.com 339 .: M&A Volume and Value Trend (2007 .: Mergers and Acquisitions Figure 4: Harbin Electric.: Corporate Financial Deals Activity Harbin Electric. June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 22 www.YTD*2011) Figure 5: Harbin Electric.: M&A Volume and Value Trend (2007 . Inc.Harbin Electric.YTD*2011) SOURCE: DATAMONITOR DATAMONITOR SOURCE: DATAMONITOR DATAMONITOR Table 10: Harbin Electric.: M&A Activity by Geography (2007 .YTD*2011) Year 2007 2008 2009 2010 2011 SOURCE: DATAMONITOR Table 11: Harbin Electric.YTD*2011) Geography Asia-Pacific Europe Middle East and Africa North America South and Central America SOURCE: DATAMONITOR Deal Volume 1 1 1 - Deal Value (US$m) 11 54 DATAMONITOR Deal Volume 3 DATAMONITOR Company Report.

: Capital Raising Figure 6: Harbin Electric.: Capital Raising Volume and Value Trend (2007 . Inc.Harbin Electric.: Capital Raising Volume and Value Trend (2007 .YTD*2011) Deal Type Private Placement Public Offering SOURCE: DATAMONITOR Deal Volume 2 1 - Deal Value (US$m) 99 100 DATAMONITOR Deal Volume 2 1 DATAMONITOR Company Report.: Capital Raising by Deal Type (2007 . June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 23 www. Inc. Inc.YTD*2011) SOURCE: DATAMONITOR DATAMONITOR SOURCE: DATAMONITOR DATAMONITOR Table 12: Harbin Electric.YTD*2011) Figure 7: Harbin Electric.datamonitor.: Capital Raising by Deal Type (2007 . Inc. Inc.YTD*2011) Year 2007 2008 2009 2010 2011 SOURCE: DATAMONITOR Table 13: Harbin Electric.: Corporate Financial Deals Activity Harbin Electric.com 340 . Inc.

Inc.: Corporate Financial Deals Activity Harbin Electric. June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 24 www.: Partnership Volume and Value Trend (2007 .: Partnership Figure 8: Harbin Electric.: Partnership Trend by Deal Type (2007 .datamonitor. Inc.YTD*2011) Figure 9: Harbin Electric.: Partnership Volume and Value Trend (2007 .YTD*2011) Deal Value (US$m) DATAMONITOR Table 15: Harbin Electric.com 341 .: Partnership Trend by Deal Type (2007 . Inc. Inc.YTD*2011) SOURCE: DATAMONITOR DATAMONITOR SOURCE: DATAMONITOR DATAMONITOR Table 14: Harbin Electric. Inc.YTD*2011) Deal Type Joint Venture SOURCE: DATAMONITOR Year 2007 2008 2009 2010 2011 Deal Volume 1 - Deal Volume 1 DATAMONITOR SOURCE: DATAMONITOR Company Report. Inc.Harbin Electric.

Inc. Inc. Inc.: Corporate Financial Deals Activity Harbin Electric.YTD*2011) SOURCE: DATAMONITOR DATAMONITOR SOURCE: DATAMONITOR DATAMONITOR Table 16: Harbin Electric.datamonitor.: Private Equity and Ownership Volume and Value Trend (2007 YTD*2011) Figure 11: Harbin Electric.com 342 . Inc.: Private Equity and Ownership Volume by Deal Type (2007 . Inc.: Private Equity and Ownership Volume by Deal Type (2007 .YTD*2011) Year 2007 2008 2009 2010 2011 SOURCE: DATAMONITOR Table 17: Harbin Electric. June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 25 www.YTD*2011) Deal Type Private Equity SOURCE: DATAMONITOR Deal Volume 1 - Deal Value (US$m) 746 DATAMONITOR Deal Volume 1 DATAMONITOR Company Report.Harbin Electric.: Private Equity and Ownership Figure 10: Harbin Electric.: Private Equity and Ownership Volume and Value Trend (2007 . Inc.

as lender pursuant to which CDB will provide a $35 million loan facility and an RMB100 million loan facility to the company.. or CDB. Corporate loans/ other capital raising Category Nov 23. Corporate loans/ other capital raising Category Nov 23. a developer and manufacturer of electric motors in China.: Financial Deals Table 19: Harbin Electric. a developer and manufacturer of electric motors in China.Harbin Electric. Inc. Company Report.: Financial Deals Publication Date Headline Harbin Electric enters into term loan facility agreement with CDB Harbin Electric.: News and Events Summary Table 18: Harbin Electric.. Inc. Inc.: Recent Developments Harbin Electric. Inc.: News and Events Summary Date HeadLine Harbin Electric enters into term loan facility agreement with CDB Harbin Electric. 2010 SOURCE: DATAMONITOR DATAMONITOR *YTD – The period beginning January 1st of the current year up until today's date.com 343 . 2010 SOURCE: DATAMONITOR DATAMONITOR Harbin Electric. Inc. Inc. Inc. June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 26 www. or CDB. as lender pursuant to which CDB will provide a $35 million loan facility and an RMB100 million loan facility to the company. Hong Kong Branch. has entered into a term loan facility agreement with China Development Bank Corporation.datamonitor. Hong Kong Branch. Inc. has entered into a term loan facility agreement with China Development Bank Corporation.: Recent Developments Harbin Electric.

com 344 .Appendix Appendix Contact Us We hope that the data and analysis in this brief will help you make informed and imaginative business decisions. If you have further requirements feedback please contact us at: cpqueries@datamonitor. 10-Q etc) Media releases Investor’s presentations Datamonitor proprietary databases Company Report.datamonitor.datamonitor. The information is primarily sourced through: • • • • • • • Company Annual Reports Company Analyst Relations Company websites SEC filings (10-K. June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 27 www.com Methodology Datamonitor company reports are prepared under an established and tested methodology which ensures proper checks and controls to capture and validate the quality and accuracy of data. 20-F.com For further information on Datamonitor and our range of business information services please visit www.

addressing specialized research requirements of clients. our market intelligence products and services ensure that you will achieve your desired commercial goals by giving you the insight you need to best respond to your competitive environment. We monitor more than 75. Dubai. Consumer Packaged Goods. We collect our own data through an extensive global network using audited methodologies. This is further supported and substantiated by our global primary research team engaged in producing original analysis covering key verticals. Canberra. Chicago. Taipei. New York. analysis and opinion across the Automotive. in-house analysts and industry specialists. Boston. premium business information and market analysis company that assists clients with operational and strategic decision-making.000 business including company websites. and has 20 regional offices in Manchester. Beijing. key business publications and stock market sites round-the-clock to provide you with powerful business insights and real time updates.datamonitor. Durban. Logistics & Express. Hull. Paris.com 345 . Seoul. Hyderabad. Financial Services. Technology and Telecoms industries. Sourcing. Datamonitor delivers independent data. The Datamonitor Group's consulting team offers a customized research and analysis service. Pharmaceutical & Healthcare. We combine our industry knowledge and experience to assist over 6000 of the world’s leading companies in making better strategic and operational decisions Delivered online via our user-friendly web platforms. Energy & Sustainability. Melbourne. The Datamonitor Group’s research and analysis products are compiled by an extensive global network of researchers. June 2011 Product Code: 732345C1-017F-413B-A6A3-C3DF193F55EB Page 28 www. Scranton. Company Report. Hong Kong. Canandaigua and Silicon Valley. Retail.Appendix About Datamonitor The Datamonitor Group is an independent. Datamonitor is headquartered in London. Tokyo. As a world-leading provider of premium global business information. Sydney.

2011) formed a complete LBO syndication. We still believe the wide gap between the current share price and the LBO offering price provides buying opportunities. SEC approval up next.05 $419.12 $2.7 $123.68 $0.46 5.63 $0.62 $0.2 $2.48 $0. In our view. Reiterate Buy and $24 price target Definitive merger agreement reached.4 14.0 10% .34A $0. Meanwhile.34A $0. Filed with the merger agreement was an investment commitment letter from Abax to contribute $38.67 5. respectively.14 6.6% outstanding shares owned by buying parties) for the current LBO.70 4Q $0. The shareholder voting should come after the SEC’s approval.8A $122.4 $131. 2012.3 $2. HRBN and the acquisition vehicle have termination penalties of $22.35 $24 $5.58 2Q $0. Abax’s equity and debt investments combined with the $400M debt financing from China Development Bank (CDB.3 1. PhD ehe@maximgrp. HRBN announced that it has entered into a definitive.6 Current Current EPS P/E $0. we warn investors about the high volatility of HRBN’s shares – the trading gap to our price target could further widen before narrowing.1 $112.66 $0.60 NA Medium Revenues ($M) 2011E 2012E $103.maximgrp. there is still a significant gap – over a 40% discount – to the $24/share offer price. binding merger agreement with the acquisition vehicle owned by HRBN’s chairman Tianfu Yang.78 FY Echo He.0 $140.4 $470. Maxim Group Current Current FYE: December 2011E 2012E 1Q $0.66 3Q $0.70 4Q $0. we believe the next step will be the SEC approving the acquisition.com SEE PAGES 4-6 FOR IMPORTANT DISCLOSURES AND DISCLAIMERS 346 .50 $0. The $30M termination fee of the acquisition vehicle is guaranteed by Mr. Yang and his partner.58 2Q $0.4 8.8M to purchase HRBN’s common shares and a note purchase agreement for Abax to purchase $25M senior notes of HRBN. please refer to our report published on June 10.2 31. we won’t be surprised if SEC takes a few months to reach a decision. With the current share price trading at a substantial discount to the offering price. we believe it should not be difficult for the company to gather a majority of votes among the minority holders (excluding 40.4 $2.EQUITY RESEARCH COMPANY UPDATE China June 21. With the necessary documents submitted to the SEC. (000) Book Value/Share: Dividend/Yield: Risk Profile: Maxim Group FYE: December 1Q 2Q 3Q 4Q FY Maxim Group FYE: December 2009A: GAAP 2010A: GAAP 2011E: GAAP 2012E: GAAP LT Earnings Growth $13. (HRBN – Nasdaq – $13. We believe it is reasonable for the company to expect the deal to close in 4Q11.7 $547. NY 10174 – www.com (212) 895-3718 Maxim Group LLC 405 Lexington Avenue New York. Yesterday.2 $134.67 Consensus-First Call Quarterly EPS FYE: December 2011E 2012E 1Q $0. with a termination date of March 8. Again.35) Buy Definitive agreement announced as expected.15% GAAP Quarterly EPS Harbin Electric. 2011 Closing Price (6/20/11): 12-Month Target Price: 52-Week Range: Market Cap (MM): Shares O/S (MM): Float (MM): Shares Short (MM): Avg. Inc. MD.$25. as well as the fear that additional negative publicity regarding HRBN may cause the share price to drop. That said. the company and buying parties have made solid efforts along the LBO process.74 $2.5M and $30M.66 3Q $0. which is based on the reaffirmed LBO offer price. Although HRBN’s share price appreciated nearly $5/share (or $60%) during yesterday’s trading.6 $150.77 17. we believe this is mainly due to the over-generalized distrust among Chinese companies.82 . Vol.14 $2.74 FY $2. Abax Global Capital (Abax). We maintain our thesis on a likely successful LBO and reiterate our Buy rating and $24 price target.244 $19.

474 Smith AO AOS $ 40.02 9.9x 70.1x 11.04 0.8x 3.02 $ $ $ $ $ 0.012 Average Source: Thomson One.35 LAST $ $ $ $ $ $ $ $ $ 7.7x 9.03 0.4x 16.70 1.20 0.09 $ 1.28 1.4x 14.1x 3.5x 17.95 1.236 Franklin Electric FELE $ 43.403 Emerson Electric EMR $ 52.01 1.4x 11.05 1.91 $ 3.84 $ 2.44 $ 5.19 0.51 1.9x 9.7x 25.46 $ 2.78 0.4x 2.29 28.445 Cummins CMI $ 93.6x 5.03 0.0x 31.4x 9.3x 17.7x 2.03 Dongfang Electric Group 600875-SH $ 3.62 $ 27.433 Rockwell Automation ROK $ 79.4x 12.0x 0.11 $ -$ $ $ $ $ $ $ 1.007 $ $ $ $ $ $ 0.27 $ 3.61 Average $ 1.08 0.6x 17.3x Maxim Group LLC 2 347 .06 0.2x 5.11 0.48 -1. (HRBN) Exhibit 1.1x -14.790 Illinois Tool Works ITW $ 54.04 0.8x -14.4x 3.24 $ $ $ $ -$ 0.3x 10.55 MktCap (mm) $ 419 EPS P/E __________________________________________________ 10A 11E 12E 10A 11E 12E $ 2.59 1.42 1.87 $ 1.17 1.8x 3.2x 10.7x 14.8x -4.3x 9.08 $ 5.7x 19.8x 16.9x 13. HRBN – Comparable Companies 6/20 Company Harbin Electric TKR HRBN Price $ 13.56 $ 5.8x 4.8x 2.4x 2.69 $ 5.4x 15.83 $ 39.48 0.08 $ 4.20 $ $ $ $ $ 714 1.9x 0.12 0.3x $ $ $ $ $ 1.2x 3.3x 70.1x 10.4x 13.63 $ 56.10 $ 2.49 0.0x 8.19 Shanghai Electric Group 601727-SH $ 1.7x 8.63 0.7x 15.18 $ 5.1x 12.378 Lear Corporation LEA $ 47.10 1.14 0.17 $ 4.9x US/International Motor Companies Siemens SI $ 131.0x 18.40 1.538 1.96 3.7x 9.03 0.05 Jiangte Electric Motor 002176-SZ $ 3.234 Regal Beloit RBC $ 64.50 $ 1.4x 6.4x 15.07 1.2x 6.307 $ 346 $ 10.96 0.25 $ 2.6x 17.95 $ 8.135 $ 6. Materia CHOP SORL Auto Parts SORL Average HK Listed China Motor Companies Harbin Power Equipment 1133-HK Shanghai Electric Group 2727-HK Dongfang Electric Group 1072-HK Chongqing Machinery & E2722-HK Shanghai Prime Machine 2345-HK Average $ $ $ $ $ $ $ $ $ 191 79 179 215 17 184 253 124 69 $ -$ $ $ $ $ $ $ 1.3x 4.9x 25.42 n/a $ 2.14 $ 2.4x 37.4x 18.7x 4.04 0.20 $ $ $ $ $ $ 0.04 0.9x 7.1x 22.8x 11.97 0.185 290 152 $ $ $ $ $ 0.05 0.70 Zhejiang Founder Motor 002196-SZ $ 2.52 3.71 $ 1.03 0.6x 7.25 BroadOcean 002249-SZ $ 3.1x 26.49 $ 1.08 0.9x 12.94 $ 11.035 $ 245 $ 1.12 1.58 $ 5.0x 16.5x 4.8x 16.Harbin Electric.67 5.23 0.5x 15.89 21.4x 9.7x 59.29 6.1x 11.48 $ 18.5x 19.472 Magna International MGA $ 48.3x 25.5x 12.6x 5.05 0.2x 0.0x China Mainland Listed China Motor Companies Xiangtan Electric 600416-SH $ 1.3x 40.08 $ 113.1x 12.12 0.9x 3.873 ABB ABB $ 24.56 $ 3.2x 12.23 n/a $ 2.34 $ 3.4x 41.7x 3.0x Chinese Industrial Companies China Automotive CAAS A-Power APWR FushiCopperweld FSIN Lihua International LIWA Shengdatech SDTH Wonder Auto WATG ChemSpec CPC China Gerui Adv.4x 9.07 0.30 1.74 4.99 2.4x 8.50 $ 10.87 $ 4.27 $ 2.31 5.23 1.0x 45.1x 2. Bloomberg and Maxim Group estimates.12 0.9x 20.79 $ 11.69 $ 3. $ 6.61 $ 9.7x 8.06 0.11 0.7x 11. Inc.2x 5.2x -19.02 $ $ $ $ $ 0.40 0.50 $ 1.05 0.80 5.05 $ 4.26 0.2x 12.7x 18.04 0.97 n/a -$ 2.06 $ -$ $ $ $ $ $ $ 1.20 1.27 0.01 $ 5.2x 13.4x 20.3x -3.46 $ 2.9x 13.42 6.

9% (0.5% (1.3 16.7) 8.0% 6.6% 17.7 NM 24.7 15.4 84% 45.8) 26.6 135.3% (1.4% 1.0 2.1 31.9) 15.8) 27.7 1.0) 0.5 $ $ 0.7% (8. net Total other income (expense) Income before income taxes Provision for income taxes Tax Rate Net income before noncontrolling intere Minority interests As % of net income Net income Y/Y Growth Net Margin Foreign currency translation adjustmen Comprehensive income Weighted average shares outstanding Basic Diluted EPS (to controlling interest) Basic Diluted Y/Y Growth D&A Share-based compensation EBITDA EBITDA margin Exchange Rate (RMB/US$) $ $ 2004 Full Yr 2005 Full Yr 2006 Full Yr 2007 Full Yr 36.5 46% 39.1) 1.36 0.2 15.2 86.3% 1.7%) 7.3) 1.0) 106.4 0.1 40.5 23.6 137% 19.0 (21.7 19.11 $ 0.1 42.3% 7.2 6.0% 18.1 20.5) 3.9% (0.6 62% 85% 85% 243% 175% 133% -1% 91% (1.5 $ 103.0) 7.9% 25.6% 1.1 (1.9 1.4) 93.1) 0.3 19.4) 0.68 $ 2.6 $ 470.8) 25.0 -1% 28.1% 17.2 $ 426.8 (47.0 60.0% 25.5) 7. Inc.2 $ 123.3 (41%) 15.9 166% 78% 81% -18% 51% -4% (3.1 14.8% (0.2% (10.9 (4.4 31.0 44.4% (1.1 2.4) 0.7 93.5 (7.7 36.66 $ 0.3% 0.6 47.8 (4.5) 29.8) 0.9 23.83 74.68 $ 2.3 16.7 70% 48.3 (0.9) 6.63 $ 10% 2.9% (0.9 11.5% (10.34 $ 0.1 0.3% 6.4 6.4 65% 49.8 36.0 (4.8% (14.3 125.3 14.91 $ 53% (10%) 2.3% (0.2 (40.4) 84.6% (7.8 (0.5% 0.1 61.66 $ 82% 0.3) 9.7% (7.2) 20.3% 19.6% (7.7 $ 547.7% (14.2) 10.0% 25.2% 23.1 31.35 $ 0.1) 0.4 0.9 0.3 22% 27% 40.0% 84.3% (1.7 (1.6% 8.3 20.8) 16.5 23.6 61% 34.4 0.8% 5.5 0.1 (4.9% 67.5 155.2) 3.3) 2.0% 5.9) 3.9) (1.9) (1.84 18.47 $ 0.3 17.4 48.9) 30.9% 5.0) 0.67 $ 0.2 (15%) 29.5 (3.5 125.7) (4.5 11.0 0.9 (0.8% (0.4 18.4 (1.8% (3.9) (1.1% 5.8) 55.6 52.2 (14.60 105.1 33.6 31.4 29.2 $ 105.4 45% 28.3% (10.8% (1.5% 1.3) 15.0 30.6) (0.1 28.5% (7.8% 6.2) (6.0 0.0 0.8) (73.7) 11.5 14.4% 12.8% (41.7) (70.6) (94.3% (2. HRBN-Income Statement (In millions except per shr) Revenue Drivers: Linear Motors Y/Y Growth % of Total Rev Specialty Micro-Motors Y/Y Growth % of Total Rev Rotary Motors .7) 19.7% 12.6 48.0 0.3) 1.5 31.8% (39.1) 34.1) 16.2 13.9 27.2) 1.Weihai Y/Y Growth % of Total Rev Rotary Motors .9 16.3 0.1) 11.0% 10.4 31.4 48.1% 19.0% 16.1 18.3 31.8) 12.8 85% 28% 27.2 (2.3% 6.8 20.9 188.6 (6.4) 0.4 50% 21.7% (1.5 $ 105.5 31.3 30.7% (10.1 (1.1% 0.6 2008 Full Yr 49.4 29.1 0.49 $ 0.7) (391.4 77.4 31.0% (11.0 19.0% 15.3 43.6% 1.7%) 14.0% 10.3) (24.5% (45.4%) (40.8%) 3.6% (1.7 107% 39% 14% 3% 31% -3% 10% 15% 30% 13% 19% 0% 21% 22% 21% 22% 22% 21% 23% 22% 23% 22% 23% 45.3 6.3 67% 21.4 218.3) 2.1% 10.6 18.1% 7.3 (1.7 35.6) (69.6%) 6% 12% 24% 10% 16% (33.8 60% 74% 18% -14% 27% -3% -10% 0% 20% 1% 12% 56% 19% 19% 18% 16% 18% 19% 16% 16% 16% 16% 16% 18.6 31.3 (1.7 2.8 62% 25.1 219% 26.8 1.1) 9.28 $ 23.44 $ 2.3 27.8% (15.2 43.9 0.0% 13.48 100.8% 7.3 -12% 14.8) 19.9 24% 20.2 17.3 31.63 $ 0.76 19.9 NM 16.4% (1.4 0.5% 1.8 0.82 $ NM 2.4) 15.54 0.3 0.84 35.9% 10.2% (11.14 $ 54% -13% 2.3 135.7% 1. net Interest expense.1) (0.3) 7.6% 76.7 71% 20.77 $ 1.0% 21.3) 18.0 $ 131.4%) 10.2) 15.1) (335.07 1.1) (75.9) (0.6 (23%) 8.7 258.8 31.2 6.5% 84.0 0.5 (12.9% (18.0) (73.5) 11.4) 8.0% 67.0) 1.6) (80.7 62.6) 88.1 25.51 37.1% 25.0 34.3 51.9 (8%) 25.8 0.8 11% 16.7 90.0% (8.7% (38.25 $ 0.1) 1.8 24. (HRBN) Exhibit 2.1 31.3 19.7) 21.4 13.3% (5.1 (7.2) 19.7% (4.4) 2.36 60.5 35% 41% 33.0% 19.36 0.4% (20.9 2.3% (46.7) 20.0% 19.0% 0.1 (3.3 0.4 -5% 18.7) 1.3 175% 33.0% 18.5 0.9 0.30 1.8) 0.0 333% 42.5 16.1 19.2) 28.9) 9.5 21% 28.4 5% 28.3 0.9) 32.0 76.1% (42.3 31.2 (1.6%) 13.9 0.0 42.9 15.1% 0.3% 5.3 (0.2 21.7 77% 31.9) 25.9) 8.01 $ 0.0% 1.7) 23.2 15.9% (0.7 227% 33.3 11.6) 13.Xi'an Y/Y Growth % of Total Rev Revenues Y/Y Growth Cost of sales Gross profit Y/Y Growth Gross Margin R&D As % of Rev G&A As % of Rev Total operating expenses Income from operations Y/Y Growth Operating Margin Other income (expenses).44 $ 2.7 67.2% 6.2) 1.3 31.0 (2.6) 0. Maxim Group LLC 3 348 .77 $ 31% (35.4 $ 120.4) 7.8 105.5 2.7% 8.3% 67.0% 2.8) 1.0) 27.0% 15.0% 2.46 $ 0.5) 15.2 19% 18% 71.6 25.2% (0.1 19.9 (2.2% (10.3 25.6% (1.6) (6.8 94.9 68% 20.3 0.3% 1.1 31.4 $ 106.3 31.84 0.2 1.8% 79.8) (75.2 6.9 (2.7% 2.4 21.6% 0.7 (0.4 $ 71% (20.9 -10% 28.0% 21.6% 2.0 1.3 58.3 47.2% (11.6) 10.2) 25.0) 0.9 13% 6% 11% 12% 11% 3% 15% 20% 25% 16% 18% 0% 0% 20% 43% 42% 45% 47% 44% 45% 46% 48% 47% 46% 47% 65.0% 16.8 $ 223.0% 9.0% (9.99 $ 1.48 Source: Company reports and Maxim Group estimates.1 2.3% (6.3) (146.67 25% 14.5) 4.8 291% 18.8 (0.84 33.5 (4.6 (3.7 17.1% (3.4 31.4) (87.66 $ 68% 3.3 6.8 $ 112.80 31.0% 6.6% 15.7) 14.1) (290.6 $ 387% (12.1 6.7% 20.0% 84.0) 9.57 $ 0.2 (3.0) 24.8 25.0 31.1) 9.1 -14% 29.6 23.8 15.8 0.5% (0.7 -31% 12.6 17.3 31.15 $ 0.1% 22.7) 21.0 (16.2 0.3 18.6 (39.0 20.57 23.4 10.0) 0.9% (13.7) (4.4) 17.2 0.8 2009 Full Yr 1Q10 31-Mar 2Q10 30-Jun 3Q10 30-Sep 4Q10 31-Dec 2010 Full Yr 1Q11 31-Mar 2Q11E 30-Jun 3Q11E 30-Sep 4Q11E 31-Dec 2011E Full Yr 2012E Full Yr $ 4.3 31.57 $ 0.6 100% 30.9 (7.7) 109.3) 5.19 $ 0.2 6.4 69% 16.5 40.1) 15.6 23.1) (4.2) 27.0% (9.2 6.0 (4.0) 16.4 31.3 31.8) 20.2 21.3% 21.1 (3.4% (4.Harbin Electric.8 31.2 (28%) 18.4 0.5 46.9 49.6) 0.4 0.3) 1.68 2.3 76.2 31.3 47.83 $ 0.4 $ 109.2 6.4 35.1 31.4 157% 23% 32% $ 44.6 350% 48.7 6.2 15% 20.48 $ NM -25% 221% (47.7 15% 28.7 246% 26.4% 2.0 10.8 26% 15.0%) 0% 15% 2% 10% 28% 15% 14% 14% 13% 14% 15% 13% 12% 12% 13% 12% 22.8) 22.

in the next 3 months. Maxim Group expects to receive or intends to seek compensation for investment banking services from Harbin Electric.0% 0. Maxim Group makes a market in Harbin Electric.com Maxim Group LLC Stock Rating System As of: % of Coverage Universe 6/21/2011 % of Ratings that Firm received Banking fees 24.0% Expected Performance* Buy Hold Sell Expected total return of 15% or more over next 12 months Expected total return of plus or minus 14% over next 12 months Expected total negative return of at least 15% over next 12 months with Rating 65. Furthermore. sum of the parts analysis and discounted cash flow. Valuation Methods: One or more of the following valuation methods are used by Maxim Group analysts in making a ratings or price projection: Analysis of companies P/E ratio. Inc. The research analyst(s) primarily responsible for the preparation of this research report have received compensation based upon various factors.0% 0. price/book ratio. I. (HRBN) DISCLOSURES Source: Investars. earnings expectations or sales growth as they relate within an industry group or to the broader market. Echo He. or will be directly or indirectly related to the specific recommendation or views expressed in this research report. Maxim Group LLC 4 349 . Inc. enterprise value/sales. An Under Review (UR) rating represents a stock that the Firm has temporarily placed under review due to a material change.3% 7.8% 26. is. Inc. including the firm’s total revenues. attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer. Individual sector analysis.Harbin Electric. a portion of which is generated by investment banking activities. no part of my compensation was.9% * Relative to Nasdaq Composite.

Harbin Electric. Accordingly. Accordingly. Price volatility: The price volatility of companies falling within this category is expected to be above the industry. (5) Difficulties of developing linear motor market. unforeseen macroeconomic and/or industry events that adversely impact demand for the company’s products and services. Speculative – Fundamental Criteria: This is a risk rating assigned to early-stage companies with minimal to no revenues. High – Fundamental Criteria: This is a risk rating assigned to companies having below-average revenue and earnings visibility. rating include: (1) Failure of the proposed LBO to be completed. High-risk stocks may not be suitable for a significant class of individual investors. fundamental risk is expected to be significantly above the industry. risks particular to our Harbin Electric. positive cash flow. Medium – Fundamental Criteria: This is a risk rating assigned to companies that may have average revenue and earnings visibility. and/or a short operating history. Inc. DISCLAIMERS Maxim Group LLC 5 350 . Speculative stocks may not be suitable for a significant class of individual investors. (3) Raw material price increases. Low – Fundamental Criteria: This is a risk rating assigned to companies that may have above-average revenue and earnings visibility. refer to the most recent form 10-Q or 10-K that the company has filed with the SEC. the company’s failure to achieve our earnings and revenue estimates. Accordingly. and low market cap or public float. (2) Slowdown of Chinese economy. lack of earnings. both price volatility and fundamental risk are expected to approximate the industry average. and is fairly liquid. positive cash flow. Inc. both price volatility and fundamental risk are expected to be below the industry. fundamental risk is expected to be above the industry. RISK RATINGS Risk ratings take into account both fundamental criteria and price volatility. changes in investor sentiment regarding the specific company or industry. (4) High competition in industrial motor market. and is fairly liquid. but are not limited to. balance sheet concerns. For a complete discussion of the risk factors that could affect the market price of the company’s shares. the company’s ability to recruit and retain competent personnel. product obsolescence. the price volatility is expected to be significant with the possibility that the investment could eventually be worthless. negative cash flow. changing competitive pressures and adverse market conditions. Accordingly. Investment Risks: Aside from general market and other economic risks. and (6) Potential equity issuance. (HRBN) Price Target Risks: Investment risks associated with the achievement of the price target include. Price Volatility: Because of the inherent fundamental criteria of the companies falling within this risk category.

but Maxim makes no representation as to their accuracy or completeness. you may be required to pay more money to support these losses. in the case of some investments. Past performance should not be taken as an indication or guarantee of future performance. Inc. except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to Maxim. including the possible loss of principal invested. value of and income from any of the securities mentioned in this report can fall as well as rise. is made regarding future performance. the values of which are influenced by currency volatility. offered or sold by Maxim: (1) are not insured by the Federal Deposit Insurance Company. views and analytical methods of the analysts who prepared them and Maxim is under no obligation to ensure that such other reports are brought to the attention of any recipient of this report. based on their specific investment objectives. (2) are not deposits or other obligations of any insured depository institution. without the prior written consent of Maxim Group. and may in the future issue. opinions and estimates contained in this report reflect a judgment at its original date of publication by Maxim and are subject to change without notice. Securities recommended. copies circulated. financial status and risk tolerance. Indeed. Maxim may have issued.Harbin Electric. Investors in securities such as ADRs. Information and opinions presented in this report have been obtained or derived from sources believed by Maxim to be reliable. The value of securities is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities. in such circumstances. and reach different conclusions from. and (2) are subject to investment risks. the information presented in this report. effectively assume this risk. Those reports reflect the different assumptions. This communication is neither an offer to sell nor a solicitation of an offer to buy any securities mentioned herein. other reports that are inconsistent with. Maxim accepts no liability for loss arising from the use of the material presented in this report. This report is not to be relied upon in substitution for the exercise of independent judgment. express or implied. or disclosed to another party. (HRBN) Some companies that Maxim Group LLC follows are emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. and no representation or warranty. the potential losses may exceed the amount of initial investment and. The securities discussed in Maxim Group LLC research reports may not be suitable for some investors. The price. ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST Maxim Group LLC 6 351 . Investors must make their own determination as to the appropriateness of an investment in any securities referred to herein. Information. LLC (“Maxim”). This publication is confidential for the information of the addressee only and may not be reproduced in whole or in part.

Homer Sun. 2011. can serve as positive catalysts. HRBN). Important Disclosures & Regulation AC Certification(s) are located on page 4 to 4 of this report.Mark Tobin. O'Melveny & Myers LLP as its United States legal counsel and Walkers as its Cayman Islands legal counsel. we believe the process remains in the early stages for each. ezhao@roth. 2011. particularly from brand-name firms. we believe dual-listing is a viable approach for certain companies to unlock value. LLC and Morgan Joseph TriArtisan LLC as financial advisors. will join YONG's BoD. 2011 China U. 2011 .98 Neutral Buy Buy Buy Buy Buy Buy Neutral s s s s May 31. exchanges versus those on the Hong Kong exchange. including the signing of definitive agreements for two of the transactions (FTLK.Privatization.1% ownership. the buyer group has a 40. and dual-listing. CFA.S. On June 9th. PE Investment. The buying group has ~77. Stock prices are as of previous day's close. (949) 720-5775 mtobin@roth. No material change in terms since last update. We believe PE investments. 2011 . Shares have been halted since April 11.-Listed China .FTLK buyout reached definitive agreement. 2011 . & Dual-Listing (4th Edition) This report provides an update on the activity within the U. June 13.39 $5. CFA.10. June 13. s Reason for Report: Industry Update Roth Covered Companies Mentioned in this Report: CFSG CHC COGO FSIN FTLK HOLI HRBN YONG $7.S.HRBN announced the signing of a definitive agreement.72 $9.S. LLC | 24 Corporate Plaza | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC 352 .-listed Chinese companies. particularly for those like CHC that have a large number of comparable companies listed in HK. via open market purchases and/or private placements. DUAL-LISTING ON HONG KONG STOCK EXCHANGE For the companies that have announced intent to dual-list shares on the Hong Kong Stock Exchange (CHC. offer price increased to $7. It includes a table providing details for each company pursuing privatization. YONG closed a $50M investment by Morgan Stanley Private Equity Asia (initially announced on May 31st).91 $3. offer price remains $24. (949) 720-7149 ktao@roth. According to related filings.CISG's board special committee has retained Duff & Phelps. COGO. June 10. (ii) $25M secured notes issued to Abax and (iii) $38. Since our last edition on this topic (dated May 26. In connection with the transaction. 2011 . providing needed capital as well as validation for companies. funding will be from (i) term loan $400M from CDB. Roth Capital Partners.80 $6. 2011 .20 from $7. there have been several noteworthy events.65 $13. and one transaction that was abandoned. MD of MSPE Asia. FTLK filed its initial SC 13E3 on June 14.-listed China sector related to privatization.35 $4.CFSG filed its initial SC 13E3 with going-private transaction details. Trading (800) 933-6820 INDUSTRY NOTE | CHINA EQUITY RESEARCH | June 21. With the current wide valuation discrepancy for small-cap Chinese companies listed on U. The attached tables includes relevant details for each.8M equity financing from Abax. June 20. 2011). LLC as its independent financial advisor. PE investment.com Sales (800) 933-6830.PUDA announced that its Independent Committee has retained Cowen and Company. PRIVATIZATION UPDATE There are currently eight companies that have privatization activities ongoing.6% stake in the Company.com Emma Jia Zhao.com Kun Tao.05 $4. We have expanded our tables to include additional information which we believe is valuable for deal tracking and assessment. if not otherwise specified PRIVATE EQUITY INVESTMENT We believe there continues to be high interest from the PE community (particularly in Asia) for investing in certain U. The deal is now pending shareholder vote and expected to close in Q4'2011. The deal is currently pending shareholder vote and expected to close by the end of Q3' 2011. HOLI). three completed transactions.S.

Arps. Expected to close by the end of Q3' 2011 PAG Asia Capital (3) US$ 150M May-31-2011 Jun-14-2011 N/A Pending N/A Board approved.2% $11.9x 10.8% Barclays Capital PE not involved Imperial Capital. and (iii) $38.3%) Oct-11-2010 40. 2011 BofA.10 9.65 (28.6% $12.6% $24. LLC 77. Expected to close by Nov 15.3x $13.3x $13. shareholder vote.91 (12. Primavera China Fire & Security CFSG Bain Capital (Management's 59. ROTH Capital Partners Page 2 of 4 353 .8x 5. pending shareholder vote.1% stake agreed to vote for the agreement) Mar-07-2011 59.8x 7.4%) Apr-29-2011 31. Bloomberg.26 44% --17. 2011 Buyers (as announced) Harbin Electric HRBN Chairman & CEO. Chairman & CEO.97 (26.4x $7. pending Under board review shareholder vote.9x $4.1%) China Security & Surveillance Technology CSR Chairman & CEO Funtalk China FTLK Chairman & CEO (key mgt).8x 8.00 $19.32 28% Mar-21-2011 $8. pending shareholder vote.3x 16. HSBC US$ 80M May-20-2011 Jun-10-2011 China Development Bank US$ 500M Apr-20-2011 May-31-2011 Board approved. GM Investment Mar-25-2011 77.2x $4.5%) Under board review Nov-11-2010 55.7x $6. LLC / Morgan Joseph TriArtisan LLC Not disclosed Board Legal Advisor (1) Shearman & Sterling LLP Shearman & Sterling LLP Skadden.7%) Fushi Copperweld FSIN Chariman & CEO. the source of fund will from (i) term loan $400M from CDB.9% $6.00 $6.00 $6. Citi.10 $6.CHINA Summary of On-going Deals CNinsure CISG TPG Asia. Abax Global Capital Puda Coal PUDA Chairman (4) Announcement Date Pre-deal Buyer/mgt Ownership % Bid Price per Share or ADS Price 1-Day Prior to Announcement Premium (1) Price Revision Date Revised Price P/E (TTM) (2) P/E (NTM) (2) Current Price (06/20/2011) Current Discount to Bid Price Status May-16-2011 34.00 $6. Slate. Shares halted since Apr 11. data sourced from ROTH research if companies are covered.3% $19.00 (50.4x 8. or Bloomberg if otherwise. Dunn & Crutcher LLP Gibson.7% Bank of America Merrill Lynch N/A N/A Post-deal Private Equity Ownership Board Financial Advisor N/A Duff & Phelps.15 15% May-31-2011 $7.0% $8.0x 13. pending Board approved.00 (5) According to SC 13D filed June 20. ARCH.35 (44. shareholder vote. 2011. lastest available close price is $6. LLC O'Melveny & Myers LLP and Walkers 27.00 (13. NA indicates not available.8M equity financing from Abax Source: Company Filings.50 $4.1x $6.6%) Board approved. Dunn & Crutcher LLP and Calder Premium of bid price above the closing price on previous trading day before announcement (2) Valuation multiples are calculated as of deal announcement date.2x $7.80 (58. Expected to close in Q4' 2011 2011 China Development Bank: US$ 400M Abax: US$25M (5) Jun-20-2011 N/A >50% total & >50% of disinterested shares N/A Morgan Stanley & Co. Meagher & Flom LLP / Maples Gibson. NM indicates not meaningful (3) US$ 150M investment in convertible preferred shares (4) PUDA stock halted since April 11.10 26% --8. Expected to close by the end of Q3'11 Standard Chartered US$ 70M Mar-21-2011 May-03-2011 Mar-08-2011 20. pending Under board review. LLC Debt/Convertible Financing Board Approval/Signing Definitive Agreement Initial Filing of SC 13E3 N/A Pending N/A N/A Pending N/A Voting Threshold N/A >50% of disinterested shares >50% total & >75% total & >2/3 of voting shares at EGM >50% of disinterested shares >50% of disinterested shares 75.2% Houlihan Lokey Shearman & Sterling LLP / Maples and Calder N/A BofA Merrill Lynch N/A Cowen and Company.0%) Board approved.00 100% --10. 2011.5%) Nov-03-2010 29.20 8.50 $9. (ii) $25M secured notes issued to Abax.1% $9. Capital Ally.1% $7.10 59% --6.00 $13.June 21.16 44% --15.72 (6.96 20% --8. CDH Inservice Chemspec International CPC Chairman & CEO. Abax Global Capital China Industry Note . / Lazard Freres & Co.0x 8.

92 $3.28 48% NM NA Completed on Sep 29. we convert to dollar value using XING's closing price on Sept-8-2010 (3) Valuation multiples are calculated as of deal announcement date.00 $7. NM indicates not meaningful Source: Company Filings. Arent Fox LLP N/A Morgan Stanley Asia Limited NA Premium of bid price above the closing price on previous trading day before announcement The offer price is 1.CHINA China Industry Note . (Nasdaq: XING) Sep-09-2010 61. 2011 Mar-10-2008 39.50 $3. 2008 Debt/Convertible Financing Board Approval/Signing Definitive Agreement Initial Filing of SC 13E3 Voting Threshold Post-deal Private Equity Ownership Board Financial Advisor Board Legal Advisor (1) (2) Not involved Oct-28-2010 N/A >50% of toal shares Not involved Oct-12-2009 Nov-13-2009 >50% of total shares CITIC Bank US$ 25M Nov-01-2010 Nov-26-2010 >50% of shareholders representing >75% of voting shares Not involved Morgan Stanley Asia Limited Sheppard.0x 90. Morgan.66 31% 125.9 shares of XING common stock plus $0. Bloomberg.1% $1.0% $3. ROTH Capital Partners Page 3 of 4 354 .20 $6. 2011 Summary of Completed or Abandoned Deals BMP Sunstone BJGP Sanofi-Aventis Buyers (as announced) Announcement Date Pre-deal Buyer/mgt Ownership % Bid Price per Share or ADS Price 1-Day Prior to Announcement Premium (1) P/E (TTM) (3) P/E (NTM) (3) Status Oct-28-2010 23.June 21. Lewis & Bockius LLP Not involved Brean Murray. or Bloomberg if otherwise.0% $10.0% $4.55 10% NM NA Abandoned due to lack of quorum in shareholder meeting on Apr 7.3x Withdrawn on Jun 27. 2011 Qiao Xing Mobile (2) QXM Parent Company Qiao Xing Universal Resources.0x Completed on Apr 15.90 $1. Inc. 2011 Not involved Jan-03-2011 Oct-22-2010 >50% of disinterested voting shareholders representing >75% of voting disinterested shares Not involved Not disclosed Not disclosed Tongjitang Chinese Medicines Sinoenergy TCM SNEN Skywide Capital Management Hanmax (controlled by CEO) / CEO & Director (owned by management) Fosun Oct-12-2009 39.9x Completed on Feb 24. NA indicates not available. 2010 Apr-08-2010 83. Carret & Co.78 19% NM 18.2% $10. Mullin.8 in cash.60 55% NM 11. Richter & Hampton LLP / Thorp Alberga N/A N/A N/A N/A Not involved Stephens Inc. data sourced from ROTH research if companies are covered.

CHINA

China Industry Note - June 21, 2011
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. For important disclosure information regarding the companies in this summary report, please contact: The Director of Research at (800) 678-9147 or write to: ROTH Capital Partners, LLC, Attention: Director of Research, 24 Corporate Plaza, Newport Beach, CA 92660.

Disclosures:
ROTH and/or its employees, officers, directors and owners own options, rights or warrants to purchase shares of Fushi Copperweld, Inc. stock. Within the last twelve months, ROTH has received compensation for investment banking services from Funtalk China Holdings Limited. ROTH makes a market in shares of China Fire & Security Group, Inc., Cogo Group, Inc., Fushi Copperweld, Inc., Funtalk China Holdings Limited, Hollysys Automation Technologies, Harbin Electric, Inc. and Yongye International, Inc. and as such, buys and sells from customers on a principal basis. Within the last twelve months, ROTH has managed or co-managed a public offering for Funtalk China Holdings Limited. On September 28, 2010, ROTH changed its rating system in order to replace the Hold rating with Neutral. On May 26, 2011, ROTH changed its rating system in order to incorporate coverage that is Under Review.

Distribution of IB Services Firmwide IB Serv./Past 12 Mos. as of 06/21/11 Count Percent 45 22.8 5 8.9 0 0 0 0

Rating Buy [B] Neutral [N] Sell [S] Under Review [UR]

Count 197 56 2 0

Percent 76.7 21.8 0.8 0.0

Our rating system attempts to incorporate industry, company and/or overall market risk and volatility. Consequently, at any given point in time, our investment rating on a stock and its implied price movement may not correspond to the stated 12month price target. Ratings System Definitions - ROTH employs a rating system based on the following: Buy: A rating, which at the time it is instituted and or reiterated, that indicates an expectation of a total return of at least 10% over the next 12 months. Neutral: A rating, which at the time it is instituted and or reiterated, that indicates an expectation of a total return between negative 10% and 10% over the next 12 months. Sell: A rating, which at the time it is instituted and or reiterated, that indicates an expectation that the price will depreciate by more than 10% over the next 12 months. Under Review [UR]: A rating, which at the time it is instituted and or reiterated, indicates the temporary removal of the prior rating, price target and estimates for the security. Prior rating, price target and estimates should no longer be relied upon for UR-rated securities. Not Covered [NC]: ROTH does not publish research or have an opinion about this security. ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. The material, information and facts discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are from sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used as a complete analysis of the company, industry or security discussed in the report. Additional information is available upon request. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report are subject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a high degree of risk and may not be suitable for all investors. No part of this report may be reproduced in any form without the express written permission of ROTH. Copyright 2011. Member: FINRA/SIPC.

Page 4 of 4

355

Mark Tobin, (949) 720-5775 mtobin@roth.com Steve Chen, schen@roth.com Emma Jia Zhao, CFA, ezhao@roth.com Sales (800) 933-6830, Trading (800) 933-6820

CHINA FLASH NOTE | EQUITY RESEARCH | June 20, 2011

Global Energy & Industrials: China

Harbin Electric, Inc.
Company Update
Stock Data 52-Week Low - High Shares Out. (mil) Mkt. Cap.(mil) 3-Mo. Avg. Vol. 12-Mo.Price Target Cash (mil) Tot. Debt (mil) Est. 3Yr. EPS Growth
Auditor: FRAZER FROST LLP EPS $ Yr Dec 1Q 2Q 3Q 4Q YEAR P/E —2010— 0.66A 0.79A 0.65A 0.62A 2.72A 3.1x —2011E— Curr 0.41A 0.51E 0.61E 0.64E 2.17E 3.9x

| HRBN - $8.39 - NASDAQ | Buy CORRECTED - HRBN: Enters Into Definitive Merger Agreement
This morning, HRBN announced that it has entered into a definitive agreement to be acquired for $24 per share by a buying group consisting of its Chairman, Tianfu Yang, and Abax Global Capital. The board approved and adopted the agreement, which is now subject to shareholder vote. The transaction is expected to close in 4Q11.

$5.82 - $25.05 31.25 $262.1 1,148,322 $24.00 $122.8 $80.9 15%

—2012E— Curr 2.89E 2.9x

Pro-forma EPS for all periods Revenue ($ millions) Yr Dec 1Q 2Q 3Q 4Q YEAR —2010— 105.5A 105.4A 109.4A 106.2A 426.5A —2011E— Curr 103.8A 115.3E 126.7E 131.1E 476.8E —2012E— Curr 578.3E

Merger agreement. HRBN entered into a definitive merger agreement with a buying group consisting of its Chairman, Tianfu Yang, and Abax Global Capital. The key aspects of the transaction are below: s $24 per share in cash without interest s BoD approved and adopted the merger agreement s Closing subject to shareholder vote (majority in combined voting power of the outstanding shares not owned by the Purchasing Group) s Expected to close in 4Q11 s Secured debt financing from China Development Bank Corporation Hong Kong Branch; Abax has issued an equity commitment letter Next steps. The transaction is subject to customary closing conditions. The company will file a proxy statement (Form 14) and Schedule 13E-3 with the SEC; followed by a shareholder vote. Once completed, the merger will result in the company becoming privately-held and shares will no longer be listed on any public market. Shares set to open up strongly, but still at a substantial discount to offer price. Pre-market trading indicates that HRBN continues to trade at a substantial discount to the offer price. The current discount is the widest of any of the U.S.-listed Chinese companies that have reached the definitive agreement stage (CFSG, CPC, CSR, FTLK).

16.0 12.8 9.6 6.4 3.2 0.0

HRBN One-Year Price and Volume History

30 25 20 15 10 5

Aug-10

Sep-10

Nov-10

Dec-10

May-11

Feb-11

Mar-11

Jan-11

Oct-10

Jun-11

Apr-11

Jul-10

Price

Important Disclosures & Regulation AC Certification(s) are located on page 3 to 4 of this report.
Roth Capital Partners, LLC | 24 Corporate Plaza | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC

356

HARBIN ELECTRIC, INC.

June 20, 2011

VALUATION
Our $24 PT is based on the offer price of the proposed buy-out. Factors that may impede HRBN shares from reaching our price target include: s There are still numerous steps in the privatization process, some of which could lead to delays in completing the transaction. s A slow-down in China''s economic growth and continued inflation could impact sales and compress margins.

RISKS
Change in macro policies in China. Two of HRBN's major catalysts, oil pump for oilfield and linear motors for urban metro lines, can be largely affected by central and local government policies. The development of urban railways can experience delays that out of control of HRBN, such as delay in construction. Volatile raw materials costs HRBN is subject to market fluctuations and volatility of two major raw materials, copper and steel respectively.

COMPANY DESCRIPTION
Harbin Electric, Inc. develops, engineers, manufactures and sells an array of industrial electric motors, customized linear motors, controller automation systems, automobile specialty micro-motors, and other special motors. The Company operates, through its indirect wholly owned subsidiary, Harbin Tech Full Electric Co., Ltd (HTFE). The Company offers three key product lines: industrial electric motors, linear motors and their integrated application systems, and automobile specialty micro-motors.

Page 2 of 4

357

HARBIN ELECTRIC, INC.

June 20, 2011
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Disclosures:
Within the last twelve months, ROTH has received compensation for investment banking services from Funtalk China Holdings Limited. ROTH makes a market in shares of Harbin Electric, Inc., China Fire & Security Group, Inc. and Funtalk China Holdings Limited and as such, buys and sells from customers on a principal basis. Within the last twelve months, ROTH has managed or co-managed a public offering for Funtalk China Holdings Limited. On September 28, 2010, ROTH changed its rating system in order to replace the Hold rating with Neutral. On May 26, 2011, ROTH changed its rating system in order to incorporate coverage that is Under Review.

Page 3 of 4

358

HARBIN ELECTRIC, INC.

June 20, 2011

Each box on the Rating and Price Target History chart above represents a date on which an analyst made a change to a rating or price target, except for the first box, which may only represent the first note written during the past three years. Distribution Ratings/IB Services shows the number of companies in each rating category from which Roth or an affiliate received compensation for investment banking services in the past 12 month. Distribution of IB Services Firmwide IB Serv./Past 12 Mos. as of 06/20/11 Count Percent 45 22.8 5 8.9 0 0 0 0

Rating Buy [B] Neutral [N] Sell [S] Under Review [UR]

Count 197 56 2 0

Percent 77.0 21.9 0.8 0.0

Our rating system attempts to incorporate industry, company and/or overall market risk and volatility. Consequently, at any given point in time, our investment rating on a stock and its implied price movement may not correspond to the stated 12month price target. Ratings System Definitions - ROTH employs a rating system based on the following: Buy: A rating, which at the time it is instituted and or reiterated, that indicates an expectation of a total return of at least 10% over the next 12 months. Neutral: A rating, which at the time it is instituted and or reiterated, that indicates an expectation of a total return between negative 10% and 10% over the next 12 months. Sell: A rating, which at the time it is instituted and or reiterated, that indicates an expectation that the price will depreciate by more than 10% over the next 12 months. Under Review [UR]: A rating, which at the time it is instituted and or reiterated, indicates the temporary removal of the prior rating, price target and estimates for the security. Prior rating, price target and estimates should no longer be relied upon for UR-rated securities. Not Covered [NC]: ROTH does not publish research or have an opinion about this security. ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. The material, information and facts discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are from sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used as a complete analysis of the company, industry or security discussed in the report. Additional information is available upon request. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report are subject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a high degree of risk and may not be suitable for all investors. No part of this report may be reproduced in any form without the express written permission of ROTH. Copyright 2011. Member: FINRA/SIPC.

Page 4 of 4

359

EQUITY RESEARCH

COMPANY UPDATE
China June 10, 2011
Closing Price (6/9/11): 12-Month Target Price: 52-Week Range: Market Cap (MM): Shares O/S (MM): Float (MM): Shares Short (MM): Avg. Vol. (000) Book Value/Share: Dividend/Yield: Risk Profile: Maxim Group FYE: December 1Q 2Q 3Q 4Q FY Maxim Group FYE: December 2009A: GAAP 2010A: GAAP 2011E: GAAP 2012E: GAAP LT Earnings Growth $15.48 $24 $13.34 - $25.05 $486.1 31.4 14.4 7.5 783 $19.60 NA Medium Revenues ($M) 2011E 2012E $103.8A $122.1 $112.2 $134.7 $123.0 $140.4 $131.6 $150.4 $470.7 $547.6 Current Current EPS P/E $0.77 20.1 $2.46 6.3 $2.14 7.2 $2.67 5.8 10% - 15% GAAP Quarterly EPS

Harbin Electric, Inc.
(HRBN – Nasdaq – $15.48)

Buy

$400M term loan available; HRBN has made significant progress on LBO; Reiterate Buy rating and $24 price target
The largest piece of LBO financing is now officially available. Yesterday, the buying parties of HRBN’s ongoing LBO, including the Chairman Tianfu Yang and Abax Global Capital (Abax), filed a 13D to announce that they entered into a $400M term loan agreement with China Development Bank (CDB) to fund the buyout of HRBN’s publicly held outstanding shares, which we believe totals around 19M shares. We have learned that the loan is collateralized by HRBN’s entire asset or equity ownership. The agreed-upon interest rate is LIBOR + 3.5% in the first three years, and LIBOR + 4.5% thereafter. HRBN will start to repay the loan three years after it is issued, at 20% of total principal each year for five years, or after its successful relisting. We believe that $400M is sufficient to buy ~85% of the outstanding shares. The purchase of the remaining shares should be funded by Abax and other investors, with an aggregated amount of $67M in the form of both equity and debt financing. We believe this is an important step forward for the ongoing LBO. In our view, the following steps should include, at least: (1) a contract signing for the minor financing of $67M; (2) signing the LBO agreement with the board of HRBN; and (3) collecting votes from public shareholders. With the major financing secured, we believe HRBN’s buyers have overcome the most difficult hurdle on the LBO track, but the rest of the journey may also take a longerthan-expected time due to the lack of LBO precedents in China, as well as extra cautions among board members under negative market headwinds. Wide gap to LBO offering price provides buying opportunities. We believe the market’s lack of response to the significantly positive news is mainly due to the over-generalized distrust of Chinese companies, as well as the fear that the negative publicity regarding HRBN may prevent its appreciation. Per our knowledge, the buying parties are seriously motivated to carry the LBO process forward within a reasonable time frame. Therefore, we believe this wide gap of more than 30% between the current stock price and the LBO’s offering price of $24/share creates a buying opportunity. We maintain our thesis on a likely successful LBO and reiterate our Buy rating.

Maxim Group Current Current FYE: December 2011E 2012E 1Q $0.34A $0.58 2Q $0.48 $0.66 3Q $0.63 $0.70 4Q $0.68 $0.74 FY $2.14 $2.67 Consensus-First Call Quarterly EPS FYE: December 2011E 2012E 1Q $0.34A $0.58 2Q $0.50 $0.66 3Q $0.62 $0.70 4Q $0.66 $0.74 $2.12 $2.78 FY Echo He, MD, PhD ehe@maximgrp.com (212) 895-3718

Maxim Group LLC 405 Lexington Avenue New York, NY 10174 – www.maximgrp.com
SEE PAGES 4-6 FOR IMPORTANT DISCLOSURES AND DISCLAIMERS 360

Harbin Electric, Inc. (HRBN)
Exhibit 1. HRBN – Comparable Companies
6/9 Company Harbin Electric TKR HRBN Price $ 15.48 LAST $ $ $ $ $ $ $ $ $ 7.15 2.16 5.60 6.25 3.55 5.42 7.20 3.79 4.24 MktCap (mm) $ 485 EPS P/E _________________________ _________________________ 10A 11E 12E 10A 11E 12E $ 2.46 $ 2.14 $ 2.67 6.3x 7.2x 5.8x

Chinese Industrial Companies China Automotive CAAS A-Power APWR FushiCopperweld FSIN Lihua International LIWA Shengdatech SDTH Wonder Auto WATG ChemSpec CPC China Gerui Adv. Material CHOP SORL Auto Parts SORL Average HK Listed China Motor Companies Harbin Power Equipment 1133-HK Shanghai Electric Group 2727-HK Dongfang Electric Group 1072-HK Chongqing Machinery & E2722-HK Shanghai Prime Machiner2345-HK Average

$ $ $ $ $ $ $ $ $

193 98 209 239 192 184 260 159 82

$ -$ $ $ $ $ $ $

1.12 1.30 1.40 0.49 0.96 0.95 1.01 1.06

$ -$ $ $ $ $ $ $

1.22 1.17 1.78 0.59 1.28 1.05 1.10 1.11

$ -$ $ $ $ $ $ $

1.48 -1.40 1.97 0.70 1.51 1.20 1.42 1.29

6.4x -4.3x 4.5x 7.2x 5.6x 7.6x 3.8x 4.0x 5.4x

5.9x -4.8x 3.5x 6.0x 4.2x 6.9x 3.4x 3.8x 4.8x

4.8x 4.0x 3.2x 5.1x 3.6x 6.0x 2.7x 3.3x 4.1x

$ $ $ $ $

1.01 0.50 3.48 0.28 0.19

$ $ $ $ $

682 1,492 1,182 312 147

$ $ $ $ $

0.11 0.03 0.20 0.03 0.02

$ $ $ $ $

0.11 0.04 0.23 0.03 0.02

$ $ $ $ $

0.12 0.04 0.27 0.04 0.02

8.9x 15.1x 17.7x 9.8x 10.1x 12.3x

9.4x 13.3x 15.0x 9.1x 9.1x 11.2x

8.6x 12.0x 12.9x 7.9x 8.1x 9.9x

China Mainland Listed China Motor Companies Xiangtan Electric 600416-SH $ 3.92 Zhejiang Founder Motor 002196-SZ $ 2.29 BroadOcean 002249-SZ $ 3.44 Jiangte Electric Motor 002176-SZ $ 3.31 Shanghai Electric Group 601727-SH $ 1.02 Dongfang Electric Group 600875-SH $ 3.73 Average

$ 1,193 $ 248 $ 1,474 $ 359 $ 10,015 $ 6,201

$ $ $ -$ $

0.12 0.04 0.08 0.03 0.20

$ $ $ $ $ $

0.17 0.05 0.12 0.04 0.04 0.24

$ $ $ $ -$

0.25 0.14 0.19 0.06 -0.29

33.1x 60.2x 42.8x 30.6x 18.9x 37.1x

23.5x 41.8x 28.5x 79.1x 24.8x -15.4x 35.5x

15.8x 16.6x 18.1x 51.2x 12.7x 22.9x

US/International Motor Companies Siemens SI $ 132.73 $ 115,307 ABB ABB $ 26.02 $ 59,586 Emerson Electric EMR $ 51.69 $ 38,931 Illinois Tool Works ITW $ 55.34 $ 27,807 Cummins CMI $ 96.58 $ 19,084 $ 46.06 $ 5,194 Magna International MGA Rockwell Automation ROK $ 79.66 $ 11,360 Lear Corporation LEA $ 49.07 $ 2,291 Regal Beloit RBC $ 66.40 $ 2,556 Smith AO AOS $ 39.71 $ 1,212 Franklin Electric FELE $ 42.54 $ 989 Average Source: Thomson One, Bloomberg and Maxim Group estimates.

$ 6.09 $ 1.25 $ 2.69 $ 3.08 $ 5.17 $ 4.34 $ 3.05 $ 4.42 n/a $ 2.87 $ 1.94

$ 11.36 $ 1.56 $ 3.27 $ 3.94 $ 8.01 $ 5.07 $ 4.60 $ 5.18 n/a $ 2.10 $ 2.50

$ 10.58 $ 1.91 $ 3.87 $ 4.60 $ 9.69 $ 5.56 $ 5.49 $ 5.94 n/a -$ 2.44 $ 2.89

21.8x 20.8x 19.2x 18.0x 18.7x 10.6x 26.1x 11.1x -13.8x 21.9x 18.2x

11.7x 16.7x 15.8x 14.1x 12.1x 9.1x 17.3x 9.5x -19.0x 17.0x 14.2x

12.5x 13.6x 13.4x 12.0x 10.0x 8.3x 14.5x 8.3x 16.3x 14.7x 12.4x

Maxim Group LLC

2

361

Harbin Electric, Inc. (HRBN)
Exhibit 2. HRBN-Income Statement
(In millions except per shr) Revenue Drivers: Linear Motors Y/Y Growth % of Total Rev Specialty Micro-Motors Y/Y Growth % of Total Rev Rotary Motors - Weihai Y/Y Growth % of Total Rev Rotary Motors - Xi'an Y/Y Growth % of Total Rev Revenues Y/Y Growth Cost of sales Gross profit Y/Y Growth Gross Margin R&D As % of Rev G&A As % of Rev Total operating expenses Income from operations Y/Y Growth Operating Margin Other income (expenses), net Interest expense, net Total other income (expense) Income before income taxes Provision for income taxes Tax Rate Net income before noncontrolling intere Minority interests As % of net income Net income Y/Y Growth Net Margin Foreign currency translation adjustmen Comprehensive income Weighted average shares outstanding Basic Diluted EPS (to controlling interest) Basic Diluted Y/Y Growth D&A Share-based compensation EBITDA EBITDA margin Exchange Rate (RMB/US$) $ $ 2004 Full Yr 2005 Full Yr 2006 Full Yr 2007 Full Yr 36.6 2008 Full Yr 49.5 35% 41% 33.8 85% 28% 27.8 2009 Full Yr 1Q10 31-Mar 2Q10 30-Jun 3Q10 30-Sep 4Q10 31-Dec 2010 Full Yr 1Q11 31-Mar 2Q11E 30-Jun 3Q11E 30-Sep 4Q11E 31-Dec 2011E Full Yr 2012E Full Yr

$

4.9 (2.3) 2.6 52.9% (0.1) 1.9% (0.2) 3.8% (0.3) 2.3 47.1% 0.0 0.0 2.3 0.0% 2.3 0.0% 2.3 47.6% 2.2 6.4 6.4 0.36 0.36 0.1 2.4 48.6% 8.28

$

23.6 $ 387% (12.1) 11.6 350% 48.9% (0.3) 1.4% (1.3) 5.3% (1.6) 10.0 42.1% 0.0 0.0 10.0 0.0% 10.0 0.0% 10.0 333% 42.3% 0.5 11.1 14.9 15.1

40.4 $ 71% (20.8) 19.7 70% 48.6% (1.5) 3.7% (4.2) 10.3% (5.7) 14.0 34.6% 0.0 (2.5) 4.4 18.4 0.0% 18.4 0.0% 18.4 84% 45.6% 1.0 19.5 16.6 18.3

19.8 20.1 19.3 17.0 76.3 19.3 18.1 19.3 20.4 77.2 86.8 60% 74% 18% -14% 27% -3% -10% 0% 20% 1% 12% 56% 19% 19% 18% 16% 18% 19% 16% 16% 16% 16% 16% 18.3 16.2 15.2 15.3 14.0 60.8 15.5 14.7 15.3 16.1 61.7 67.9 166% 78% 81% -18% 51% -4% (3.0%) 0% 15% 2% 10% 28% 15% 14% 14% 13% 14% 15% 13% 12% 12% 13% 12% 22.5 23.6 23.5 23.7 93.2 21.8 25.9 27.0 30.8 105.5 125.7 107% 39% 14% 3% 31% -3% 10% 15% 30% 13% 19% 0% 21% 22% 21% 22% 22% 21% 23% 22% 23% 22% 23% 45.0 44.6 48.9 49.9 188.5 46.3 51.3 58.7 62.4 218.7 258.9 13% 6% 11% 12% 11% 3% 15% 20% 25% 16% 18% 0% 0% 20% 43% 42% 45% 47% 44% 45% 46% 48% 47% 46% 47% 65.4 $ 120.8 $ 223.2 $ 105.5 $ 105.4 $ 109.4 $ 106.2 $ 426.5 $ 103.8 $ 112.2 $ 123.0 $ 131.6 $ 470.7 $ 547.6 62% 85% 85% 243% 175% 133% -1% 91% (1.6%) 6% 12% 24% 10% 16% (33.0) (73.3) (146.6) (69.7) (70.1) (75.8) (75.1) (290.8) (73.6) (80.4) (87.6) (94.1) (335.7) (391.9) 32.4 65% 49.6% (1.1) 1.6% (7.7) 11.7% (8.7) 23.7 36.3% (0.2) (6.6) (6.8) 16.9 0.0% 16.9 0.0% 16.9 (8%) 25.8% 7.2 13.2 17.1 18.6 47.5 46% 39.3% (1.2) 1.0% (11.9) 9.9% (13.1) 34.4 45% 28.5% 1.6 (6.1) (4.5) 29.9 (4.5) 15.1% 25.4 0.0% 25.4 50% 21.0% 9.5 40.0 20.2 21.3 76.6 61% 34.3% (2.1) 0.9% (18.7) 8.4% (20.8) 55.8 62% 25.0% 5.5 (12.3) (24.9) 30.9 (7.8) 25.2% 23.1 (3.5) 11.3% 19.6 (23%) 8.8% (0.1) 16.3 25.6 25.7 35.7 227% 33.9% (0.6) 0.6% (7.4) 7.0% (8.0) 27.7 246% 26.3% 1.1 (1.6) (0.8) 27.0 (4.1) 15.1% 22.9 (2.4) 8.7% 20.6 137% 19.5% 0.1 20.6 31.1 31.4 0.66 $ 0.66 $ 68% 3.3 0.3 31.3 6.84 35.3 175% 33.5% (0.4) 0.3% (6.9) 6.5% (7.2) 28.1 219% 26.6% 1.3 (1.0) 1.4 29.5 (3.8) 12.9% 25.7 (0.0) 0.0% 25.7 NM 24.4% 1.3 27.0 31.1 31.3 0.83 $ 0.82 $ NM 2.8 0.3 31.1 6.84 33.6 100% 30.7% (1.7) 1.5% (10.1) 9.2% (11.7) 21.9 68% 20.0% 0.7 (1.1) (0.7) 21.2 (3.3) 15.6% 17.9 (0.0) 0.1% 17.9 NM 16.3% 5.6 23.5 31.1 31.3 31.1 -14% 29.2% (0.8) 0.8% (14.6) 13.8% (15.4) 15.6 (39.7%) 14.7% 2.3 (0.8) 0.9 16.6 (3.8) 22.7% 12.8 (0.1) 0.4% 12.7 -31% 12.0% 6.7 19.4 31.1 31.3 135.7 77% 31.8% (3.4) 0.8% (39.0) 9.1% (42.4) 93.3 67% 21.9% 5.5 (4.6) 0.8 94.2 (14.9) 15.8% 79.2 (2.4) 2.6% 76.8 291% 18.0% 13.7 90.5 31.1 31.3 30.2 (15%) 29.1% (3.9) 3.7% (10.1) 9.7% (14.0) 16.3 (41%) 15.7% 1.1 (1.9) (1.2) 15.0 (4.2) 27.9% 10.8 (0.0) 0.1% 10.8 (47.4%) 10.4% 2.4 13.3 31.3 31.4 31.9 -10% 28.4% (1.3) 1.2% (10.3) 9.2% (11.7) 20.2 (28%) 18.0% 1.2 (1.9) (1.2) 19.1 (3.8) 20.0% 15.2 0.0% 15.2 (40.6%) 13.6% 15.2 31.3 31.4 35.4 5% 28.8% (1.2) 1.0% (9.0) 7.3% (10.2) 25.2 15% 20.5% 1.3 (1.9) (1.0) 24.1 (4.3) 18.0% 19.8 0.0% 19.8 11% 16.1% 19.8 31.4 31.5 0.63 $ 0.63 $ 10% 2.9 0.1 28.2 6.51 37.5 21% 28.5% (1.3) 1.0% (9.5) 7.2% (10.8) 26.7 71% 20.3% 1.4 (1.9) (0.9) 25.8 (4.4) 17.0% 21.4 0.0% 21.4 69% 16.3% 21.4 31.4 31.6 135.0 -1% 28.7% (7.8) 1.7% (38.9) 8.3% (46.6) 88.4 -5% 18.8% 5.1 (7.7) (4.4) 84.0 (16.7) 19.9% 67.3 (0.0) 0.0% 67.3 -12% 14.3% 67.3 31.3 31.5 155.7 15% 28.4% (4.4) 0.8% (41.3) 7.5% (45.7) 109.9 24% 20.1% 5.5 (7.7) (4.0) 106.0 (21.2) 20.0% 84.8 0.0% 84.8 26% 15.5% 84.8 31.6 31.7 2.68 2.67 25% 14.7 1.3 125.9 23.0% 6.36

60.3 22% 27% 40.2 19% 18% 71.4 157% 23% 32% $ 44.5

$ $

0.67 $ 0.66 $ 82% 0.4 10.3 43.7% 8.07

1.11 $ 0.99 $ 1.01 $ 0.91 $ 53% (10%) 2.2 6.2 0.9 1.6 17.1 42.3% 7.80 31.4 48.1% 7.30

1.25 $ 0.77 $ 1.19 $ 0.77 $ 31% (35.7%) 7.7 17.0 1.8 1.2 43.8 36.3% 6.83 74.1 33.2% 6.84

0.57 $ 0.44 $ 2.47 $ 0.35 $ 0.49 $ 0.57 $ 0.44 $ 2.46 $ 0.34 $ 0.48 $ NM -25% 221% (47.4%) (40.8%) 3.1 2.3 11.5 2.9 2.9 0.3 0.2 1.0 0.1 0.1 25.2 6.84 18.2 6.60 105.8 24.8% 6.76 19.3 6.57 23.2 6.54

0.68 $ 2.15 $ 0.68 $ 2.14 $ 54% -13% 2.9 11.5 0.1 0.4 29.7 6.48 100.4 21.3% 6.48

Source: Company reports and Maxim Group estimates.

Maxim Group LLC

3

362

Harbin Electric, Inc. (HRBN) DISCLOSURES

Source: Investars.com

Maxim Group LLC Stock Rating System

As of:
% of Coverage Universe

6/10/2011
% of Ratings that Firm received Banking fees 23.5% 0.0% 0.0%

Expected Performance* Buy Hold Sell Expected total return of 15% or more over next 12 months Expected total return of plus or minus 14% over next 12 months Expected total negative return of at least 15% over next 12 months

with Rating 67.1% 25.0% 7.9%

* Relative to Nasdaq Composite. An Under Review (UR) rating represents a stock that the Firm has temporarily placed under review due to a material change.

Maxim Group makes a market in Harbin Electric, Inc. Maxim Group expects to receive or intends to seek compensation for investment banking services from Harbin Electric, Inc. in the next 3 months.

I, Echo He, attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer. Furthermore, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report. The research analyst(s) primarily responsible for the preparation of this research report have received compensation based upon various factors, including the firm’s total revenues, a portion of which is generated by investment banking activities. Valuation Methods: One or more of the following valuation methods are used by Maxim Group analysts in making a ratings or price projection: Analysis of companies P/E ratio, price/book ratio, earnings expectations or sales growth as they relate within an industry group or to the broader market, enterprise value/sales, Individual sector analysis, sum of the parts analysis and discounted cash flow.

Maxim Group LLC

4

363

and is fairly liquid. fundamental risk is expected to be above the industry. risks particular to our Harbin Electric. High – Fundamental Criteria: This is a risk rating assigned to companies having below-average revenue and earnings visibility. Inc. Price volatility: The price volatility of companies falling within this category is expected to be above the industry. (5) Difficulties of developing linear motor market. Accordingly. For a complete discussion of the risk factors that could affect the market price of the company’s shares. RISK RATINGS Risk ratings take into account both fundamental criteria and price volatility. High-risk stocks may not be suitable for a significant class of individual investors. and/or a short operating history. (3) Raw material price increases. changes in investor sentiment regarding the specific company or industry. and (6) Potential equity issuance. the company’s failure to achieve our earnings and revenue estimates. Accordingly. Speculative stocks may not be suitable for a significant class of individual investors. Inc. rating include: (1) Failure of the proposed LBO to be completed. positive cash flow. (4) High competition in industrial motor market. negative cash flow. both price volatility and fundamental risk are expected to be below the industry. both price volatility and fundamental risk are expected to approximate the industry average. but are not limited to. Low – Fundamental Criteria: This is a risk rating assigned to companies that may have above-average revenue and earnings visibility. Accordingly. positive cash flow. and low market cap or public float. Accordingly. (2) Slowdown of Chinese economy. Medium – Fundamental Criteria: This is a risk rating assigned to companies that may have average revenue and earnings visibility. product obsolescence. Investment Risks: Aside from general market and other economic risks.Harbin Electric. the price volatility is expected to be significant with the possibility that the investment could eventually be worthless. refer to the most recent form 10-Q or 10-K that the company has filed with the SEC. lack of earnings. the company’s ability to recruit and retain competent personnel. Price Volatility: Because of the inherent fundamental criteria of the companies falling within this risk category. balance sheet concerns. fundamental risk is expected to be significantly above the industry. changing competitive pressures and adverse market conditions. and is fairly liquid. DISCLAIMERS Maxim Group LLC 5 364 . unforeseen macroeconomic and/or industry events that adversely impact demand for the company’s products and services. (HRBN) Price Target Risks: Investment risks associated with the achievement of the price target include. Speculative – Fundamental Criteria: This is a risk rating assigned to early-stage companies with minimal to no revenues.

in such circumstances. Information and opinions presented in this report have been obtained or derived from sources believed by Maxim to be reliable. based on their specific investment objectives. and no representation or warranty. This publication is confidential for the information of the addressee only and may not be reproduced in whole or in part. and (2) are subject to investment risks. and reach different conclusions from. Inc. Investors must make their own determination as to the appropriateness of an investment in any securities referred to herein. without the prior written consent of Maxim Group. opinions and estimates contained in this report reflect a judgment at its original date of publication by Maxim and are subject to change without notice. effectively assume this risk. Securities recommended. value of and income from any of the securities mentioned in this report can fall as well as rise. express or implied. The securities discussed in Maxim Group LLC research reports may not be suitable for some investors. views and analytical methods of the analysts who prepared them and Maxim is under no obligation to ensure that such other reports are brought to the attention of any recipient of this report. other reports that are inconsistent with. the potential losses may exceed the amount of initial investment and. is made regarding future performance. (2) are not deposits or other obligations of any insured depository institution. Maxim accepts no liability for loss arising from the use of the material presented in this report.Harbin Electric. Those reports reflect the different assumptions. and may in the future issue. financial status and risk tolerance. ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST Maxim Group LLC 6 365 . The price. (HRBN) Some companies that Maxim Group LLC follows are emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. This communication is neither an offer to sell nor a solicitation of an offer to buy any securities mentioned herein. Maxim may have issued. including the possible loss of principal invested. or disclosed to another party. The value of securities is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities. you may be required to pay more money to support these losses. Information. Indeed. offered or sold by Maxim: (1) are not insured by the Federal Deposit Insurance Company. except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to Maxim. the information presented in this report. in the case of some investments. but Maxim makes no representation as to their accuracy or completeness. This report is not to be relied upon in substitution for the exercise of independent judgment. the values of which are influenced by currency volatility. copies circulated. LLC (“Maxim”). Investors in securities such as ADRs. Past performance should not be taken as an indication or guarantee of future performance.

NY 10174 – www. When Chairman. listed Chinese companies with announced LBO proposals.63 $0.EQUITY RESEARCH COMPANY UPDATE China May 27. Yang.60 NA Medium Revenues ($M) 2011E 2012E $103. just as we shouldn’t generalize high growth to all of them.21 $24 $14. Chinese stocks are alike U. Under one macro condition.4 $131.com $16.12 $2. Vol.S. We believe the change of equity investor played a negative role to the LBO process. To our knowledge. Inc.58 $0. HRBN is one of the first. most likely before they could form a definite syndication. We believe this is mainly due to the wide-spread investors’ disbelief on a traditional LBO in an emerging market of China.S.6 Current Current EPS P/E $0.67 6. the more cumbersome steps of a Chinese LBO process include auditing/due diligence.S. PhD ehe@maximgrp.2 $134.95 . This created a wide gap of over 30% between the current stock price and the LBO’s offering price of $24/share.14 $2.6 $2.4 31.66 $0.3 14.66 $0.maximgrp. instead of a short/long block.70 $0. Reiterate Buy Over the past month.77 21. Why is this deal taking so long? First. 2011 Closing Price (5/26/11): 12-Month Target Price: 52-Week Range: Market Cap (MM): Shares O/S (MM): Float (MM): Shares Short (MM): Avg. This suggests it will be likely a long process for the majority of these companies. Abax Global Capital. Why HRBN is more likely to succeed with an LBO? We believe the key is its ability to secure debt financing.34A $0.1 $112. open bidding and.66 $0. a Chinese institution.6 $2. the Chairman/founder.50 $0. securing debt financing with reasonably low interest rates (especially under tightening monetary policies). because it wasn’t until the end of April 2011 that the buying parties reported that China Development Bank committed $400 term loan. In our view. HRBN’s price has been extremely volatile. counterparts in general.05 $507. instead.67 Quarterly EPS 2011E 2012E $0. which is compounded with a market headwind against Chinese companies. is potentially taking a role of minority equity holder.7 $123.68 Current 2012E $0.58 $0.$25. we shouldn’t generalize distrust to all Chinese companies. submitted the buyout proposal in October 2011. if not the first. Baring Private Equity Asia (Baring).1 shareholder. the misunderstanding of the value of Chinese assets may have made foreign funds/investors biased on their decisions. (HRBN – Nasdaq – $16. but common sense. there are ones with higher returns and others with lower returns. but selling out a significant portion of equity is not in the interests of the company’s No.1 15% GAAP Quarterly EPS Current 2011E $0.8A $122. This could be one reason that Baring is no long in the buyout group. $2. most important. if they are eventually able to complete the LBO. MD. Mr.46 6.com SEE PAGES 4-6 FOR IMPORTANT DISCLOSURES AND DISCLAIMERS 366 .74 $2.4 $470. (000) Book Value/Share: Dividend/Yield: Risk Profile: Maxim Group FYE: December 1Q 2Q 3Q 4Q FY Maxim Group FYE: December 2009A: GAAP 2010A: GAAP 2011E: GAAP 2012E: GAAP LT Earnings Growth Maxim Group FYE: December 1Q 2Q 3Q 4Q FY Consensus-First Call FYE: December 1Q 2Q 3Q 4Q FY Echo He. Up to date.7 $547. the buyout syndication might not have formed yet. having overcome majority of the hurdles. Second. cases of management-initiated LBO among Chinese companies listed in the U.62 $0.48 $0.74 Harbin Electric.5 563 $19.34A $0. HRBN is much advanced in the process. they should be treated as individual stocks.1 $2. We maintain our thesis on a successful LBO and reiterate Buy.14 7.70 $0.6 $150. there are good ones and bad ones. we believe the announcement of the LBO could have been too early.0 $140. All parties involved in the transaction lack experience in the current situation. there are around 10 U. We believe equity investment is not a hurdle because the current Chinese capital market is filled with private equity funds.4 7.78 (212) 895-3718 Maxim Group LLC 405 Lexington Avenue New York. and his former buyout partner.21) Buy It’s not about trust. In our opinion.

55 $ 5.38 $ Shanghai Electric Group 601727-S $ 1.17 1.44 $ 2.5x 13.03 0.50 $ 10.6x 33.36 $ 5.08 0.27 $ 3.0x 5.6x 10.48 5.1x 16.23 4.7x 11.636 Cummins CMI $ 105.38 1.7x 61.9x 11.04 1.8x 9.7x 14.6x 12.20 1.10 $ 2.60 3.49 -1. (HRBN) Exhibit 1.1x 18.448 10.1x 4.03 0.1x 8.99 $ 2.28 33.34 $ 3.06 $ 4.10 0.85 $ 20.569 1.8x 43.163 ABB ABB $ 26.5x 18.49 0.0x 20.433 Rockwell Automation ROK $ 83.19 $ $ $ $ $ 0.79 2.5x 14.58 $ 5.2x China Mainland Listed China Motor Companies Xiangtan Electric 600416-S $ 3.8x 5.28 MktCap (mm) $ 508 EPS P/E __________________________________________________ 10A 11E 12E 10A 11E 12E $ 2.6x 4.97 0.316 Regal Beloit RBC $ 67.00 $ 1.12 0.11 $ -$ $ $ $ $ $ $ 1.9x 5.7x 14.12 1.1x 26.03 0.000 Average Source: Thomson One.97 0.18 $ 5.95 1.1x 3.14 $ 2.3x 9.53 $ 5.0x 8.9x 42.40 0.42 n/a $ 2.5x HK Listed China Motor Companies Harbin Power Equipment 1133-HK $ Shanghai Electric Group 2727-HK $ Dongfang Electric Group 1072-HK $ Chongqing Machinery & E2722-HK $ Shanghai Prime Machine 2345-HK $ Average 1.61 $ 1.0x 4.0x 22.23 $ $ $ -$ 0.9x 29.26 0.2x 5.6x 6.46 $ 2.0x 6.0x 3.11 0.13 $ 11.23 0.0x 19.6x 13.04 0.7x Maxim Group LLC 2 367 .59 1. Inc.22 0.01 1.3x 6.2x 10.2x 16.19 0.8x 16.2x 17.203 $ $ $ $ $ 0.16 0.06 $ $ $ $ $ $ $ $ $ 1.5x 20.0x 12.53 3.854 Lear Corporation LEA $ 49.95 n/a -$ 2.4x 5.9x 4.1x 17.398 6.2x US/International Motor Companies Siemens SI $ 127.70 1.2x 5.02 $ $ $ $ $ 0.40 1.97 $ 5.701 Illinois Tool Works ITW $ 56.77 7.61 1.Harbin Electric.90 $ 3.1x 3.3x 4. Materia CHOP SORL Auto Parts SORL Average $ $ $ $ $ $ $ $ $ 211 126 263 291 192 184 261 188 102 $ -$ $ $ $ $ $ $ 1.07 7.04 0.4x 7.168 245 1.8x 16.723 Emerson Electric EMR $ 54.6x 17. $ 6.60 $ 2.4x 13.03 0.02 11.84 $ Zhejiang Founder Motor 002196-S $ 2.0x 4.3x 16.55 $ 3.5x -6.5x 14.89 21.9x 20.11 0.30 1.6x 7.26 $ BroadOcean 002249-S $ 3.4x 5.3x 9.5x 8.3x 27.40 $ 1.52 1.87 $ 1. Bloomberg and Maxim Group estimates.17 $ 1.9x 12.5x 11.6x 6.6x 15.03 0.42 7.08 $ 5.86 0.618 Smith AO AOS $ 40.18 0.96 $ 111.3x 11.1x 18.4x 13.67 6.31 0.17 $ 4.0x 4.0x 6.3x 4.1x 27.226 Franklin Electric FELE $ 43.25 $ 2.06 $ Dongfang Electric Group 600875-S $ 3.04 $ 40.21 LAST $ $ $ $ $ $ $ $ $ 7.2x -14.4x 11.1x 10.19 $ $ $ $ $ 815 1.55 5.3x 9.05 0.1x Chinese Industrial Companies China Automotive CAAS A-Power APWR FushiCopperweld FSIN Lihua International LIWA Shengdatech SDTH Wonder Auto WATG ChemSpec CPC China Gerui Adv.2x 18.13 0.1x 14.94 $ 7.08 $ 59.24 0.4x 12.69 $ 3.87 $ 4.6x 38.1x 13.18 n/a $ 2.73 $ Average 1.05 $ 4.11 0.59 $ 9.94 $ 11.11 1.3x 11.2x 14. HRBN – Comparable Companies 5/26 Company Harbin Electric TKR HRBN Price $ 16.21 0.29 7.312 341 146 $ $ $ $ $ 0.28 1.916 Magna International MGA $ 48.02 $ $ $ $ $ 0.3x 11.6x 7.5x 20.04 0.7x -16.78 0.09 $ 1.2x 6.6x -19.04 0.99 $ 28.3x 23.2x 5.3x 16.

8) 0.2 6.6) (0.9% (0.0 10.7 246% 26.0 42.9 0.6% 17.4 50% 21.2 6.2 21.9 11.84 35.2 13.0% (9.5% (0.8% 7.2 31.4 48.6 100% 30.3 31.5% 84.3 14.1 219% 26.0 30.3) 9.0 0.68 2.5% (7.7 70% 48.0% 2.3 31.5 11.84 0.3% 5.7% (8.2 0.3% 6.8 291% 18.9) (1.4) 15.1 (1.3) 7.14 $ 54% -13% 2.4% (1.5 46.9) 9.8 25.1% 22.8 85% 28% 27.82 $ NM 2.3% 6.8) 19.2) (6.2 $ 105.2 21.4) 0.9 68% 20.4% (1.2 (1.9) 25.9% 25.3 31.8% (0.2 (15%) 29.6%) 6% 12% 24% 10% 16% (33.2 (14.9% (0.0% 21.6 137% 19.4) 0.0% 1.1 (7.9) 15.9) (0.7 71% 20.5% 1.5) 15.6 17.6% 76.1 25.7 19.8) 26.6% (7.2 43.6) (69.8% (3.1) 1.4% 1.1) (335.0% 25.2 (28%) 18.6% (1.1) (4.6 $ 470.1 0.7) 23.2 17.3 16.3 19.6) 13.44 $ 2.11 $ 0.1 28.1) 15.1 31.7 227% 33.0 1.4% (20.7 77% 31.7% 20.4 48.6 2008 Full Yr 49.7% (10.3) 5.0) 24.3) 18.77 $ 1.3 31.4 10.7 (0.4 0.0% (9.0 -1% 28.8 31.8 11% 16.4 31.3% 0.7%) 14.6 350% 48.4 0.9% (0.2% (11.57 $ 0.7 35.6 47.3 31.0% 5.1) (0.8 2009 Full Yr 1Q10 31-Mar 2Q10 30-Jun 3Q10 30-Sep 4Q10 31-Dec 2010 Full Yr 1Q11 31-Mar 2Q11E 30-Jun 3Q11E 30-Sep 4Q11E 31-Dec 2011E Full Yr 2012E Full Yr $ 4.1 61.6% 1.9) 32. Inc.9 13% 6% 11% 12% 11% 3% 15% 20% 25% 16% 18% 0% 0% 20% 43% 42% 45% 47% 44% 45% 46% 48% 47% 46% 47% 65.5) 29.7) (4.3 175% 33.7 36.5 (7.60 105.66 $ 82% 0. net Total other income (expense) Income before income taxes Provision for income taxes Tax Rate Net income before noncontrolling intere Minority interests As % of net income Net income Y/Y Growth Net Margin Foreign currency translation adjustmen Comprehensive income Weighted average shares outstanding Basic Diluted EPS (to controlling interest) Basic Diluted Y/Y Growth D&A Share-based compensation EBITDA EBITDA margin Exchange Rate (RMB/US$) $ $ 2004 Full Yr 2005 Full Yr 2006 Full Yr 2007 Full Yr 36.9 16.2 1.3 76.0% 15.7) (4.6 (39.3 67% 21.3% 1.8% (0.8 26% 15.0% 16.3 22% 27% 40.0% 21.6 $ 387% (12.4 -5% 18.7) 8.6) (6.0) 9.0% 10.35 $ 0.2) 15.83 74.4 $ 106.68 $ 2.7% 12.1 31.1 2.9% (18.3 25.1 31.7 107% 39% 14% 3% 31% -3% 10% 15% 30% 13% 19% 0% 21% 22% 21% 22% 22% 21% 23% 22% 23% 22% 23% 45.0) 7.0) (73.9 166% 78% 81% -18% 51% -4% (3.3 0.0 31.2 15.6% 0.5 35% 41% 33.Weihai Y/Y Growth % of Total Rev Rotary Motors .2 6.2) 27.4) 84.3 135.1% 17.1) 34.3 18.47 $ 0.1) (290.4 29.4 5% 28.0 2.8) 0.Harbin Electric.0% 19.4% 2.0% 25.5) 7.9) (1.0% 6.3 47.6% (7.9 (2.0 34.3 31.7% (1.3 31.4 6. HRBN-Income Statement (In millions except per shr) Revenue Drivers: Linear Motors Y/Y Growth % of Total Rev Specialty Micro-Motors Y/Y Growth % of Total Rev Rotary Motors .0% 9.2% (11.2 6.2% (10.3) (146.1 (1.3) (24.2 0.8%) 3.2 15.9 (7.8) (73. Maxim Group LLC 3 368 .3 58.7 67.6) 10.0% 2.7% 1.8% 79.7% (14.6 (6.3 31.4 31.1 18.34 $ 0.7) 20.0 76.0) 27.0% 67.3% (10.8) (75.3 27.9% 5.5% (1.5 23.36 0.0% 84.7 93.7 -31% 12.5 125.9 (8%) 25.8) 12.57 $ 0.4 $ 71% (20.2) 1.2 6.5 0.8 15.5% (10.5% 0.1% 25.5 (12.9% (0.9) 30.8 0.3% 67.9 (0.1) 0.4 31.2) 10.54 0.8 105.2 (3.9% 10.7) 1.5 16.84 18.0) 0.9 (2.0) 0.3 125.1 33.30 1.0% 0.8 60% 74% 18% -14% 27% -3% -10% 0% 20% 1% 12% 56% 19% 19% 18% 16% 18% 19% 16% 16% 16% 16% 16% 18.3 17.77 $ 31% (35.67 $ 0.8 (0.0% 16.0% (8.9 49.8% (41.6% 1.4%) 10.01 $ 0.28 $ 23.9 2.67 25% 14.0% 13.4 31.0% 84.0 333% 42.8% 5.48 Source: Company reports and Maxim Group estimates.1) 0.2) 28.6 25.6) 88.8% (1.0 (4.51 37.1 (3.6) 0.2 19% 18% 71.0 60.6) (80.7%) 7.5) 4.3) 1.3% (6.0 (2.0% 18.3 0.6 23.8 94.0 0.2% 23.1% 0.5 23.3% 7.8) 27.9 -10% 28.4 0.8 (47.6 31.7) 21.5 31.0% 19.76 19.2% 6.3) 2.8 $ 223.1 40.0%) 0% 15% 2% 10% 28% 15% 14% 14% 13% 14% 15% 13% 12% 12% 13% 12% 22.6 61% 34.7) 14.83 $ 0.9 1. net Interest expense.9 24% 20.7% 8.8 (4.6 48.9) 6.8% 6.8) 1.6% 8.3 16.4% 12.8) 25.3 47.2 15% 20.1 19.2 $ 426.5 21% 28.0) 0.1 6.1% (42.3 0.8 31.5 2.4 0.4 18.3% 1.9 27.9) 3.1) (75.9 (4.1% 10.3% (1.1 0.49 $ 0.7 $ 547.7% (7.2% (10.8) 22.4 (1.4 35.3 20.7) 109.8 24.3 (0.1) 1.3 (41%) 15.1 2.15 $ 0.8) 20.9 0.7) 19.6 23.8 $ 112.4) 17.1 (3.0 19.1 31.3 (0.3) 15.57 23.4 77.8% (14.9 0.7 17.80 31.4) 8.2) 25.9 NM 16.1) 9.9) (1.7 1.48 100.1% (3.3 -12% 14.5) 11.44 $ 2.1 14.6%) 13.7% 2.1% 7.48 $ NM -25% 221% (47.4 84% 45.3 11.1 -14% 29.8% (15.3) 1.1 19.5 $ 103.2) 19.8% (39.5 (4.1 20.3% (2.66 $ 0.0 0.7 (1. (HRBN) Exhibit 2.4 29.0) 16.4 65% 49.8 (0.2) 3.8 1.2) 20.8) 16.0 (4.1 (4.9) 8.5 (3.7) 11.0% 6.46 $ 0.5 14.4 45% 28.3) 1.9% 67.3 6.0 $ 131.4 $ 109.3) 2.07 1.36 0.66 $ 68% 3.7 258.2 86.5 46% 39.0% (11.2) 1.6 (23%) 8.1) 9.4 0.63 $ 10% 2.7 NM 24.0 44.4 $ 120.0 0.7% (4.3% (0.6 52.2% (0.9 15.2 (40.7 15% 28.2 $ 123.4 157% 23% 32% $ 44.7) (70.7 15.9 23.8 0.36 60.5 155.3 0.5 0.4 0.7 2.91 $ 53% (10%) 2.1% 0.3 30.2 6.8 0.8 36.3 51.3 (1.6) (94.3 0.5% 1.5% (45.0 (16.5 $ $ 0.3% 19.3 6.0 0.4) 7.5 $ 105.4) 93.4) (87.8 20.7) (391.5) 3.4) 0.7 62.0) 0.68 $ 2.0) 1.0% 18.0) 106.4 31.3% (5.9 0.84 33.2 (2.0 (21.4 69% 16.3 (1.3 19.7 6.1) 11.6 18.7) 21.5 40.9 188.6) 0.7% (38.1) 16.8) 55.4%) (40.4 218.4 21.6 31.1 31.Xi'an Y/Y Growth % of Total Rev Revenues Y/Y Growth Cost of sales Gross profit Y/Y Growth Gross Margin R&D As % of Rev G&A As % of Rev Total operating expenses Income from operations Y/Y Growth Operating Margin Other income (expenses).1% 5.1% 19.3% (46.25 $ 0.8 62% 25.5 31.6 135.4 13.0% 10.63 $ 0.0 20.3 43.99 $ 1.6 62% 85% 85% 243% 175% 133% -1% 91% (1.3% 21.4) 2.0% 15.6 (3.1 42.6% 2.19 $ 0.3% (1.6% (1.7 90.4% (4.9% (13.6% 15.

price/book ratio. in the next 3 months. is. Inc. earnings expectations Maxim Group LLC 4 369 . Inc. Inc.0% Expected Performance* Buy Hold Sell Expected total return of 15% or more over next 12 months Expected total return of plus or minus 14% over next 12 months Expected total negative return of at least 15% over next 12 months with Rating 65. Maxim Group makes a market in Harbin Electric. no part of my compensation was. (HRBN) DISCLOSURES Source: Investars. Furthermore.0% 0.com Maxim Group LLC Stock Rating System As of: % of Coverage Universe 5/27/2011 % of Ratings that Firm received Banking fees 24. An Under Review (UR) rating represents a stock that the Firm has temporarily placed under review due to a material change. attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer.9% * Relative to Nasdaq Composite. The research analyst(s) primarily responsible for the preparation of this research report have received compensation based upon various factors.Harbin Electric. or will be directly or indirectly related to the specific recommendation or views expressed in this research report. a portion of which is generated by investment banking activities.0% 0.8% 30. Maxim Group expects to receive or intends to seek compensation for investment banking services from Harbin Electric.3% 3. Echo He. including the firm’s total revenues. I. Valuation Methods: One or more of the following valuation methods are used by Maxim Group analysts in making a ratings or price projection: Analysis of companies P/E ratio.

Inc. Accordingly. Accordingly. enterprise value/sales. product obsolescence. Inc. Price Volatility: Because of the inherent fundamental criteria of the companies falling within this risk category. both price volatility and fundamental risk are expected to approximate the industry average. fundamental risk is expected to be significantly above the industry. Speculative stocks may not be suitable for a significant class of individual investors. Speculative – Fundamental Criteria: This is a risk rating assigned to early-stage companies with minimal to no revenues. unforeseen macroeconomic and/or industry events that adversely impact demand for the company’s products and services. refer to the most recent form 10-Q or 10-K that the company has filed with the SEC. sum of the parts analysis and discounted cash flow. Accordingly. Investment Risks: Aside from general market and other economic risks. fundamental risk is expected to be above the industry. Individual sector analysis. Accordingly. (5) Difficulties of developing linear motor market. and (6) Potential equity issuance. Low – Fundamental Criteria: This is a risk rating assigned to companies that may have above-average revenue and earnings visibility. High – Fundamental Criteria: This is a risk rating assigned to companies having below-average revenue and earnings visibility. High-risk stocks may not be suitable for a significant class of individual investors. lack of earnings. negative cash flow. Price Target Risks: Investment risks associated with the achievement of the price target include. (2) Slowdown of Chinese economy. (4) High competition in industrial motor market. the price volatility is expected to be significant with the possibility that the investment could eventually be worthless. the company’s failure to achieve our earnings and revenue estimates.Harbin Electric. changes in investor sentiment regarding the specific company or industry. risks particular to our Harbin Electric. Price volatility: The price volatility of companies falling within this category is expected to be above the industry. the company’s ability to recruit and retain competent personnel. both price volatility and fundamental risk are expected to be below the industry. positive cash flow. and is fairly liquid. (HRBN) or sales growth as they relate within an industry group or to the broader market. Maxim Group LLC 5 370 . and is fairly liquid. and low market cap or public float. Medium – Fundamental Criteria: This is a risk rating assigned to companies that may have average revenue and earnings visibility. changing competitive pressures and adverse market conditions. and/or a short operating history. rating include: (1) Failure of the proposed LBO to be completed. For a complete discussion of the risk factors that could affect the market price of the company’s shares. (3) Raw material price increases. balance sheet concerns. positive cash flow. RISK RATINGS Risk ratings take into account both fundamental criteria and price volatility. but are not limited to.

without the prior written consent of Maxim Group. and (2) are subject to investment risks. The securities discussed in Maxim Group LLC research reports may not be suitable for some investors. Indeed. including the possible loss of principal invested. The price. LLC (“Maxim”). is made regarding future performance. based on their specific investment objectives. (HRBN) DISCLAIMERS Some companies that Maxim Group LLC follows are emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. Past performance should not be taken as an indication or guarantee of future performance. Information. Maxim may have issued. the information presented in this report. Those reports reflect the different assumptions. or disclosed to another party. Securities recommended. Investors in securities such as ADRs. offered or sold by Maxim: (1) are not insured by the Federal Deposit Insurance Company. Maxim accepts no liability for loss arising from the use of the material presented in this report. copies circulated. and no representation or warranty. opinions and estimates contained in this report reflect a judgment at its original date of publication by Maxim and are subject to change without notice. value of and income from any of the securities mentioned in this report can fall as well as rise. The value of securities is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities. the potential losses may exceed the amount of initial investment and. Information and opinions presented in this report have been obtained or derived from sources believed by Maxim to be reliable. effectively assume this risk. the values of which are influenced by currency volatility.Harbin Electric. in such circumstances. but Maxim makes no representation as to their accuracy or completeness. express or implied. views and analytical methods of the analysts who prepared them and Maxim is under no obligation to ensure that such other reports are brought to the attention of any recipient of this report. ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST Maxim Group LLC 6 371 . and may in the future issue. Investors must make their own determination as to the appropriateness of an investment in any securities referred to herein. This communication is neither an offer to sell nor a solicitation of an offer to buy any securities mentioned herein. and reach different conclusions from. in the case of some investments. (2) are not deposits or other obligations of any insured depository institution. other reports that are inconsistent with. This publication is confidential for the information of the addressee only and may not be reproduced in whole or in part. except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to Maxim. financial status and risk tolerance. you may be required to pay more money to support these losses. This report is not to be relied upon in substitution for the exercise of independent judgment. Inc.

All rights reserved.FINAL TRANSCRIPT HRBN .Q1 2011 Harbin Electric Inc Earnings Conference Call Event Date/Time: May.streetevents. 11. is prohibited without the prior written consent of Thomson Reuters. 2011 / 1:00PM GMT THOMSON REUTERS STREETEVENTS | www. including by framing or similar means.com | Contact Us ©2011 Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. 372 . Republication or redistribution of Thomson Reuters content.

Mr. .Chairman & CEO Zedong Xu Harbin Electric Inc.CFO CONFERENCE CALL PARTICIPANTS Echo He Maxim Group . Please go ahead.EVP.Analyst Mark Tobin Roth Capital . These forward-looking statements reflect the Company's current expectations on future events and are subject to a number of factors and uncertainties that could cause the actual results to differ materially. Tianfu Yang and Chief Financial Officer. Finance and Investor Relations.EVP.Q1 2011 Harbin Electric Inc Earnings Conference Call CORPORATE PARTICIPANTS Christy Shue Harbin Electric Inc.Harbin Electric Inc. 2011 / 1:00PM.com | Contact Us ©2011 Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. 11. 2011 on SEC Form 10-Q yesterday after market closed and we issued a press release this morning to highlight our first-quarter financial result in comparison with the same quarter last year. I would now like to turn the conference over to Christy Shue. Welcome to Harbin Electric's first-quarter 2011 earnings conference call. I would like to remind you that our discussion this morning may include forward-looking statements. Finance and Investor Relations Thank you. we would like to focus the discussions on the year-over-year comparison and explain to you the factors that contributed to those changes. A detailed discussion of these factors and uncertainties is contained in the Company's filings with the SEC. All participants will be in listen-only mode. . (Operator Instructions). When you compare this quarter's results with the same quarter last year there were significant changes on certain line items. Andrew. . When you compare our results sequentially with the fourth quarter last year the changes are minor on major line items and the results this quarter were roughly comparable to the last quarter. I'm joined by our Chairman and Chief Executive Officer. on the call. 1 THOMSON REUTERS STREETEVENTS | www. Christy Shue . including by framing or similar means. . All rights reserved.Analyst Chad Cooper Roth Capital .FINAL TRANSCRIPT May. HRBN . Before we begin.Analyst PRESENTATION Operator Good morning and welcome to the Harbin Electric to report first-quarter 2011 earnings conference call. Executive Vice President. is prohibited without the prior written consent of Thomson Reuters. Therefore. Good morning.streetevents. Zedong Xu. Mr. We filed our quarterly report for the three months ended March 31. Republication or redistribution of Thomson Reuters content. 373 . Finance and Investor Relations Tianfu Yang Harbin Electric Inc.

11. have lower margins than the oil pumps and our linear motor for propulsion systems.3m. And. The margin compression was mainly attributable to two factors besides higher raw material and labor costs. relatively speaking. And then the second factor that contributed to lower margin in the linear motors is because we have lower average selling price. 2 THOMSON REUTERS STREETEVENTS | www. for some of the other linear motor products we lowered the selling prices. compared to $105m in the first quarter of last year. but sometimes it takes some time to raise the price of a product and usually you have a lag there. but compared to the first quarter last year. while rotary motors sales at Weihai were down $0. similarly. higher raw material costs and the labor costs contributed to higher cost of goods sold across all product lines. And this is for the reference.4m decrease in sales. sales of other linear motors remained robust and the new models generated significant revenues in the first quarter this year.FINAL TRANSCRIPT May. At Harbin we've sold more of other linear motors and -. down slightly. In the specialty micro-motor product line sales declined by about $0. from 38% in the first quarter of last year.4m. Meanwhile. The decline in overall gross margin was primarily due to margin decline in linear motors and specialty micro-motors In addition.approximately $104m. Our sales volume of higher-margin products.6%. Aluminum and the silicon steel prices were also up on a significant level. However. is prohibited without the prior written consent of Thomson Reuters. In the linear motor product line our sales were down minimal [or] marginally $0. 2011 / 1:00PM. with linear motors and related systems contributing approximately 19% of total revenues. 374 . from 59. A decrease in sales volume of existing products was partially compensated by sales of new products. And not in this quarter. In the linear motors gross margin declined to 45. The lower gross margin was mainly due to the following two major factors in addition to higher raw material and the labor costs. Republication or redistribution of Thomson Reuters content. Specialty micro-motors contributed 15% and the rotary motors accounting for about 66% of the total revenues. including by framing or similar means.com | Contact Us ©2011 Thomson Reuters.7m due to lower volumes. We have a gross margin of 29.some specific factors by product lines. So next in terms of the gross profit margin. Our gross profit margin is roughly in line with the last quarter sequentially but down some 33. HRBN . Sales of other products dropped by about $1m. but that was not enough to compensate the -. Mainly lower sales volume [in oil pumps] and in the propulsion systems for coal transportation trains were lower but which were largely offset by higher volumes in other linear motors.Q1 2011 Harbin Electric Inc Earnings Conference Call In terms of the revenue for the first quarter of 2011 total revenues were 104 -. Rotary motor sales at Xi'an Tech Full Simo were up $1.6m year over year. but lower -. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. The breakdown of total revenues by product line was relatively stable year over year.1% this quarter. Although the Company anticipates passing on a portion of the higher costs through increased selling prices. in the linear motor propulsions systems for coal transportation trains the revenues also declined by about $1. The first factor mainly is the change in product mix. oil pumps and propulsion systems for coal transportation trains. the copper price increased by nearly 20% in our raw material purchasing year over year.9% in the first quarter.but those other linear motors. And in order to expand our customer base and gain our market share. All rights reserved. Although for a minor portion of the product we also raised the prices.for the products that we lowered the prices.7m. the first quarter last year did not have those products.streetevents. for example. what we've seen. By product line let me pull out each -. The first major factor contributing to lower margin in the specialty motor is we added several new products in the first quarter. In the specialty micro-motors product line gross margin declined to 32% in the first quarter. driven by volumes.but slightly lower than the copper. We sold 75 units of linear motor-driven oil pumps in the first-quarter 2011 compared with 105 units in the first quarter of last year and this resulted in about $1. our total labor cost from production and manufacturing also increased. for example. Marginally lower sales of linear motors and specialty micro-motors were partially compensated by slightly higher sales in industrial rotary motors.8% last year. those two products are our highest-margin products and their volume declined in the first quarter this year compared to last year. So we expect that higher raw material prices will continue to pressure our gross margin near term.

One part of the project is the automated control system for the linear servo motors. But we expect when the volume ramps up and we do gain economies of scale and then our production efficiency would improve and then we would lower -.significantly higher than last year. so you do have this product mix shift and some rotation.FINAL TRANSCRIPT May. This development project was initiated in March in collaboration with another research institute and we have seen that the project has been successful and attracted extensive interest from potential customers. And also usually the [new] products and the customer usually start with the lower or smaller order volumes so to give you -.the production of this newly-developed linear servo motor during this year. We actually started this project development last year around -. exploring opportunities in new products in new technology and we invest -. So both products increased.the Company has been telling our investors that technology and R&D are the Company's long-term strategic focus we have been making every effort to enhance our R&D projects. gross margin was 23. In this line we do also see higher raw material costs and labor costs. And then we expected to launch this -. while the new products we are selling and we're producing because of the higher costs they also have lower margins.Q1 2011 Harbin Electric Inc Earnings Conference Call So these few new products we added and generally when you launch new products you do experience higher manufacturing costs at the start up stage because of the higher costs associated with the training of our workforce and we have to do more test runs. So that means we are front-end loaded with the R&D expense because of this project [last year] that hit the milestones and that is near completion.we have launched new products.9m R&D expense in the first quarter compared to only $0. because we do -. including by framing or similar means. And in the first quarter we incurred about $3.we will continue invest in product and technology development in order to capture additional market share and position the Company well for further growth. In terms of operating expenses line item you probably -. which actually contributes to the largest portion of our revenue. The second factor is also related to the changes in product mix in micro-motors. However. So all those factors result in reduced production efficiency and result to higher costs per unit. in subsequent quarters this year we expect our R&D expenses to be lower and expect that the total R&D expenses in the entire year will remain below 3% of total revenues. HRBN . is prohibited without the prior written consent of Thomson Reuters. First of all. I won't go into much detail about this. in this quarter is the highest in our historical period and we incurred a total about $3. Republication or redistribution of Thomson Reuters content. the R&D expenses.the cost of sales percentage would be lowered once the economies of scale is going up. However.in March last year. All rights reserved. I believe that there were several items that are higher -. While we have -. 11. 2011 / 1:00PM.5% in the first quarter of this year.(inaudible) that you have paid attention. that affected the margin overall in this product line.to give us more time to do test runs and make quality consistently all that. And about -.com | Contact Us ©2011 Thomson Reuters.will be used for heavy equipment machinery and is supported by government and we jointly developing this project with research institutions and each research institution will focus on certain technology. Some of them may have lower margins but help us continue to capture new opportunities in the market and is essential for our growth in top line and bottom line.so you have questions about this product and everything and the technology.streetevents. In the rotary motors product line. we can get into that later.1m just on this project.9m R&D expense in this quarter was primarily associated with a new development project to develop an automated control system for linear servo motors. We actually have been talking about this project each quarter. 375 . So the sales volume of the existing products that we have been selling which also have a higher margin declined. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. our research and development expenses. we have been working on improve the manufacturing efficiency at our rotary motor facilities after we acquired them. relative stable compared with the 25% in the year-ago period. 3 THOMSON REUTERS STREETEVENTS | www. In both linear motors and specialty micro-motor product lines we continue launching new and customized products. The $3. We told investors that these linear servo motors are -. all that. And we have seen the improved manufacturing efficiency helped with stabilizing the margin despite high escalating raw material and labor costs there.6m in the three months in the same quarter last year.

And the second factor that contributes to higher SG&A is the expenses related to the Going Private proposal that's submitted by the Company's Chairman and Chief Executive Officer.energy costs that you see all over the world anyway. And our corporate income tax -.4m in the first quarter of last year. is in the process of applying for a new preferential income tax rate from the Chinese government. And although Harbin Tech Full. that's the typical length of time in China. It takes two or even more months to get a government approval.so it's longer distances. Republication or redistribution of Thomson Reuters content. So that also contributed to higher shipping and handling costs.some of our preferential discounted tax rates expired also in China. All rights reserved.$27. the Company expected to recover some of the legal expenses related to the class-action law suits because we do have an insurance policy that covers some of the expenses.from the same quarter last year. with all those factors our operating profit dropped to $16m from $27m -.66 per diluted share. The major one is our Harbin Tech Full which in last year. the R&D expenses or some other expenses incurred on the US side are not deductible on the China side. 2011 / 1:00PM. However.8m the same quarter last year. So the shipping and handling amounted to $1. for example. including by framing or similar means. and from last year -.the lower net income also contributes to several major factors. So we have to ship -. So before we obtain the government 4 THOMSON REUTERS STREETEVENTS | www. The first one is Xi'an Tech Full Simo recorded $1. 11. Another factor that affected the net income is the income tax provision. also fees associated with the legal and financial advisors for the Special Committee of the Board and also included those fees associated with the Company's legal counsels and also the other related expenses. This is purely reflecting the accounts receivable aging analysis. but we have not obtained the government's approval yet. And the net income -.34 per diluted share. The third factor that contributed to higher SG&A is the shipping and the handling costs increased significantly this quarter compared to the same quarter last year. the lower gross margin. And based on the Chinese tax law. Then the government usually approve you towards the end of the year. So we did get more customers but they are located farther away from our manufacturing sites. or $0. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. Mr. The year-over-year increase in SG&A primarily reflected three contributors. which we're applying at the next level. our PRC subsidiary. The income tax provision. 376 .7% from 26.7% of total revenue this quarter compared to 7% of the total revenues same quarter last year. the fair value change in our warrant and also our interest expense are higher due to we took [$50m] on debt from China Development Bank last year. And this expense included the legal fees associated with the class-action law suits. however. but that was -. higher SG&A expenses. general and administrative expenses we reported $10m compared to $7. But. Okay. keep in mind that our China subsidiary they pay tax on the income that they earn. given that the lower net income.FINAL TRANSCRIPT May.3%. HRBN .7m incremental provision for bad debts in the first quarter of 2011. In 2010 it was 10%. And also another contributor is that further we have been expanding our customer base trying to get more customers. some of the deductibles that can be deductible in the US but cannot be deductible in China. The expense in this quarter totaled $0.com | Contact Us ©2011 Thomson Reuters. higher R&D expenses.just discussed. And also there were some expenses that are also higher than the last year.5m compared to $0. For example. with those factors that we discussed our net income also decreased to $10. Some of them we have discussed -. we would expect that we would have lower tax. So we would have to make the income tax provision based on the net income that the local subsidiaries earn. Tianfu Yang. or $0.7m in the first quarter of last year and the operating margin also declined to 15. The higher shipping and handling costs mainly reflect the higher fuel costs -.make the shipments more distance -. Usually. So a lot of the expenses incurred. which is 9.6m. which is 15%.Q1 2011 Harbin Electric Inc Earnings Conference Call In other selling. Therefore. or in the past we have been enjoying very low preferential tax rates.8m. is prohibited without the prior written consent of Thomson Reuters. Versus in the first quarter of 2010 the reserve was minimal. for example. it takes about several months. sell our products all over the country.9m so this proposal and the Company's evaluation of this proposal is continuing. which was $20.but that preferential tax treatment expired at the end of 2010.streetevents.

And also we have actually developed a motor -. The most recent public information about this proposal is the amended 13D filed jointly by Mr. let's start the question session.the management believes that it's highly likely that Harbin Tech Full will get approval for this 15% income tax rate. We know that investors may have questions regarding this event. Lastly. 5 THOMSON REUTERS STREETEVENTS | www. The Special Committee of the Board is continuing its process of evaluating this proposal by Mr. So that is the major income tax rate change. in connection with this Going Private proposal. According to the amended 13D filed jointly by Mr. There is a recent event section in the press release that provides the current status of this event and also much more details is also provided in the 10-Q that we filed.we have not spent a lot of capital items there. so that would open up new market demand. Long term. And as of March 31 we had cash and cash equivalent of about $123m. So we expect the capital spending to increase in subsequent quarters of this year while we continue to invest in upgrading our manufacturing capabilities. or previously. Okay. 11. So that's the most recent public information that we have available.Q1 2011 Harbin Electric Inc Earnings Conference Call approval the management decided to use the standard rate of 25% to make the income tax provision. that regarding this Going Private proposal. And the other PRC subsidiaries' tax rate remained pretty much the same. Yang and ABAX jointly submitted the proposal to the Special Committee recently. improving production efficiency and expanding the capacity. has received a debt commitment of [$400m] issued by China Development Bank. However. And also according to the amendment 13D filed ABAX also committed equity and debt financing up to $63. And also in the first quarter we have not used the -.the linear motor that replace the motor in the traditional oil pump. primarily considered as a temporary near-term business fluctuation. Our capacity expansion is underway at our [rotary motor] facilities in Xi'an and Weihai and our new products continue to come out of pipeline through both our specialty micro-motor facility in Shanghai and our linear motor facility in Harbin. The Company's Board of Directors received from the Company's Chairman and CEO. there are couple of balance sheet items I would like just to give for discussion.FINAL TRANSCRIPT May. continuing to complete the project that we started to expand the capacity and some new projects that we start. Yang and ABAX or any of their respective affiliates at $24 per share. the linear servo motors and also the second-generation oil pumps. 377 . And we expect -. from 11% last year to 12% this year.com | Contact Us ©2011 Thomson Reuters. to the Special Committee of the Board of Directors that they intend to acquire all of the shares of the Company's common stock not already -. Okay. Yang stated that Tech Full Electric Co. And you know that generally capital spending in the first quarter is seasonally lower in China as major capital spending usually starts in the second quarter after the Chinese New Year. The capital expenditure in the first quarter is minimal. Capital. Yang. When Mr. we do want to remind you that we are not in the position and will not be able to discuss this event with you beyond what's already disclosed. on April 20 I believe. overall we had a flat quarter on the top line year over year. So income tax also hit our net income this year. Yang and ABAX. For example. including by framing or similar means. Please note that the Company does not have any other information beyond what's disclosed in this press release or in our 10-Q. Republication or redistribution of Thomson Reuters content. if we get approval of the 15% income tax rate later this year then we would lower the income tax provision.if not already held by Mr. management are confident with our business prospects and we expect to continue grow top and bottom line longer term. We had a cash increase from $99m at the end of 2010 mainly attributable to our operating earnings and we still made very good operating earnings.8m. it's about $20m. HRBN . And also we had [proceeds on the note] provided by PRC banks. And now we can move to the floor for questions. Yang. is prohibited without the prior written consent of Thomson Reuters. Yang and ABAX or any other proposals that the Company may receive. new market for us. Operator.streetevents. And we'll mention a few new products that are in the pipeline that we expect to launch this year. Mr. I would like just to make a few comments on the Going Private proposal. this completes our prepared remarks. 2011 / 1:00PM. which is an acquisition vehicle formed and Mr. Yang and ABAX Mr. In summary. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. All rights reserved. However. Ltd. other than at our Shanghai subsidiary the income tax rate just gone up 1%.

Tianfu Yang . third quarter.EVP. the construction and everything and the launching everything. third quarter that that project should be wrapped up and we should be completing and moving on. Please go ahead.FINAL TRANSCRIPT May. is prohibited without the prior written consent of Thomson Reuters. The first project that we took on started December -. Okay.Maxim Group . negotiating and exploring 6 THOMSON REUTERS STREETEVENTS | www. So we expect that actually by the second quarter. The first one -. . for the -.first of all.the fourth-quarter 2009. Finance and Investor Relations Let me translate the reply.Analyst -. So for that project we will close -.my questions. . let's talk about our coal transportation train project.Harbin Electric Inc. Is this because of seasonality where you see some weakening of the market demand due to some kind of tightening in the economy? Is that -. is completing and towards the end of the completion.Analyst Okay.several of them. including by framing or similar means.can that be generalized? (Spoken in foreign language).Chairman & CEO (Spoken in foreign language).EVP. 11.Harbin Electric Inc. Currently.Maxim Group . All rights reserved.streetevents. Echo He . Okay. HRBN . Echo He . yes. Finance and Investor Relations Hi. The question is the volume decline in our oil pumps and the propulsion systems for coal transportation train. . okay? First one is about the -. Republication or redistribution of Thomson Reuters content. Christy Shue .com | Contact Us ©2011 Thomson Reuters.we will finish by second quarter. Thank you for taking -- Christy Shue . So that usually towards the end of a project you see the volume declining because we are wrapping up the project. That project we have been supplying our equipment to that coal transportation line for over a year and that project itself. Echo He .Q1 2011 Harbin Electric Inc Earnings Conference Call QUESTIONS AND ANSWERS Operator We will now begin the question and answer session. (Operator Instructions). 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. whether they're driven by the seasonality or driven by the tightening policy in China. The first question comes from Echo He from Maxim Group.Maxim Group .Harbin Electric Inc.Analyst Hi. Echo. Tianfu.you said the volume of oil pump and coal transportation cars. Christy. 378 . the order volume declined in the quarter. we are discussing. 2011 / 1:00PM.

When we can sign the contracts we do not have that timeframe yet.we should maintain stable volume shipment to them. Echo He . So we'd not be able to raise price in that area because they are all long-term customers that we want to sign up. 2011 / 1:00PM.ahead of time. Tianfu Yang . At our Shanghai facility for our specialty micro-motor for the automobile industry. Republication or redistribution of Thomson Reuters content. right now our margin is about 30% in our micro-motor segment. But then you do have some pricing lag when you can really realize those higher price and also 7 THOMSON REUTERS STREETEVENTS | www. the raw material price -. So overall in the industry that margin is very decent. For this one customer it should -. All rights reserved. very good. how much we can pass on to the customers by raising price. In the beginning it might be small volume but it's opened another door for us. let me translate this -. So we believe those are reasonable rates that we can -.so that's how we -. But in other line of business. how much the cost increase -.EVP. still.starting in the second quarter toward the spring the activity started to ramp up. In terms of the overall total volume of the oil pump we do not expect a change from last year.Harbin Electric Inc. The raw material cost increase actually affected your margins a lot in each product line.that are acceptable for us. thank you. given that our existing customer and then the new customer that we sign now.com | Contact Us ©2011 Thomson Reuters. HRBN . 379 . we are also starting to selling this oil pump to other oil field in China. we do consider one of the strategies to raise the price and pass on some cost to the customer. is prohibited without the prior written consent of Thomson Reuters. And -. (Spoken in foreign language). okay? The question is the higher raw material costs in our product line. So overall the oil pump volumes should be higher than last year. It's not bad. yes. particularly in the rotary motors.Chairman & CEO (Spoken in foreign language).it's long. Also because that when we sign contracts with the customers and when we give them the price quotes we do consider some of the room in considering the raw material fluctuation and. And also [in the spring and winter] time there is not much of activity going on in this period because in the north part of China. And usually when we do the production we actually receive the orders and we arrange the production one-quarter or two-quarters ahead of time. And the reply is. because those contracts are longer term it is very difficult to re-price in that line of products.the raw material that we have to really arrange before time -. Right now we expect pretty stable.Harbin Electric Inc. which currently is -.Q1 2011 Harbin Electric Inc Earnings Conference Call two other projects within the space for coal transportation and we're still in the process of discussing. My second question is about the cost side. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.FINAL TRANSCRIPT May. So that's the current situation of those two projects. it's 32%.raw material cost increase you can pass through to your customers. However. Christy Shue . but once we do have this news we will update investors. The other field is Jiangsu oil field and we will start to install new oil pumps for them by second quarter (inaudible) second quarter right now. And towards the spring you start -. I will just give some highlights -.Analyst Okay. And usually in the first quarter we do encounter the Chinese Spring Festival that has a long -.Maxim Group . . it's very cold and you can't really work outdoors too much in the oil fields. in Harbin.longer days of vacation. so there is no installation much going on.streetevents. it is more seasonality. actually.perhaps we believe it to be a big factor there for all our products.escalating raw material price does hurt our margin.translation of the highlights. micro-motor and rotary motor. linear motor. And I want to know in each product line. In terms of the oil pump and the declining volume. including by framing or similar means. 11. Finance and Investor Relations Okay. .

is by really improve all our systems. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. you're on the phone. Republication or redistribution of Thomson Reuters content. No. Christy. It's in our -- Unidentified Company Representative Yes. All rights reserved.in the beginning that we'd made some initiative to improve the margin. HRBN . I don't think it's LIFO. Christy Shue . Echo He . I just want to say that it's just not practical that one -.Analyst Okay. even with the raw material cost factor that's hurting our margin the overall margin in the industry is still quite decent. Just remind me.to expect that everything stays the same that it's not practical for us to really improve the margin. to improve the revenue.Analyst It's FIFO. is prohibited without the prior written consent of Thomson Reuters. And their existing inventories we sold so that showed some higher margin. Like our Simo Motor. Finance and Investor Relations Yes. do you use FIFO or LIFO to calculate your raw --? Christy Shue .Harbin Electric Inc. . but then you do have raw material come in that it's -. including by framing or similar means. all that. And the one reason is after we acquired and did the restructuring.com | Contact Us ©2011 Thomson Reuters. all that. right? 8 THOMSON REUTERS STREETEVENTS | www. it's the first thing -.yes.we disclose that in our footnotes. their gross margin is at the 23%. and that's only short term. We report -.Q1 2011 Harbin Electric Inc Earnings Conference Call it's just impractical to pass on or to recover all the price increases. all that. Finance and Investor Relations It's not LIFO. And one other factor I would like to point out is we have -.Maxim Group . A good thing is right now we see some copper price has started declining again right now compared to last year. our manufacturing equipment and technology.Harbin Electric Inc. . 380 . Unidentified Company Representative (Spoken in foreign language).streetevents. 25% range.by passing on by raising the price. But if you look at our current margin. Echo He . downsized the administration. 2011 / 1:00PM. so we did get a lot of cost savings there and in the manufacturing also improved some efficiency there.EVP. Finance and Investor Relations [Angela]. So it is really difficult to quantify how much you can really recover from -. So you do see the raw material fluctuation from time to time.when we just acquired [Xi'an Simo and Weihai] you see that last year and the year before you see they reported higher gross margin. To improve our operations and the manufacturing efficiency.EVP. longer term. I can't recall.FINAL TRANSCRIPT May. And short term by recovering costs from some customer. So in the field in the industry that is very good margin already. I believe it's FIFO.EVP. .Maxim Group . we downsized the management. 11. Christy Shue . So we will still need to focus on longer term.Harbin Electric Inc.

FINAL TRANSCRIPT May.EVP. Christy Shue . new product lines. (Spoken in foreign language).the motor part we in-house developed. we want to sell a system. we are the one that owns all this proprietary technology once it's developed.streetevents. All rights reserved.actually. 2011 / 1:00PM. Republication or redistribution of Thomson Reuters content. heavy machinery industry.Harbin Electric Inc. Christy Shue .Analyst Okay. Finance and Investor Relations Yes. the answer for the question is our linear servo motor where are they used and whether -.Q1 2011 Harbin Electric Inc Earnings Conference Call Unidentified Company Representative Yes.com | Contact Us ©2011 Thomson Reuters. The part -. Echo He . (Spoken in foreign language).Analyst Okay. FIFO.EVP. However. And the servo motor's mainly used for the petrochemical industry. but we did get some government subsidy for the R&D part. But once you go into the production and then you have to rely on your own. So when you sell a higher -. Tianfu Yang . 9 THOMSON REUTERS STREETEVENTS | www.Harbin Electric Inc.how we develop the technology and whether we get government support -. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.the controlling -. Echo He . 11. the motors that goes to big machinery equipment in industrial.subsidy -. . the linear servo motor we were talking about. 381 .the system usually we do have -.EVP. Right now we're not only just only developing a product where we just want to sell the motors. And what we are doing is we are making a system. . HRBN .subsidies there.we consider our system an integrated system where you have motors and you also have the control systems that go with it.get higher margin. . All right. And I want to know what's the technology you're using. thanks.Chairman & CEO (Spoken in foreign language). Did you acquire it and/or co-developed and from what kind of approximate source? And also the potential customers you're targeting and also is there are any government subsidies in this project. is prohibited without the prior written consent of Thomson Reuters. including by framing or similar means. And especially this particular system we collaborated -.Maxim Group . Finance and Investor Relations Echo. My third question is about your -. Christy Shue .Maxim Group . And in develop stage then we did get some sort of government subsidy but it's not -.the automated control part that goes with the motor to make the system is where we collaborated with the other research institute.Harbin Electric Inc. because we are the initiative party.Harbin Electric Inc.it's minimal. So this is -. Finance and Investor Relations Okay. .

Finance and Investor Relations Okay. but that's the potential project we're working on just to give you some information on that. So we believe. All rights reserved. And when we can contract we don't know yet. we have a few minutes for some -. 10 THOMSON REUTERS STREETEVENTS | www. That's all. okay. HRBN . which is the Beijing Airport express line that we -.within this year we should be delivering the products -. but we are the only one in China. 11. Let's see do we have more questions online in the queue? Operator Yes.Maxim Group . also in Beijing that is starting construction.just a few questions. that metro transportation project.EVP. which is very -. 382 .three projects. The next question comes from Mark Tobin of Roth Capital Partners.Harbin Electric Inc. like Canadians.com | Contact Us ©2011 Thomson Reuters. is prohibited without the prior written consent of Thomson Reuters. Echo. And now they need to expand. So we are actually one of the bidders.streetevents.Analyst All right. Please go ahead. And the third project we just started to bid. Tianfu Yang . that's all. 2011 / 1:00PM.that track -.it's a low-speed maglev subway metro train in Beijing and the technology and the linear motors we co-developed working together with them.that line has already been operating and the trains are using the imported train. but we have to wait until they finish bidding process.EVP. So we expect to also once that finish construction. thank you. actually. Echo He . And the other line.Chairman & CEO (Spoken in foreign language). .Maxim Group . but that is more longer-term next year is the -. and the question is what's the status over there. put more trains to run more frequently. In terms of the subway transportation we're actually currently working on three potential projects -. thank you so much. And there we expect by later this year they should complete the assembly and tests and by -. Christy Shue . The first one is the one that we have been discussing and informed the investors. Republication or redistribution of Thomson Reuters content. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. (inaudible) and all that. So we mentioned that we -. given our cost advantage we have hope to get the project. Finance and Investor Relations Okay.the production to them. Christy Shue . They wanted to run 20 minutes -. we will deliver our products to them. is that still -.what status is that and what's the project -.Harbin Electric Inc. yes.every 20 minutes and run a train there. So they do need more trains to put on the track. About the metro train subway transportation project. Okay. Just the last one [I care about].the goal for this currently? (Spoken in foreign language).Harbin Electric Inc. including by framing or similar means.FINAL TRANSCRIPT May. .that the first domestic train will be built and we delivered some of the motors for the testing train. And we have other bidders from the other parts of the world.Q1 2011 Harbin Electric Inc Earnings Conference Call Echo He .Analyst Okay. So that is scheduled to deliver this year for us. then it's called the [S1] line that actually has been published or more discussed in China in all the newspapers. .a subway line in [Chongqing] and they already decided to use the linear motor technology.

70% of the raw material -.or heavy machinery industry it's common that the raw material takes up 50% of the total cost of goods sold. 383 . And then the raw material we looked at a few items to see the one thing. had the mix during this past quarter -.EVP. is prohibited without the prior written consent of Thomson Reuters.Roth Capital . The copper I looked at is nearly 20% higher in our purchasing -. So we can rather look at what are the factors that are contributing to it. .FINAL TRANSCRIPT May. . So the raw material cost is about 50% of the cost of goods sold.in our raw material purchasing than last year. but it's a lot of data that we need to put together to make a number. we do -.70% of raw material and about 10%. What we'll see. Finance and Investor Relations Mark. yes. Finance and Investor Relations Okay. particularly in the linear motor and micro motor segments.streetevents.in the past we have provided a breakdown for the linear motors and micro-motors.this -.EVP. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. We do see when we're looking -. Mark Tobin . Tianfu Yang .in the cost of goods sold the raw material is the bigger part of the cost of goods sold. but we did not quantitatively to see that.Harbin Electric Inc.do the analysis we look at our total manufacturing costs. 11 THOMSON REUTERS STREETEVENTS | www.Harbin Electric Inc. We can get back to you later on and see if we have that breakdown.the product mix for linear motors been the same as it was a year ago what would the margins have been? Or how much would they have declined? I guess I'm trying to get a sense of what recovery can we expect on the gross margin line and how much is tracking with gross margin and how much is more of a structural shift in the mix of your business. we'll take a look and see if we'll be able to quantify that.com | Contact Us ©2011 Thomson Reuters. HRBN . the raw material was about 60%. Christy Shue . 11. But it's common in China the labor cost is relatively lower and for all the other -. understood. looking at the declines. And I guess another way of asking.qualitatively speaking that the raw material -.Harbin Electric Inc. that's a good question.Chairman & CEO (Spoken in foreign language). 2011 / 1:00PM. And we do not have breakdown right now but we have provided -. including by framing or similar means. Currently we do not have that breakdown. just to go back to the gross margin question. The manufacturing costs have gone up a lot.Q1 2011 Harbin Electric Inc Earnings Conference Call Mark Tobin .Analyst Hi.Roth Capital .if you look at all the industry -. Republication or redistribution of Thomson Reuters content. . So we'll discuss that offline. 15% the labor and 10% for the utilities and all that other manufacturing costs. All rights reserved.EVP. . thanks for taking my question. made to that decline? Christy Shue . let me just translate the question first. Finance and Investor Relations Yes. First.Harbin Electric Inc. can you help quantify what contribution mix.Analyst Okay.manufacturing industry that's coming from machinery not from labor industry or for the -. (Spoken in foreign language). Christy Shue . raw material and labor. Okay. I do not have the number breakdown for rotary motor on top of my head.

So this project -. they don't tell you right now. I can explain this R&D expense is mainly -.okay. And. tax rate. .Q1 2011 Harbin Electric Inc Earnings Conference Call Mark Tobin . Mark Tobin . . finally.Analyst Okay. based on the guidance for just under 3% of total annual revenue.Harbin Electric Inc.Analyst Okay. and the remaining is for the normal R&D activities that we do. Mark Tobin . Although we have submitted the application now to the Tax Bureau. we need to pay those milestone achievement expense.let me ask the CFO to see if we can provide more details. is prohibited without the prior written consent of Thomson Reuters.streetevents.Roth Capital . . What drove such a large portion of the expenses to be recognized during this quarter? And obviously.Harbin Electric Inc. so that will be different from R&D. they don't process that.1m] is related to this one particular project. Zedong Xu .EVP.EVP. Finance and Investor Relations (Spoken in foreign language). but we are still qualified as a high technology development 12 THOMSON REUTERS STREETEVENTS | www.CFO (Spoken in foreign language). .Roth Capital .com | Contact Us ©2011 Thomson Reuters. Republication or redistribution of Thomson Reuters content. So that's just for that -.has been underway for the better part of a year. HRBN . Christy Shue . 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. Even if they believe you can get it they don't tell you right now to give you the document.okay.FINAL TRANSCRIPT May. higher than a year ago. this level is going to continue to some extent but. I understand that the development project was -. .the servo motor project mainly during the first quarter is incurred in the first quarter because a lot of milestones achieved and then. two-year half that was expired.Harbin Electric Inc. But let me get -. Finance and Investor Relations The common practice in China is usually the government towards the end of the year they tell you -. All rights reserved. certainly. however.Harbin Electric Inc.Roth Capital .for this quarter. Christy Shue . And then.the government usually give you -. yes. changing over to R&D. Christy Shue .towards the end of the year they give you approval and say -.Analyst Okay. including by framing or similar means. 384 . But for Harbin Tech Full we had a three-year exemption.Harbin Electric Inc. Finance and Investor Relations Yes.[$3. so you're okay to do this. that's helpful. according to their contract. the servo motor project.EVP. 2011 / 1:00PM. you know that you're approved for this rate. And once we complete the part of the R&D and then the main part is how we fit the product into our production line and we ramp up and arrange production and all that.EVP. but that's the information I have now. 11. Finance and Investor Relations We heard the government in China -. on the tax rate when do you expect to find out the decision on the approval for the reduced tax rate? Christy Shue .

Please go ahead. 385 .com | Contact Us ©2011 Thomson Reuters. for coming to our first-quarter earnings conference call. Okay.Harbin Electric Inc. You may now disconnect.EVP.Roth Capital . Thank you.Q1 2011 Harbin Electric Inc Earnings Conference Call company and located in an economic development zone.Analyst Okay.not until later this year the government would not clearly say that's okay. 2011 / 1:00PM. We will pass your message and the shareholders' message to the Special Committee.EVP. Chad. thank you. Yang.Roth Capital . Mark Tobin . Chad Cooper .FINAL TRANSCRIPT May.Analyst Hi. Hi.Harbin Electric Inc. . everyone. Yang and the sponsors is a sufficient price and they are not in favor of the Special Committee holding up the timing of the transaction to try to find a higher bidder. I speak to several of your large institutional shareholders really on a daily basis and I think the consistent message across the board is that the $24 proposal by Mr. So we believe we're still qualified for that 15% and we should be able to get that 15%. Operator Next question comes from Chad Cooper of Roth Capital. Okay.Harbin Electric Inc. including by framing or similar means. is prohibited without the prior written consent of Thomson Reuters. Let's just take one simple one. All rights reserved.EVP. 11. good morning. HRBN . Thank you for attending today's presentation. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. Christy Shue . Finance and Investor Relations Thank you. Chad Cooper . And my number is 631-312-8612 for follow-up questions.Roth Capital . . everybody. 13 THOMSON REUTERS STREETEVENTS | www. Mr.streetevents. Chad. Republication or redistribution of Thomson Reuters content. thanks. Thank you. Operator The conference has now concluded. but more a message to your Special Committee. (Spoken in foreign language). If you have follow-up questions regarding our business and operation please feel free to call me. one more question and we will close this right now. Christy. This process has gone on for seven months now and I think the general consensus is that it's gone on long enough. . Okay. Christy Shue . that's helpful. and thank you for your interest in the Company. Christy Shue .Analyst Not really a question. But that's just -. Sorry that we run out of time and we're almost [done]. Finance and Investor Relations Hi. Finance and Investor Relations Okay.

All Rights Reserved. Thomson Reuters. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. Actual results may differ materially from those stated in any forward-looking statement based on a number of important factors and risks. In the conference calls upon which Event Transcripts are based. HRBN . 11. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. any of the assumptions could prove inaccurate or incorrect and. there can be no assurance that the results contemplated in the forward-looking statements will be realized. ©2011. THERE MAY BE MATERIAL ERRORS. 386 . is prohibited without the prior written consent of Thomson Reuters.streetevents. OMISSIONS.810 14 THOMSON REUTERS STREETEVENTS | www. All rights reserved. IN NO WAY DOES THOMSON REUTERS OR THE APPLICABLE COMPANY ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY EVENT TRANSCRIPT. Although the companies may indicate and believe that the assumptions underlying the forward-looking statements are reasonable. companies may make projections or other forward-looking statements regarding a variety of items.com | Contact Us ©2011 Thomson Reuters.Q1 2011 Harbin Electric Inc Earnings Conference Call DISCLAIMER Thomson Reuters reserves the right to make changes to documents. Such forward-looking statements are based upon current expectations and involve risks and uncertainties. OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS. which are more specifically identified in the companies' most recent SEC filings. THE INFORMATION CONTAINED IN EVENT TRANSCRIPTS IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION. content. Republication or redistribution of Thomson Reuters content. including by framing or similar means. therefore.FINAL TRANSCRIPT May. 4017385-2011-05-12T02:00:04. 2011 / 1:00PM. or other information on this web site without obligation to notify any person of such changes.

and a 27. $14.00 $98. Dial in: 877-317-6789.0 5. (86)(21)6141-5757 schen@roth.65/$0.11E 5.05 31. Roth Capital Partners.).$25. Non-GAAP EPS excludes $0.0M is $4. ROTH/ Consensus est.com Emma Jia Zhao.25 $561. and a higher than expected tax rate.8 $79.9M.0 2. A portion of the expenses appear to be non-recurring in nature.06 bad debt expense.8M vs.8x Pro-forma EPS for all periods Revenue ($ millions) Yr Dec 1Q 2Q 3Q 4Q YEAR —2010— 105.0 HRBN One-Year Price and Volume History 28 26 24 22 20 18 16 14 12 Price Feb-11 Mar-11 Jan-11 Jun-10 Important Disclosures & Regulation AC Certification(s) are located on page 3 to 4 of this report.5 0.87E 0.41 vs.96 .NASDAQ | Buy HRBN: First Take .25 1. 98. Non-GAAP EPS equaled $0. Analysis of Sales/Earnings Stock Data 52-Week Low .25 4.5E 1Q11 results.65E 0. We continue to view the pending privatization as the major value-driver for shares of HRBN. Debt (mil) Est. (86) (21) 6141-5757 x 7825 ezhao@roth.com Sales (800) 933-6830.8M in cash.3E —2012E— Curr 625.9M/ $108. Balance sheet. (949) 720-5775 mtobin@roth.8x | HRBN .6 25% —2012E— Curr 3. 2011 Global Energy & Industrials: China Harbin Electric. CFA.4A 106.3 500. Management will host a conference call on Wednesday at 9am ET.76E 4. 12-Mo.79A 0. A portion of the expenses appear to be non-recurring in nature.9E 122. Management will host a conference call Wednesday at 9am ET.75 0.72A 6.1Q11 Results Well Below Estimates.com Steve Chen. Downside was primarily due to the following factors: (a) lower than expected revenue.5E 136.01 charge for the change in fair value of warrants and $0. (mil) Mkt.62A 2. and we expect opex will decrease from current levels. elevated operating expenses. Downside was primarily due to lower than expected sales of rotary motors from Weihai and Xi'an.Mark Tobin.2A 426. $112.(mil) 3-Mo.87E 3. Vol.66A 0.1M higher than est.72E 0.5A —2011E— Curr 112.9% tax rate (exceeded our 15% est).1E 512. EPS Growth Auditor: FRAZER FROST LLP EPS (Net) Yr Dec 1Q 2Q 3Q 4Q YEAR P/E —2010— 0. Earnings downside was primarily due to lower revenue.5 3.8E 140. vs.95 .4A 109. We continue to view the pending privatization as the primary value driver for shares of HRBN. Inc. 3Yr. Conference call.65A 0.Price Target Cash (mil) Tot.High Shares Out. Cap.$17.75 3. Avg. and we expect opex will decrease from current levels. Privatization remains the focus. Aug-10 Sep-10 Nov-10 Dec-10 May-11 6. LLC | 24 Corporate Plaza | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC Oct-10 Apr-11 Jul-10 387 . higher than expected operating expenses (opex of $14. ROTH/Consensus est. Conf Call Wed 9am ET HRBN reported 1Q11 results that were well below our estimates. Trading (800) 933-6820 CHINA FLASH NOTE | EQUITY RESEARCH | May 11.59.5A 105. HRBN ended with 1Q11 with $122. $0.505 $24. Revenue equaled $103.7m at the end of 4Q10.6x —2011E— Curr 0.

linear motors and their integrated application systems. Factors that may impede HRBN shares from reaching price target include s There are still numerous steps in the privatization process. controller automation systems.HARBIN ELECTRIC. engineers. INC. such as delay in construction. 2011 VALUATION Our $24 PT is based on the offer price of the proposed buy-out. manufactures and sells an array of industrial electric motors. May 11. and other special motors. customized linear motors. COMPANY DESCRIPTION Harbin Electric. automobile specialty micro-motors. can be largely affected by central and local government policies. Two of HRBN''s major catalysts. Page 2 of 4 388 . RISKS Change in macro policies in China. Ltd (HTFE). through its indirect wholly owned subsidiary. Volatile raw materials costs HRBN is subject to market fluctuations and volatility of two major raw materials. copper and steel respectively. The Company operates. The Company offers three key product lines: industrial electric motors. oil pump for oilfield and linear motors for urban metro lines. s Continued share weakness could lead to a lower takeout offer. some of which could lead to delays in completing the transaction. The development of urban railways can experience delays that out of control of HRBN. Harbin Tech Full Electric Co. s A slow-down in China''s economic growth and continued inflation could impact sales and compress margins. and automobile specialty micro-motors. Inc.. develops.

An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additionally. Not Covered (NC): ROTH does not publish research or have an opinion about this security.ROTH employs a rating system based on the following: Buy: A security. Sell: A security. however. ROTH changed its rating system in order to replace the Hold rating with Neutral. This report should not be used as a complete analysis of the company. ROTH Capital Partners. Distribution of IB Services Firmwide IB Serv. Distribution Ratings/IB Services shows the number of companies in each rating category from which Roth or an affiliate received compensation for investment banking services in the past 12 month. Any opinions or estimates in this report are subject to change without notice. information and facts discussed in this report other than the information regarding ROTH Capital Partners.HARBIN ELECTRIC. except for the first box. related to the specific recommendations or views expressed in this report. 2011 Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities.9 5 8. LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. Inc. are from sources believed to be reliable.0 0. On September 28. an investment in the stock may involve a high degree of risk and may not Page 3 of 4 389 . is or will be. which at the time the rating is instituted and or reiterated. Each box on the Rating and Price Target History chart above represents a date on which an analyst made a change to a rating or price target. This is not. May 11. but are in no way guaranteed to be complete or accurate. Disclosures: ROTH makes a market in shares of Harbin Electric. 2010. which may only represent the first note written during the past three years. Ratings System Definitions . The material./Past 12 Mos. which at the time the rating is instituted and or reiterated. LLC and its affiliates. buys and sells from customers on a principal basis. indicates an expectation of a total return of at least 10% over the next 12 months. I also certify that no part of my compensation was. at any given point in time. indicates an expectation of a total return between negative 10% and 10% over the next 12 months.8 Our rating system attempts to incorporate industry. directly or indirectly. indicates an expectation that the price will depreciate by more than 10% over the next 12 months. INC. industry or security discussed in the report. Neutral: A security. Consequently. and as such. company and/or overall market risk and volatility. Additional information is available upon request.9 0 0 Rating Buy [B] Neutral [N] Sell [S] Count 196 56 2 Percent 76.9 22. which at the time the rating is instituted and or reiterated. as of 05/11/11 Count Percent 41 20. an offer or solicitation of the securities discussed. our investment rating on a stock and its implied price movement may not correspond to the stated 12month price target.

Member: FINRA/SIPC. Copyright 2011. Page 4 of 4 390 . No part of this report may be reproduced in any form without the express written permission of ROTH. May 11. 2011 be suitable for all investors.HARBIN ELECTRIC. INC.

1% in 1Q11. Higher SG&A expense.74 $0.52 $2. although still at a large discount to its listed peers in Hong Kong and Mainland China. Our Buy recommendation is mainly based on the likely success of management LBO at $24/share. R&D expense was substantially higher.64 $0.67. At current levels. We believe the transaction is more likely to close than fall through in the near future. respectively. Vol.6% y/y mainly due to capacity constraint.52 and $2.EQUITY RESEARCH COMPANY UPDATE China May 11.82 $2. China’s commodity price inflation and HRBN’s increasing operating and tax expenses should negatively affect earnings.-listed Chinese peers.67 Quarterly EPS 2011E 2012E $0.6% in 1Q10. from prior $2. Inc.7 $547.05 $562. Per our recorded data.70 $0. Total revenue was down 1.67 $2.35 (212) 895-3718 Harbin Electric.46 7.1 31. Margins were lower due to increased raw material cost and higher expenses and taxes.96. PhD ehe@maximgrp.80 $3.maximgrp.6 498 $19.0 $140.2 $134. Revenue was $103.9% a year ago.6 Current Prior Current EPS EPS P/E $0.8A $122. 7% in 1Q10 included $1.66 $0. NY 10174 – www. China’s average manufacturers’ purchasing price increased by ~10% y/y in 1Q11. 2011 Closing Price (5/10/11): 12-Month Target Price: 52-Week Range: Market Cap (MM): Shares O/S (MM): Float (MM): Shares Short (MM): Avg. EPS was $0. We are maintaining our revenue estimates for the rest of 2011 and 2012.4 $2. Reducing EPS.9M legal and financial advisory fees associated with the on-going LBO process.96 $24 $14.77 23. 0. HRBN reported 1Q11 results.3 14. a growth rate much faster than the average selling price increase.52 8.1M dedicated to the development of an automated control system for linear servo motors. We are reducing our 2011 and 2012 EPS to $2.com $17.64 $0.68 $0. 3. 1% below our estimate and 5% below consensus. The margin pressure was mainly due to raw material price inflation. However.74 $2.77 $0.14 $2.1% of total company’s equity.81 $0. (HRBN – Nasdaq – $17. HRBN is trading at a premium to its U. as we believe HRBN’s revenue growth should be supported by gradual capacity expansion in Weihai and Xi’an as well as new linear motor product sales.6 $150. As of today.76 $0. which is a new product that HRBN plans to launch by end of 2011. 9.S. 0.63 $0.1 $112.8% y/y.$25.95 .58.7 15% GAAP Quarterly EPS Current Prior Current 2011E 2011E 2012E $0.3 $2.14 $2.56 $0. 18 cents below our estimate of $0.7% of total revenue vs. Higher expenses for good cause. the buying parties.4 $131.7 $123. Maintain Buy and $24 price target Yesterday evening.96) Buy 1Q11 missed due to higher cost and expenses.3 $2.com SEE PAGES 6-8 FOR IMPORTANT DISCLOSURES AND DISCLAIMERS 391 .48 $0. (000) Book Value/Share: Dividend/Yield: Risk Profile: Maxim Group FYE: December 1Q 2Q 3Q 4Q FY Maxim Group FYE: December 2009A: GAAP 2010A: GAAP 2011E: GAAP 2012E: GAAP LT Earnings Growth Maxim Group FYE: December 1Q 2Q 3Q 4Q FY Consensus-First Call FYE: December 1Q 2Q 3Q 4Q FY Echo He.52 and 24 cents below consensus of $0.4 6.34.96 6. a few other senior management and Abax Capital aggregately control ~46. MD.4 $470.60 NA Medium Revenues ($M) 2011E 2012E $103.34A $0.76 $0.58 $0. There was $3. flat q/q but down from 33. Reducing estimates.14 and $2.8M. HRBN’s gross margin was 29.7M incremental bad debt in Xi’an facility and $0. They have already secured $464M term loan from China Development Bank.67 $0. Maxim Group LLC 405 Lexington Avenue New York.7% of total revenue vs. Chairman.34A $0. We expect gross margin pressure to continue in the coming quarters.

9 16.1) 9.5 (3.66 $ 0.52 $ 0.7 227% 33.3 -3% 19% 15.4 31.4) (0.2 10.Weihai Y/Y Growth % of Total Rev Rotary Motors .8) 27.9% 1.3% 1.2% (0.9 0.9% Net income before noncontrolling interest 22.66 $ 0.9% (0.9) (0. Detail Comparison – Actual vs.3 3% Actual vs.8% (10.7% (14.6) 35.34 $ $ Est 104.2 13.1) 30.9) 3.213 246 12% 1.58 -1% -33% -5% -41% Source: Maxim Group estimates.5% (10.7% (10.8 $ 103.52 Consensus Actual vs.6) (0.094 bps -33% 10 bps -33% (506) bps Tax Rate 15.8 -29% 18.6 16.2 166% 15% 22.2 -15% 29.4) 7.5 10% 1Q11A Actual 19. Inc.8 -3% 21% 46.2) (73.6) 0.6% (7.5 0% 21% 49.1 31.061 178 bps bps bps bps -3% (311) bps (48) bps -7% (720) bps (269) bps -1% (89) bps -1% -1% (100) bps (8) bps 363% 294 1% 20 29% -18% (1.0) 9.0% 27.1% Net income 20.8 Y/Y Growth 137% -21% -47% Net Margin 19.52 $ 0.1 (1.0 (4.4 Change in fair value of derivative instrument (or Reclassification adjustment for gain on sales of Comprehensive income 20.0 (1. Maxim Group LLC 2 392 .7 246% 26.1 (1.4) (1.8 60% 19% 16. Actual vs.2) (0.7% 1.2) 397% -23% 26% 1. Est Maxim Consensus $ $ 108.2) 15.4 EPS (to controlling interest) Basic $ 0.1% 17.6 16.2) 19.7) (74.3 Diluted 31.0% 0.8) 0.Xi'an Y/Y Growth % of Total Rev Revenues Y/Y Growth Cost of sales Gross profit Y/Y Growth Gross Margin R&D As % of Rev G&A As % of Rev Total operating expenses Income from operations Y/Y Growth Operating Margin Other income (expenses).5 107% 21% 45.35 Diluted $ 0. Expected 14% 1.34 Y/Y Growth 68% -21% -47% -18% -33% -33% Source: Company Reports and Maxim Group estimates.1% (3.8 -15% 13% 22. Actual vs. Expected (In millions except per shr) Linear Motors Y/Y Growth % of Total Rev Specialty Micro-Motors Y/Y Growth % of Total Rev Rotary Motors .5% 10. net Interest expense.3 31.3) 30.8 0.2 10.8 Minority interests (2.9 -15% 16% 13.269) bps (322) bps 18% 60% bps bps 43% 47% 45% $ 105.7% 0.Harbin Electric.3 -41% 15. net Loss on cross currency hedge settlement Gain on debt repurchase Change in fair value of warrant Total other income (expense) Income before income taxes Provision for income taxes 1Q10 Actual 19. Maxim Estimates and Consensus Maxim 1Q11 Total Rev ($M) GAAP EPS ($) $ $ Actual 103.0) As % of net income 8.4% Foreign currency translation adjustment 0.5 $ 104.0 13% 1Q11E Expected 16.2 31. (HRBN) Exhibit 1.0) 27.0 (4.8 0.0% (8.6 -14% 29.8 243% -1% -2% (69.1 2. Exhibit 2.0) 16.5 -4% 15% 21.5% 15.2) (0.8) 19.3 Weighted average shares outstanding Basic 31.

6 $ 11% 136.0 -1% 29% 88.4 -5% 21% 67.2 6% 31.0 12% 35.2 -28% 18% 15.1 20% 21% 129. Inc.1 18% 24% 93.7 10% 135.3 1% 20% 109.8 11% 16% 0.2 -25% 19% 17. Old 0% -2% $ 3Q11E Old 123.9 -10% 28% 20.3 -12% 14% $ -15% -8% -6% -1% New 112.1 18% 17% 0.2 $ 6% 32.63 10% New vs. Bloomberg and Maxim Group estimates.8 7% 29% 25. Estimate Revision 2Q11E ($'s in millions.56 $ -31% 2011E ($'s in millions.9 25% 23% 84.8 1% 29% 94.8 18% 17% 2.0 16% 29% 113.7 15% 28% 109.1 3% 17% New 470.4 -5% 19% 100.96 $ 18% New 547.52 $ 2. Maxim Group LLC 3 393 .2 -41% 14% 0.4 -8% 29% 21.14 -15% y/y Growth 2% -13% Source: Thomson One.Harbin Electric.9 24% 20% 125.8 26% 15% 2. except EPS) Total net revenues y/y Growth Gross Profit y/y Growth Gross margin Income from operations y/y Growth Operating Margin Net Income y/y Growth Net Margin Diluted GAAP EPS y/y Growth $ Old 112.67 $ 18% 2012E Old $ 549.67 25% -10% -10% -2% -3% -2% New 123.0 $ 16% 159.48 -41% New vs. Old 0% New vs. except EPS) Total net revenues y/y Growth Gross Profit y/y Growth Gross margin Income from operations y/y Growth Operating Margin EBITDA y/y Growth EBITDA Margin Net Income y/y Growth Net Margin $ Old 471.0 $ 12% 35.0 3% 23% 79.9 19% 21% 21. Old 0% Diluted GAAP EPS $ 2.6 16% 155. Old 0% -1% -5% -3% -14% -6% $ -14% $ -7% New vs.4 5% 29% 25. (HRBN) Exhibit 3.2 15% 20% 19.7 -31% 16% 0.

9x 2.27 $ 3.14 $ 2.61 $ Shanghai Electric Group 601727-S $ 1.33 7.6x 7.29 Rockwell Automation ROK $ 86.8x 19.2x 19.1x 22.44 $ 10.94 1. Materia CHOP SORL Auto Parts SORL Average $ $ $ $ $ $ $ $ $ 238 176 291 309 192 184 271 201 106 $ $ $ $ $ $ $ $ $ 1.5x 13.01 1.2x 13.703 $ 29.0x 11.8x 21.94 ABB ABB $ 26.13 0.820 $ 1.23 0.36 0.0x 14.423 $ 2.81 5.3x 14.12 0.9x 12.8x 7.27 1.18 $ 1.09 $ 1.94 $ 7.40 0.5x 5.11 0.4x 9.18 n/a $ 2.24 0.67 $ 1.5x 6.57 1.23 Average 1.17 1.7x 18.95 1.2x 7.38 Lear Corporation LEA $ 51.70 1.55 5.029 $ 6.03 $ Zhejiang Founder Motor 002196-S $ 2.8x 16.29 0.5x 17.7x HK Listed China Motor Companies Harbin Power Equipment 1133-HK $ Shanghai Electric Group 2727-HK $ Dongfang Electric Group 1072-HK $ Chongqing Machinery & E2722-HK $ Shanghai Prime Machine 2345-HK $ Average 1.68 Emerson Electric EMR $ 55.10 0.19 $ $ $ $ $ $ $ $ $ 1.04 0.25 $ 2.8x 31.04 0.4x 11.59 1.3x 65.96 n/a -$ 2.1x 3.0x 5.2x 15.398 $ 5.04 $ 4.8x -15.233 6.69 $ 3.8x 15.17 $ 4.50 4.2x 7.88 7.3x 11.90 Regal Beloit RBC $ 73.8x 10.097 $ 41.81 3.4x 4.Harbin Electric.701 $ 61.03 0.59 $ 9.02 $ $ $ $ $ 0.40 1.08 0.55 $ 5.09 3.82 22.6x 18.1x 10.9x 46.71 1.2x 5.32 1.29 Cummins CMI $ 118.312 396 159 $ $ $ $ $ 0.323 $ 1.11 0.0x 4.1x 4.225 261 1.22 0.3x 14.04 0.14 0.6x 17.19 0.7x 17.9x 14.4x 6.19 $ $ $ $ $ 0.41 $ BroadOcean 002249-S $ 3.44 $ 2. Maxim Group LLC 4 394 .16 0.6x 35.55 3.21 $ $ $ $ $ 771 1.0x 11.9x 14.49 0.03 0.9x 4.02 10.50 MktCap (mm) $ 563 EPS P/E __________________________________________________ 10A 11E 12E 10A 11E 12E $ 2.4x 9.36 $ 5.2x 16.94 $ 11. Inc.05 $ 4.3x 12.3x 20.0x 45.36 Franklin Electric FELE $ 44.4x 17.0x 29.08 $ 5.6x 4.0x -20.3x 8.86 0.5x 7.67 7.03 0.3x $ 120.23 $ $ $ -$ 0.87 $ 1.896 $ 12.8x 5.9x 10.7x 13.49 1.1x 14.0x 25.11 $ Average US/International Motor Companies Siemens SI $ 138.16 1.46 $ 2.05 0.4x Source: Thomson One.14 $ Dongfang Electric Group 600875-S $ 4.9x 22.1x 4.2x 8.59 $ 5. (HRBN) Exhibit 4.1x 3.12 0.318 $ 2.6x 5.1x 28.1x 8.4x 19.548 11.7x 12.0x 4.623 1.03 0.97 0.30 1.6x 5.41 1.80 0.3x 12.42 n/a $ 2.1x 15.37 Illinois Tool Works ITW $ 58.95 $ 5.96 LAST $ $ $ $ $ $ $ $ $ 8.90 $ 3.82 8.290 $ 23.3x 13.4x 6.04 0.7x 14.80 0.5x 6.02 $ $ $ $ $ 0.8x 14.0x 10.845 $ $ $ $ $ 0. Comparable Company Analysis 5/10 Company Harbin Electric TKR HRBN Price $ 17.7x 4.09 $ 2.0x 17.2x 13.18 0.42 7.2x 5.7x 41.9x -18.03 0.26 0.1x 28.11 0.28 35.5x 18.41 Magna International MGA $ 52.24 Smith AO AOS $ 43.1x 10.7x 12.06 1.6x China Mainland Listed China Motor Companies Xiangtan Electric 600416-S $ 4.55 $ 3.86 $ 4.34 $ 3.0x 20.7x Chinese Industrial Companies China Automotive CAAS A-Power APWR FushiCopperweld FSIN Lihua International LIWA Shengdatech SDTH Wonder Auto WATG ChemSpec CPC China Gerui Adv.4x 16.06 $ $ $ $ $ $ $ $ $ 1.9x 5. Bloomberg and Maxim Group estimates.6x 21.53 $ 5.

7) 19.0 0.0% 21.7) 23.5 31.1) (75.3 0.9 (0.9) (1.3 31.7 15% 28.4 0.9% 67.9 (4.6%) 13.9) 30.2 6.3) 1.8) 16.4 $ 120.4 0.84 0.3) 5.9 188.3) 18.5 155.0% 15.7% 8.5 23.3 31.0 19.3% (1.7) (4.7 71% 20.0% 6.2 6.2 6.3% 0.1 14.8) 12. (HRBN) Exhibit 5.6 48.Harbin Electric.3 27.83 $ 0.6 52.0 (4.4 31.0% 16.5 (7.9 NM 16.7% 2.3% (46.7) 8.1% 10.1% 7.6) (6.7 77% 31.3% 1.5% 1.47 $ 0.0) (73.1 19. net Total other income (expense) Income before income taxes Provision for income taxes Tax Rate Net income before noncontrolling intere Minority interests As % of net income Net income Y/Y Growth Net Margin Foreign currency translation adjustmen Comprehensive income Weighted average shares outstanding Basic Diluted EPS (to controlling interest) Basic Diluted Y/Y Growth D&A Share-based compensation EBITDA EBITDA margin Exchange Rate (RMB/US$) $ $ 2004 Full Yr 2005 Full Yr 2006 Full Yr 2007 Full Yr 36.7) (391.6 2008 Full Yr 49.28 $ $ 11.9) 6.7 258.9) 15.1 31.3% 19.1) (20.7 (0.2 0.0) 9.8 11% 16.2 15.3 (41%) 15.6) (0.5) 15.4 18.0% 9.9 (2.4 218.9) (0.3) 15.1) 1.5 (12.5 21% 28.0) 1.3% 7.4) 84.84 35.67 25% 14.1 (3.2% (10.3 (1.2 $ 123.7 1.2) 10.2 $ 426.3 11.1 61.0) 106.8 60% 74% 18% -14% 27% -3% -10% 0% 20% 1% 12% 56% 19% 19% 18% 16% 18% 19% 16% 16% 16% 16% 16% 18.7% (1.3 (1.7%) 14.6%) 6% 12% 24% 10% 16% (2.9) 2.0% 13.3 125.3) 1.6 350% 48.57 23.8 94.7) (4.8) 1.2 21.3 31.0) 0.2% (0.3) (146.2 (1.68 2.67 $ 0. Inc.2 $ 105.0 34.0 30.2 43.1) 9.3% 6.2 (2.1 (7.1% 19.8 25.1) 16.84 18.3 43.6% (7.1% 17.8% (0.2% (11.4% 2.1 42.3 18.4 31.3 47.5 46.4%) (40.7% 12.0 10.1% (3.8 1.8 (4.4 0.6 $ 470.7) (70.3 0.4 48.8 (47.68 $ 2.7 NM 24.3 25.4 0.3 6.6 18.8 24.4 5% 28.8 36.36 0.2 15.1 6.11 $ 0.0) 7.Weihai Y/Y Growth % of Total Rev Rotary Motors .5) 4.76 19. Income Statement (In millions except per shr) Revenue Drivers: Linear Motors Y/Y Growth % of Total Rev Specialty Micro-Motors Y/Y Growth % of Total Rev Rotary Motors .66 $ 0.5) 29.0% 10.7% 20.4 31.8% (3.5% 0.1% 0.8 85% 28% 27.7 93.5 23.1) (335.9 16.2 21.0 (4.5% (0.5 1.8 291% 18.3) (12.2 (40.8% 5.3 (0.9 49.7) 1.1 28.7) 109.6 61% 34.4% (1.3% (6.4 69% 16.0) 16.Xi'an Y/Y Growth % of Total Rev Revenues Y/Y Growth Cost of sales Gross profit Y/Y Growth Gross Margin R&D As % of Rev G&A As % of Rev Total operating expenses Income from operations Y/Y Growth Operating Margin Other income (expenses).8 $ 223.1) 15.3 20.1) 34.7 (1.4 0.7 -31% 12.9 0.4 77.0% 84.7 $ 547.4% 12.3 175% 33.4) 7.3 31.1) 0.1) (290.1 18.0 60.4 13.8%) 3.0% 18.2) 1.6% (1.4 $ 106.3 17.0% 6.4 29.14 $ 54% -13% 2.3% (2.8) 27.8) (33.9) (1.6 (23%) 8.9) (1.0% 5.8) 20.2) 28.4 10.8% (14.15 $ 0.84 33.3% 21.1 2.6 (39.5 $ 105.63 $ 10% 2.5 11.9 0.8 62% 25.1 25.1% (42.9 24% 20.3) 2.7 67.83 74.0% (11.3 0.5 (3.9 2.0 -1% 28.1 0.66 $ 68% 3.0 $ 131.7 70% 48.4) 0.2 19% 18% 71.1 31.7) 14.0 0.4 0.4 21.4) 0.1 20.4% (20.3% (5.9 27.5% (1.4 -5% 18.7) 20.7 2.3 22% 27% 40.1 219% 26.19 $ 0.4) 8.6 31.0% 2.2 13.3 (0.3 14.77 $ 1.2% (11.7) 11.2 1.1) 1.9 68% 20.9 23.99 $ 1.2% 23.5 0.8% (15.8) 26.0%) 0% 15% 2% 10% 28% 15% 14% 14% 13% 14% 15% 13% 12% 12% 13% 12% 22.5 $ 103.0% 0.9 166% 78% 81% -18% 51% -4% (3.2 86.9 -10% 28.1) 9.0% 25.4 157% 23% 32% $ 44.8) 25.8 20.9% 10.3) 1.0% (8.9 0.3 76.4% 1.5 31.2) 15.6) (94.3% 6.3 135.3 16.48 $ NM -25% 221% (47.6 387% 71% 62% 85% 85% 243% 175% 133% -1% 91% (1.0 (21.3 0.2) 1.0 2.3 31.6) 88.7% (7.7 107% 39% 14% 3% 31% -3% 10% 15% 30% 13% 19% 0% 21% 22% 21% 22% 22% 21% 23% 22% 23% 22% 23% 45.8) 55.6% 15.2) 25.5 0.0 0.3% 67.0 20.6 31.0 44.2% (10.0 0.51 37.7% (4.7%) 7.48 Source: Company reports and Maxim Group estimates.4 48.2 (28%) 18.0% 16.5 46% 39.7 36.3 31.7% 1.4) 93.1 31.0% 19.8) 0.5) 3.0% (9.2 (3.3 31.44 $ 2.0 (16.34 $ 0.9) 9.2) 20.5 125.68 $ 2.0) 27.44 $ 2.6% 76.2 6.3) (24.0 76.9 (8%) 25.4 29.0) 0.3% 5.9% 25.3 67% 21.7) 21.4% (4.7 90.6% 17.3% 1.1 2.8 31.8 31.1 (3.0) 24.9 1.46 $ 0. net Interest expense.5% 1.0% 25.0 (2.8 2009 Full Yr 1Q10 31-Mar 2Q10 30-Jun 3Q10 30-Sep 4Q10 31-Dec 2010 Full Yr 1Q11 31-Mar 2Q11E 30-Jun 3Q11E 30-Sep 4Q11E 31-Dec 2011E Full Yr 2012E Full Yr $ 19.1 31.30 1.8% (39.6% 0.5) 11.0) 0.0 31.2) 3.6% 1.3% (1.9% 5.6) (80.6 $ 40.8 0.9% (13.6% 8.9 (7.3 58.2) 27.07 19.2 15% 20.5% (45.5% 84.0% 15.60 105.2) (6.8% 79.7) 21.0% 67.4) 0.1 33.4 50% 21.9 $ 23.0% (9.5 2.5) 7.8% 7.82 $ NM 2.2 17.7% (10.8% 6.1 -14% 29.0% 18.7 227% 33.5 35% 41% 33.5% (7.3 16.54 0.7% (14.3 30.4) 17.1) (4.0% 84.7% (8.9) 25.4 84% 45.1 (1.3) 9.2 6.8) 22.5% (10.4 45% 28.5 16.9) 3.0 0.6 137% 19. Maxim Group LLC 5 395 .1 31.3% (0.8% (1.0% 21.01 $ 0.1% 25.3 47.9% (0.7 15.6) 0.63 $ 0.6 23.6) (69.8 15.5 40.6 (3.9% (0.66 $ 82% 0.6 135.4 $ 65.4 35.6 25.6) 13.80 31.2 (14.4) (87.7% (38.8 (0.2 0.6% (1.0% 10.2 31.25 $ 0.5 14.6% (7.8) (73.0 333% 42.8 $ 112.6% 2.8) (75.4 65% 49.1% 22.0 42.2 6.57 $ 0.7 19.3 31.8 26% 15.4 31.4%) 10.5 (4.6) 0.7 35.6 23.8 0.1) 0.3 51.6% 1.3 32.8 0.9% (18.1 0.9) 8.6 (6.1% 0.49 $ 0.57 $ 0.0% 19.7 246% 26.4 31.7 6.4% (1.1 (1.77 $ 31% (35.36 0.1) (0.4) 15.1% 5.3 6.9 15.2% 6.0% 2.35 $ 0.2) 19.3 0.0 1.1 (4.0% 1.4 $ 109.2 (15%) 29.9 13% 6% 11% 12% 11% 3% 15% 20% 25% 16% 18% 0% 0% 20% 43% 42% 45% 47% 44% 45% 46% 48% 47% 46% 47% 4.8) 0.9% (0.3 -12% 14.3) 7.4 6.4 (1.36 60.6 47.3% (10.6) 10.8% (41.9 0.6 17.9 11.91 $ 53% (10%) 2.8 105.6 100% 30.8% (0.4) 2.7 62.0) 0.8 (0.1 19.1 0.9% (0.48 100.3 19.7 17.

enterprise value/sales. Individual sector analysis. An Under Review (UR) rating represents a stock that the Firm has temporarily placed under review due to a material change. the company’s ability to recruit and retain competent personnel.Harbin Electric. Inc. (HRBN) DISCLOSURES Source: Investars. price/book ratio.9% * Relative to Nasdaq Composite. Price Target Risks: Investment risks associated with the achievement of the price target include. attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer. Echo He.5% 0.0% Expected Performance* Buy Hold Sell Expected total return of 15% or more over next 12 months Expected total return of plus or minus 14% over next 12 months Expected total negative return of at least 15% over next 12 months with Rating 64. earnings expectations or sales growth as they relate within an industry group or to the broader market. Inc. Maxim Group expects to receive or intends to seek compensation for investment banking services from Harbin Electric. in the next 3 months. no part of my compensation was.com Maxim Group LLC Stock Rating System As of: % of Coverage Universe 5/11/2011 % of Ratings that Firm received Banking fees 24. sum of the parts analysis and discounted cash flow. a portion of which is generated by investment banking activities. I. Valuation Methods: One or more of the following valuation methods are used by Maxim Group analysts in making a ratings or price projection: Analysis of companies P/E ratio. the company’s failure to achieve our earnings and revenue estimates.5% 31. including the firm’s total revenues. The research analyst(s) primarily responsible for the preparation of this research report have received compensation based upon various factors.0% 0.6% 3. is. changes in investor sentiment Maxim Group LLC 6 396 . Inc. but are not limited to. unforeseen macroeconomic and/or industry events that adversely impact demand for the company’s products and services. or will be directly or indirectly related to the specific recommendation or views expressed in this research report. Furthermore. product obsolescence. Maxim Group makes a market in Harbin Electric.

Harbin Electric. risks particular to our Harbin Electric. rating include: (1) Slowdown of Chinese economy. negative cash flow. and/or a short operating history. Maxim Group LLC 7 397 . and (6) Failure of the proposed LBO to be completed. High – Fundamental Criteria: This is a risk rating assigned to companies having below-average revenue and earnings visibility. and is fairly liquid. positive cash flow. Price Volatility: Because of the inherent fundamental criteria of the companies falling within this risk category. Speculative stocks may not be suitable for a significant class of individual investors. both price volatility and fundamental risk are expected to approximate the industry average. (5) Potential equity issuance. and low market cap or public float. RISK RATINGS Risk ratings take into account both fundamental criteria and price volatility. Accordingly. High-risk stocks may not be suitable for a significant class of individual investors. fundamental risk is expected to be above the industry. lack of earnings. balance sheet concerns. Medium – Fundamental Criteria: This is a risk rating assigned to companies that may have average revenue and earnings visibility. both price volatility and fundamental risk are expected to be below the industry. (2) Raw material price increases. Accordingly. refer to the most recent form 10-Q or 10-K that the company has filed with the SEC. Investment Risks: Aside from general market and other economic risks. Inc. Price volatility: The price volatility of companies falling within this category is expected to be above the industry. (3) High competition in industrial motor market. (HRBN) regarding the specific company or industry. and is fairly liquid. Speculative – Fundamental Criteria: This is a risk rating assigned to early-stage companies with minimal to no revenues. Low – Fundamental Criteria: This is a risk rating assigned to companies that may have above-average revenue and earnings visibility. Inc. the price volatility is expected to be significant with the possibility that the investment could eventually be worthless. fundamental risk is expected to be significantly above the industry. (4) Difficulties of developing linear motor market. Accordingly. positive cash flow. changing competitive pressures and adverse market conditions. Accordingly. For a complete discussion of the risk factors that could affect the market price of the company’s shares.

Indeed. based on their specific investment objectives. the values of which are influenced by currency volatility. and reach different conclusions from. The value of securities is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities. and (2) are subject to investment risks.Harbin Electric. or disclosed to another party. and no representation or warranty. express or implied. ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST Maxim Group LLC 8 398 . (HRBN) DISCLAIMERS Some companies that Maxim Group LLC follows are emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. Inc. in such circumstances. financial status and risk tolerance. the information presented in this report. This report is not to be relied upon in substitution for the exercise of independent judgment. Information. Information and opinions presented in this report have been obtained or derived from sources believed by Maxim to be reliable. The securities discussed in Maxim Group LLC research reports may not be suitable for some investors. Maxim accepts no liability for loss arising from the use of the material presented in this report. (2) are not deposits or other obligations of any insured depository institution. Securities recommended. offered or sold by Maxim: (1) are not insured by the Federal Deposit Insurance Company. views and analytical methods of the analysts who prepared them and Maxim is under no obligation to ensure that such other reports are brought to the attention of any recipient of this report. and may in the future issue. This communication is neither an offer to sell nor a solicitation of an offer to buy any securities mentioned herein. except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to Maxim. Past performance should not be taken as an indication or guarantee of future performance. LLC (“Maxim”). the potential losses may exceed the amount of initial investment and. value of and income from any of the securities mentioned in this report can fall as well as rise. without the prior written consent of Maxim Group. This publication is confidential for the information of the addressee only and may not be reproduced in whole or in part. Maxim may have issued. is made regarding future performance. including the possible loss of principal invested. other reports that are inconsistent with. Those reports reflect the different assumptions. you may be required to pay more money to support these losses. The price. copies circulated. opinions and estimates contained in this report reflect a judgment at its original date of publication by Maxim and are subject to change without notice. Investors in securities such as ADRs. but Maxim makes no representation as to their accuracy or completeness. effectively assume this risk. Investors must make their own determination as to the appropriateness of an investment in any securities referred to herein. in the case of some investments.

Revenue equaled $103.3E —2012E— Curr Prev 578.7E 136. higher operating expenses.Mark Tobin.41A 0.11E 8.6x —2011E— Curr Prev 0.1% in 3Q10).8x 1Q11 results below est.9M).5A —2011E— Curr Prev 103.7% in 4Q10 & 63. and elevated shipping costs. bad debt provision in Xi’an. Inc. of $112.2x 4.5x 5. Pro-forma EPS for all periods Revenue ($ millions) Yr Dec 1Q 2Q 3Q 4Q YEAR —2010— 105.8x | HRBN .High Shares Out.65E 0. est.5E Aug-10 Sep-10 Nov-10 Dec-10 May-11 6.25 4.Price Target Cash (mil) Tot. We anticipate SG&A and R&D expenses will remain elevated.5M).5M) and Xi’an ($46.9M (vs.2% in 4Q & est. Management indicated that the special committee is reviewing the proposal. 29. on Tempered Outlook & Higher Opex. our outlook is tempered.51E 0. and a higher tax rate.76E 6. a higher effective tax rate due to the expiration of tax holidays contributed to the loss.05 31.61E 0.8 $80. CFA. Lowering estimates. est.72A 6.9E 115.4m associated with fair value change of warrants & 1. $26. Vol. 56.8M vs.3M vs.62A 2. Finally. schen@roth. In particular. We continue to view the pending privatization as the primary value driver for shares. based on the expectation that Q1 weakness could persist. Operating expenses equaled $13. (949) 720-5775 mtobin@roth.25 1. $9.2A 426.0 HRBN One-Year Price and Volume History 28 26 24 22 20 18 16 14 12 Price Feb-11 Mar-11 Jan-11 Jun-10 Important Disclosures & Regulation AC Certification(s) are located on page 4 to 5 of this report. of $0.89E 3. Revenue downside was primarily due to weak sales of rotary motors at Weihai ($21. Roth Capital Partners. and higher tax rate. Non-GAAP EPS equaled $0. Trading (800) 933-6820 COMPANY NOTE | CHINA RESEARCH | May 11. Downside was driven by lower than expected revenue from rotary motors (Weihai and Xi'an). Cap.NASDAQ | Buy $14.com Emma Jia Zhao.25 $561. based on the offer price of the proposed buy-out. We continue to focus on HRBN's prospective privatization as the key value driver for shares.com Sales (800) 933-6830.5 0.$17.6% vs.87E 2. we are scaling back our projections for linear motors and rotary motors.96 .1E 476.4A 109. albeit not at Q1 levels.3E 122. privatization expenses. Gross margins remained flat sequentially at 29. LLC | 24 Corporate Plaza | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC Oct-10 Apr-11 Jul-10 399 .00 $122.8E 131. —2012E— Curr Prev 2.12E 3.$25.7m bad debt expense.65A 0.8A 112. 30.75 0.65/$0. $49.87E 0. est. but no indication of expected timing was provided.8%) due to unfavorable product mix and rising raw material costs. Non-GAAP EPS excludes $0.1E 140.0 5.41.3E 625.79A 0. Avg. which included higher expense for new linear servo motors R&D. 12-Mo.9M/$108. well below ROTH/ Consensus est. While we anticipate recovery from Q1 levels. ezhao@roth.5E 126. 3Yr.8E 512. 2011 Global Energy & Industrials: China Harbin Electric. Analysis of Sales/Earnings Estimates Changed Stock Data 52-Week Low .5A 105.95 .72E 0. We are substantially lowering our 2011 and 2012 estimates to reflect a more tempered sales outlook.505 $24.5 3.8M vs. Buy-out Still the Focus We are substantially lowering our estimates after HRBN reported weaker than expected 1Q11 results. expectations for elevated operating expenses.66A 0.com Steve Chen. EPS Growth Auditor: FRAZER FROST LLP EPS (Net) Yr Dec 1Q 2Q 3Q 4Q YEAR P/E —2010— 0.1% (vs.4A 106.(mil) 3-Mo.9 15% HRBN: Lowering Est. within which Linear business margin deterioration was most dramatic (45. Privatization. ROTH/Consensus est.0 2.9M.64E 0.3 500.59. We maintain our BUY rating and $24 price target. Debt (mil) Est. (mil) Mkt.75 3.

Harbin Tech Full Electric Co. Two of HRBN's major catalysts. The Company offers three key product lines: industrial electric motors. linear motors and their integrated application systems. 2011 VALUATION Our $24 PT is based on the offer price of the proposed buy-out. MENTIONED COMPANIES Page 2 of 5 400 . The Company operates. can be largely affected by central and local government policies. manufactures and sells an array of industrial electric motors. Volatile raw materials costs HRBN is subject to market fluctuations and volatility of two major raw materials. COMPANY DESCRIPTION Harbin Electric. automobile specialty micro-motors.. and other special motors. through its indirect wholly owned subsidiary. oil pump for oilfield and linear motors for urban metro lines. China Company Note . some of which could lead to delays in completing the transaction. The development of urban railways can experience delays that out of control of HRBN.HARBIN ELECTRIC. controller automation systems. Factors that may impede HRBN shares from reaching our price target include: s There are still numerous steps in the privatization process.May 11. Inc. copper and steel respectively. s Continued share weakness could lead to a lower takeout offer. engineers. customized linear motors. Ltd (HTFE). such as delay in construction. INC. develops. RISKS Change in macro policies in China. s A slow-down in China''s economic growth and continued inflation could impact sales and compress margins. and automobile specialty micro-motors.

881 109.030 1.3% -1037% 20.3% (69.1% -125% 10.647 8.015) 2.355 133.847 11.215) 0 30.6% (73.3% 26.672) 8.6% 23.840 (1.6% 11 17.7% 16.6% FY09 60.309 (18.044 27.101 (1.772) 7.133) 0 0 740 0 0 (302) 0 21. INC.612 34.320) 13.5% 45% (2.000 0 0 0 0 25.8% (335.968) 32.141 14.3% 28.432) 76.180 (5.8% 40% $0.8% (70.89 37% $2.5% 137% 20.07 -121% $0.064 33.879) 3.015 (4.950 34.922) 39.903 25.818) 37.858 29.142) 31.475 2.0% 0 92.078 23.236 126.426 8.40 20% 27.036) 20.626) 30.7% 242% $0.144 15.66 68% $0.2% (1.886) 173.1% (25.9% 38% $2.4% -574% 24.341 10.9% (468) 1.028 15.036 20.289 115.468 45.761 35.675 24.969 (4.310 2.063) 15.938 (4.0% -34% $0.664 27.441) 0 0 539 0 0 2.009 14.121 0 0 (434) 0 15.647 32.5% Q3'10A 19.037) 0 25.026 26.512 44.628 11.180 20.443 (8.159 10.742 33.831 16.2% (12.0% 13.632) 2.647) 0 0 1.903 0 0.458 27.603 18.9% FY11E 82.532 961 21.816 23.5% (2.1% 220% $0.569 (3.765) 22.324 42.1% (3.7% (1.043) 10.077 23.0% 67% (39.1% -5% $0.797) 8.932 18.261 15.8% 15.150 15.0% 0 16.364 22.974) 9.379 21.4% 24.27 2% 22.252 15.19 31% 21.676 15.073) 9.000 0 0 0 0 23.694 44.5% 21.8% 24% (9.33 7% 22.886) 6.440 30.363 60.119 0 0 (234) 0 26.426 22. and one-time items Source: Company reports.656 (7.354 31.51 -35% 31.050 2.282 24.157 29.9% 67% (10.930) 2.411 (2. derivative valuation.293) 33.3% 41% -$0.343 30.007) 20.348 27.924) 0 0 4.64 57% $0.985 25.0% 291% 85.352) 20.71 43% 25.176 (4.6% -5% (41.648 14.9% Q4'11E 21.1% 203% 19.170) 1.39 46% $0.0% 16.5% (5.3% (30.249 188.622) 76.176 18.0% (7.491) 18.003 23.042 105. 2011 HRBN .5% (409) 1.081 19.639) 9.020 8.0% 62% (7.371 18.500) 12.448 1.575 30.934 (7.104) 35.4% -47% 12.240 20.155 (13.118 20.114 1.77 -36% $1.0% 7% (3.847 25.1% 25.731 26.8% (2.383 10.465 426.763 476.924 35.083 26.163 (14.4% -25% (9.4% (91.Income Statement FY07 Revenue Linear Motors Automobile specialty micro-motors Controllers and other special motors Rotary industrial motors (Weihai Hengda) Simo Motor Total Revenue yoy growth % Cost of Sales Gross Profit gross margin% Operating Expenses Selling.296) 15.101 0 0 (14.801) 10.8% 93.338 99.066) 0 218 1.726 41.436 174.485 243.121 0 0 (434) 0 84.5% 85% $0.61 -6% 31.1% -187% 7.853 20.8% -23% 43.189 29.8% (803) 0.806 (12.970 29.918 17.327 0 0 1.278) 8.468 23.962 24.72 60% 31.com Page 3 of 5 401 .9% (1) 25.650 0 46.315 21.3% (404.9% 55.954) 4209.144 15.51 -37% $0.813 19.573 0 9.245 1.7% 88.569 251.2% (3.479) -37.674 14.000) 0 0 1. General and Administrative Expenses as % of revenue Research and Development Expenses as % of revenue Income From Operations operating margin yoy growth % Other Income(Expenses) Interest Income/expense-net Realized Gain/loss on Sale of Marketable Securities Non-operating Income/expense.666 93.8% (88.962) 7.65 60% 31.915) 15.064) 1.688 51.296 23.941) (1.5% Q3'09A 16.713 31.234 84.4% 0 66.3% 19% -$0.320 17.0% (594) 0.043 24.3% 8.036 (23.34 -47% $0.435 49.7% 14% (9.820 85% (73.8% Q1'11A 19.714 12.9% Q2'10A 20.171) 16.777 72.208 18.059) 9.780) 33.688 (8.885 149.767 7.806 10.846 0 30.7% -40% (38.0% 50% $1.89 36% 31.932 131.41 -31% $0.6% 21.726 (2.66 142% 31.8% (19.240 28.547 8.626 10.899 22.6% FY08 46.6% 27.903 (4.240 13.757 49.462 (9.356 18.553) 0 0 1.8% 8.3% Q1'09A 12.334 60.0% -22% $2.796) 25.713) 8.924) 0 0 1.183 2.1% (2.660) 11.815 18.0% (75.2% 270% (18.768) 135.672 72.9% 39% 92.787) 20.743) 35.8% (3.000) 0 0 1.5% Q3'11E 22.214 208.1% 7% 19.4% (2.109 44.937 (4.558 4.3% 69% (11.343 16.2% (1.3% Q1'10A 19.711 36.3% (12.791) 12.650 (2.9% (1.000) 4.578 0 120.939 12.356 15.545 18.000 0 0 0 0 115.000) 0 0 4.91 -10% $0. Net Other Income/expense-net Loss on cross currency hedge settlement Gain on debt extinguishment Change in Fair Value of Warrants Loss from disposal of subdivision Earnings before Taxes Provision for Income Tax effective tax rate Minority Interest Net Income (Loss) net margin % yoy growth % Non GAAP Net Income* net margin % yoy growth % Diluted EPS yoy growth % Non GAAP EPS yoy growth % Diluted weighted average shares outstanding EBITDA 36.5% 1% $0.037 (978) 0 0 1.7% Q4'10A 17.82 N/A $0.464 18.423 19. Roth Capital Partners estimates Mark Tobin (949) 720-5775 mtobin@roth.41 -38% 31.8% 14% $0.028 15.697 (1.0% -31% 19.0% 95% $2.9% -14% 66.862 55.2% 62% 6.343) 47.May 11.403 62% (32.620) 0 (189) 0 0 0 0 0 16.997) 2.61 6% $0.7% (823) 0.9% (14) 10.788 19.3% 246% (6.711 119.6% Q2'09A 11.379 21.8% 25.065 107.937 19.8% (146.150 15.040) 2.376 17.555 1.59 114% $0.12 -22% 31.478) 0 0 1.165 97.593) 0 0 5.6% 73% $0.953 23.863 (6.000 0 0 0 0 20.62 127% 31.000) 0 0 1.784 (1.79 137% 31.943 (836) 0 0 2.321 57.635 29.000) 4.552 31.599 105.24 -178% $0.873 16.4% 232% $0.7% (91) 12.0% 50% 25.326 21.511 48.305 103.0% 0 19.829 -1.131 (3.0% 0 20.6% (3.263 9.245 (843) 0 0 2.759 0 0 (1.9% (75.036 *Pro-forma net income excludes stock compensation.908) -4.0% 68% (14.658) 141.249) 6.HARBIN ELECTRIC.863 33.7% (3.4% 58% 20.10 -14% $2.6% 219% (10.316) 0 0 5.1% 8.1% -7% (3.417) 7.2% 119.913) 9.861 578.150) 36.2% (3.654 28.155 (737) 0 46 (1.477 39.332 33.881) 7.358 0 0 0 0 29.918 0 38.64 2% 31.903 25.723 75.158 (3.663) 1.304 0 0 (547) 0 16.613) 13.065 223.382 6.641 210.62 1% 31.641 23.2% FY10A 76.91 37% 18.195) 27.8% -8% 16.382 8.6% FY12E 101.5% -38% $0.6% (71.6% 34% (6.524) 15.393 28.19 31% $1.46 221% $2.066 (1.2% (393) 1.419) -14.466 (3.505 114.4% 3% $0.064 29.57 N/A $0.0% (290.138 15.408 20.1% Q2'11E 19.505) 8.866 (1.491) 19.313 0 0 65.3% (81.015) 0 (3.0% 34.942 106.282 104.093) 0.054) 21.481 91.770 46.5% (363) 0.423) 0.7% -41% (9.204 29.554 19.0% -37% 16.063 (9.206 -0.141 14.657 (623) 29.441 643 23.490 0 0 574 (623) 94.035) 20. China Company Note .725 36.325 2.7% Q4'09A 20.

which at the time the rating is instituted and or reiterated. an offer or solicitation of the securities discussed. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. information and facts discussed in this report other than the information regarding ROTH Capital Partners. indicates an expectation of a total return between negative 10% and 10% over the next 12 months.8 Our rating system attempts to incorporate industry.9 22. The material. related to the specific recommendations or views expressed in this report. but are in no way guaranteed to be complete or accurate. our investment rating on a stock and its implied price movement may not correspond to the stated 12month price target. are from sources believed to be reliable. I also certify that no part of my compensation was. indicates an expectation that the price will depreciate by more than 10% over the next 12 months. 2010. and as such. company and/or overall market risk and volatility. 2011 Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. an investment in the stock may involve a high degree of risk and may not Page 4 of 5 402 . directly or indirectly./Past 12 Mos. Not Covered (NC): ROTH does not publish research or have an opinion about this security. Ratings System Definitions .ROTH employs a rating system based on the following: Buy: A security. except for the first box. LLC and its affiliates. at any given point in time. Distribution of IB Services Firmwide IB Serv. This is not. LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months.9 5 8. Consequently. ROTH Capital Partners. which at the time the rating is instituted and or reiterated. Distribution Ratings/IB Services shows the number of companies in each rating category from which Roth or an affiliate received compensation for investment banking services in the past 12 month. which may only represent the first note written during the past three years. ROTH changed its rating system in order to replace the Hold rating with Neutral. buys and sells from customers on a principal basis. Sell: A security. as of 05/11/11 Count Percent 41 20. Additional information is available upon request. INC. China Company Note . This report should not be used as a complete analysis of the company. Inc. Additionally. is or will be. however. indicates an expectation of a total return of at least 10% over the next 12 months.0 0. On September 28.May 11. which at the time the rating is instituted and or reiterated. Each box on the Rating and Price Target History chart above represents a date on which an analyst made a change to a rating or price target.HARBIN ELECTRIC. Neutral: A security. Disclosures: ROTH makes a market in shares of Harbin Electric. Any opinions or estimates in this report are subject to change without notice.9 0 0 Rating Buy [B] Neutral [N] Sell [S] Count 196 56 2 Percent 76. industry or security discussed in the report.

Page 5 of 5 403 . INC. Copyright 2011. 2011 be suitable for all investors.HARBIN ELECTRIC. Member: FINRA/SIPC.May 11. No part of this report may be reproduced in any form without the express written permission of ROTH. China Company Note .

both debt and equity. we believe the case of HRBN is among those most likely to succeed at current stage. again. indicating the secure of financing. on April 29.2 31. Tianfu Yang. for the purpose of HRBN’s LBO transaction.4 $2.05 $613. (HRBN – Nasdaq – $19.64 2Q $0.77 25. Mr.53M shares to be purchased by ~$445M given the $24/share offering price. (3) large amount available funding in China’s private equity market and (4) the driven management. However. a $400M term loan (expires on April 2.56 $0.64 $0.52 7.96 Consensus-First Call Quarterly EPS FYE: December 2011E 2012E 1Q $0.1 6. which is the announced LBO offer price. The remaining $64M was committed by Abax (on April 20.0 $140.6 $549.7 $123. 2012). in our opinion. Chairman and CEO. 2011) in forms of both equity and debt. 2012.82 4Q FY $2.7% of HRBN’s total 31.76 $0. the 13-D indicated China Development Bank (CDB) committed.59 $24 $14. in our view. The sources of fund are Chinese institutions.0 Current Current EPS P/E $0. 2011. The current discount of share price seems unjustifiable by the near term risks. We reiterate our Buy and $24 price target. HRBN’s share price initially jumped by over 10% to above $21. To suffice the funding.74 3Q $0. at least. Although we admit there are a few announced LBO proposals of Chinese companies that may bear higher risks of being unsuccessful.6 $112. The 13-D showed that Mr. Reiterate Buy The anticipated news finally came.maximgrp. leaving 18.52 $2.0 $2. Yang and a few other senior management members collectively own 40.74 3Q $0. NY 10174 – www. Yang and Abax jointly submitted an LBO proposal to HRBN’s board with the $24/share offer price on April 20. If adding the purchase of outstanding options.EQUITY RESEARCH COMPANY UPDATE China May 3. HRBN is a differentiated case.6 415 $18.96 6. a few other member of HRBN’s top management and Hong Kong private equity company. the stock traded back to end the day with less than 5% gain.81 $0. (000) Book Value/Share: Dividend/Yield: Risk Profile: Maxim Group FYE: December 1Q 2Q 3Q 4Q FY Maxim Group FYE: December 2009A: GAAP 2010A: GAAP 2011E: GAAP 2012E: GAAP LT Earnings Growth $19. PhD ehe@maximgrp. MD.4 $131.com SEE PAGES 4-6 FOR IMPORTANT DISCLOSURES AND DISCLAIMERS 404 . Abax Global Capital (Abax) together filed a 13-D to SEC.64 2Q $0.8 $2. The trading gap to offering price does not appear warranted. ~$464M is needed to complete the transaction according to the filing. Maxim Group Current Current FYE: December 2011E 2012E 1Q $0.58 $0.$25.com (212) 895-3718 Maxim Group LLC 405 Lexington Avenue New York. Vol.2 $134. which was originally announced in October 2010.67 $0. 2011 Closing Price (5/2/11): 12-Month Target Price: 52-Week Range: Market Cap (MM): Shares O/S (MM): Float (MM): Shares Short (MM): Avg.3 20.76 $0.76 $0.50 NA Medium Revenues ($M) 2011E 2012E $104. It seems that the market still does not believe the LBO is actually going to happen.52 $0.6 15% GAAP Quarterly EPS Harbin Electric.46 8.95 . (2) most likely reliable historical financial results. Yesterday morning before the market opened.59) Buy It is tough to believe a Chinese LBO.25M outstanding shares.4 $471. have a good chance to go through successfully. In addition.8 $123. although it may.80 $3. Our opinion is based on (1) HRBN’s solid asset quality. We believe the future steps from here include.6 $150.77 $0.35 Echo He. both of which. Inc. HRBN’s board approval of the submitted LBO proposal and shareholders voting. take some time.82 4Q FY $2. After the news was released. warrants and transaction costs.

11 0.05 0.12 $ 10.02 8.7x 7.4x 5.72 23.01 1.675 Shanghai Electric Group 601727-S $ 1.6x Chinese Industrial Companies China Automotive CAAS A-Power APWR FushiCopperweld FSIN Lihua International LIWA Shengdatech SDTH Wonder Auto WATG ChemSpec CPC China Gerui Adv.2x 41.39 $ 259 BroadOcean 002249-S $ 3.59 7.8x 20.04 0.12 0.59 LAST $ $ $ $ $ $ $ $ $ 9.3x 16.86 $ 4.9x 19.30 1.84 $ 6.500 1.6x 10.04 0.19 $ $ $ $ $ $ $ $ $ 1. (HRBN) Exhibit 1.843 Rockwell Automation ROK $ 86.0x 4.50 3.02 $ $ $ $ $ 0.800 Illinois Tool Works ITW $ 58.818 ABB ABB $ 26.9x 15.03 $ 29.17 $ 4.1x 14.94 $ 61.23 $ $ $ -$ 0.29 $ 1.8x 7.9x 10.19 $ $ $ $ $ 0.7x 12.19 0.1x 14.5x 34.10 0.11 0.5x 5.08 3.4x 33.74 $ 4.81 $ 45.9x 10.06 1.3x 8.82 n/a -$ 2.28 34. HRBN – Comparable Companies 5/2 Company Harbin Electric TKR HRBN Price $ 19.97 0.57 $ 9.209 Zhejiang Founder Motor 002196-S $ 2.5x 11.028 Average Source: Thomson One.5x 6.08 0.95 1.23 0.29 $ 3.0x 4.7x 45.80 0.6x 22.9x 12. Inc.06 $ $ $ $ $ $ $ $ $ 1.9x 14.39 1.2x 10.0x 7.8x 20.0x 4.49 0.9x $ 6.2x 5.4x 7.57 1.44 $ 5.40 0.1x 3.7x 11.405 Lear Corporation LEA $ 52.25 $ 2.3x 12.54 $ 5.9x 65.3x 13.26 0. Material CHOP SORL Auto Parts SORL Average $ $ $ $ $ $ $ $ $ 255 185 311 309 192 189 270 206 101 $ $ $ $ $ $ $ $ $ 1.41 1. Bloomberg and Maxim Group estimates.3x 3.119 393 167 $ $ $ $ $ 0.1x 6.29 $ 23.2x 22.3x 12.4x 9.4x 9.388 Average US/International Motor Companies Siemens SI $ 144.44 $ 2.33 8.3x 20.98 $ 1.36 0.47 4.3x 13.29 0.89 $ 3.03 0.4x 5.24 0.94 $ 7.83 $ 125.9x 11.2x 24.59 1.8x 19.69 $ 3.159 Cummins CMI $ 118.5x 14.22 0.7x 12.12 0.9x 4. $ $ $ $ $ 0.8x -15.332 Franklin Electric FELE $ 44.0x 4.08 8.34 $ 3.0x 30.8x 6.52 $ 2.6x 12.8x 12.05 $ 4.6x 30.5x 4.6x 18.6x 7.8x 22.80 0.42 4.17 1.3x 15.908 Smith AO AOS $ 43.20 1.5x 10.70 1.9x 5.22 $ $ $ $ $ 656 1.0x 3.9x 16.09 $ 2.12 0.8x 17.7x 14.02 $ $ $ $ $ 0.53 $ 3.7x 5.42 n/a $ 2.9x 13.1x 6.7x China Mainland Listed China Motor Companies Xiangtan Electric 600416-S $ 3.49 1.55 $ 5.8x Maxim Group LLC 2 405 .0x 4.24 $ 2.25 MktCap (mm) $ 614 EPS P/E _________________________ _________________________ 10A 11E 12E 10A 11E 12E $ 2.52 $ 2.1x 8.4x 50.3x 16.55 5.4x 21.37 $ 5.92 5.46 $ 2.2x 4.99 $ 12.374 Magna International MGA $ 51.96 8.94 $ 9.Harbin Electric.27 1.1x 17.8x HK Listed China Motor Companies Harbin Power Equipment 1133-HK $ Shanghai Electric Group 2727-HK $ Dongfang Electric Group 1072-HK $ Chongqing Machinery & E2722-HK $ Shanghai Prime Machiner2345-HK $ Average 0.03 0.988 Dongfang Electric Group 600875-S $ 3.09 $ 1.03 0.16 0.4x 9.8x 21.8x 7.29 0.0x 17.71 1.03 0.0x 28.04 0.4x 13.08 $ 5.5x -17.2x 9.62 $ 1.32 1.03 0.97 0.63 $ 1.6x 17.11 0.14 n/a $ 2.439 Regal Beloit RBC $ 75.6x 18.0x 15.0x 7.5x 16.87 $ 1.4x 15.91 $ 1.94 1.2x -20.5x 6.34 8.82 $ 5.95 $ 4.20 $ 1.29 $ 10.04 0.693 Emerson Electric EMR $ 60.18 0.

0% (4.9 19% 21.2) 10. net Interest expense.5 (5.1 31.0) 9.0) 7.8) 19.5 (4.0% 17.3% 7.9) 0.7 66. net Total other income (expense) Income before income taxes Provision for income taxes Tax Rate Net income before noncontrolling intere Minority interests As % of net income Net income Y/Y Growth Net Margin Foreign currency translation adjustmen Comprehensive income Weighted average shares outstanding Basic Diluted EPS (to controlling interest) Basic Diluted Y/Y Growth D&A Share-based compensation EBITDA EBITDA margin Exchange Rate (RMB/US$) $ $ 2004 Full Yr 2005 Full Yr 2006 Full Yr 2007 Full Yr 36.8 $ 223.39 6.1% 93.3 32.5 31.19 $ 0.Harbin Electric.82 $ 8% 159.4 2.8) 19.2) (6.57 $ 1.6 17.96 18% 14.8) 17.2 21.4 6.8% (10.3 76.1 18.0%) 0% 15% -1% 10% 10% 10% 10% 10% 28% 14% 13% 13% 12% 12% 13% 12% 12% 12% 12% 12% 93.48 35.2) 0.0% 23.56 $ 31% (35.3 47.4 $ 549.99 $ 1.0 0.4 10.6 $ 387% (12.1) 0.4 18.8 (29%) 18.2) (0.0 (1.0 34.0% 26.0) 0.8 7% 29% (0.2 27% -15% -10% 0% 20% -2% 10% 15% 10% 15% 13% 56% 18% 16% 16% 16% 16% 16% 15% 15% 15% 16% 15% 18.5 64.9% (18.3 0.3 47.5 11.0% 93.8% (3.3 67% 21.1 31.0 (19.8 1% 29.8 0.8 1.0% 25.0% 21.0% 18.5 15% 29% (1.1% 0.0 0.1) 1.0% 17.7% (4.0 51% (15.7 17.5 (4.7 17% 29% (1.8% 6.8% 7.7 135.0 62% 85% 85% 91% (0.2 22.7) 0.2 1.45 6.4 0.52 $ 0.1 2.8) (87.7) 23.1 9% 17.3 25% 16.2% (42.8 94.1% 0.9 27.65 $ 0.6 2008 Full Yr 49.2 $ 123.0% 13.76 6.3% (11.5 $ $ 0.57 6.7 (4.3% (1.5 49.0 2.4 $ 150.9 0.36 Source: Company reports and Maxim Group estimates.8% (9.2) (93.2) 31.8 $ 112.4% 26.3 (16.6 25.3% 24.83 $ 0.8 0.7% (8.0) 9.2% 23.7 70% 48.0% 10.5 (1.6% 4.0% 2.3 1% 20.3 13% 20.1 0.2 19% 18% 71.2 17.1 60.1 31.8% (10.1 31.5 1.48 6.4 $ 71% (20.2% (11.8% 79.3 31.5 40.1 18% 17.2 $ 426.3% 0.5) 3.8) 0.0% 18. Inc.36 0.8% (10.5 31.6% 76.52 $ 0.9% (0.2 0.1 0.77 $ 2.0% 26.1 33.2) 19.3 58.1 20% 20.8 24.4 14% 20.8 85% 28% 27.8) (95.2) 1.5) 7.8 106.0% 93.6 (6.5 31% 0% 10% 15% 30% 14% 25% 20% 18% 15% 19% 0% 22% 21% 23% 22% 23% 23% 23% 23% 23% 24% 23% 188.6% (1.2) (79.3 43.7 62.4) 0.0% 24.1 19.2 6.0 42.9) 0.9) 25.0 20% 29% (1.0 0.9% 1.4 45% 28.8 18% 17.0% 5.7) (106.5 16.0% 23.7%) 221% (21.8% 17.5) 27.3 0.8) 16.7 36.7 0.9 (4.0 30.1 0.1) (4.3 23.8% (0.7 (1.6 (23%) 8.1) 8.1 67.0% 24.74 $ 31% 40.25 $ 0.6) 1.3% (2.2% 6.4) 93.6 31.0 0.42 6.4) 2.0 10.5 1.4 (3.2 16.6% 8.9) (390.0% 16.8) (87.77 $ 0.5) 29.1% 24.6% 1.67 $ 0.5 (12.83 74.6 52.2 (14.9) 9.1 40.52 $ 2% 13.8 14.0% 5.1 3% 16.9% (13.7 31.2) (0.4 75% 20.5) 15.3 22% 27% 40.9 18.7% 8.0% 20.0) 0.5 51.4 31.0 $ 131.2) 27.6) (99.2 (21.4 0.80 31.1 42.9% 0.9% 1.7) 14.4 50% 21.11 $ 0.5 (4.2 31.6) 17.3% (1.07 1.4 48.9 59.2 109.0 333% 42.0 19.30 1.4 -8% 29% (0.2% 21.1) 0.0% 24.4% (20.3) 2.8% 2.7 90.0 16% 29.0 (1.6 (14%) 29% (0.0) 7.4 0.5 $ 104.2 16.8 31.3) 17.0 23.1 23.3% 23.8% (11.2%) 15.1% 0.6 350% 48.1% 25.0% 79.5 71.0 11. HRBN-Income Statement (In millions except per shr) Revenue Drivers: Linear Motors Y/Y Growth % of Total Rev Specialty Micro-Motors Y/Y Growth % of Total Rev Rotary Motors .2) 0.2 31.2% (11.3 76.8 262.64 $ 24% 39.0% 79.2 (2.1) 24.6) 0.3 0.8 (1.2) 0.3 30.8% (41.4 84% 45.9 31% 20.3) 2.7 0.3% (5.2) (0.6 0.8 36.6 25% 19.4) 28.9% 1.1 31.6) 10.5% 6.0% 9.8% (10.0%) (3.7 1.7 77% 31.1 (3.5% (11.4 221.2 13.98 2.7) 8.0 0.0% 10.5 84.0 20.0% 21.2) 3.7 0. (HRBN) Exhibit 2.36 0.3 (1.8 21.4 74.4) 29.7 $ 140.4% (1.3% (12.5 25.1 14.3 0.0%) 15.3 25.8 62% 25.3 31.5) 11.9) 15.0 89% 18.3) (24.5 0.2) 24.4 0.1) 34.0) 32.3 16.4% 20.2) 17.66 $ 82% 0.9 0.1%) 7.1) 0.7 13% 29% (1.1) 0.6 (4.1 31.1) 7.2) 21.84 105.0% 16.28 $ 23.4 $ 120.2 (25%) 18.Weihai Y/Y Growth % of Total Rev Rotary Motors .7%) 6% 12% 24% 11% 18% 20% 14% 14% 16% (33.2) 7.Xi'an Y/Y Growth % of Total Rev Revenues Y/Y Growth Cost of sales Gross profit Y/Y Growth Gross Margin R&D As % of Rev G&A As % of Rev Total operating expenses Income from operations Y/Y Growth Operating Margin Other income (expenses).3) (146.3% (9.8 11% 10% 15% 20% 25% 18% 20% 25% 15% 15% 18% 0% 0% 20% 44% 47% 46% 48% 47% 47% 48% 48% 48% 48% 48% 65.01 $ 0.0% 16.4) 94.9 15.1% (42.4 65% 49.8 13.76 $ 73% 136.5) 4.6 29.0 (2.2 28.7) 8.5 126.2 (1.2) 17.1) 11.8) (0.4 157% 23% 32% $ 44.46 $ 0.7) 11.0) (73.6 61% 34.0% (3.6 47.1% 6.2) 17.0 0.7 15.0 43.2) 1.6 18.2 21.6 $ 134.8 18.8% (39.7 (31.2 6.3 31.9% 1.8 17.8) (74.3) 1.36 60.3) 17.9) 17.3 16.3) 5.0% 16.51 6.3) 17.9% 5.3 32% 17.1% 7.6 $ 471.54 6.5) 7.5 20.4 31.1 (4.5% (10.9) 30.1) 16.9) 113.9 1.1 31.6% (1.0 (4.9% (0.6) (290.5 35% 41% 33.5 0.68 $ 0.76 $ 0.3 28.4 48.6% 0.8% 79.8 (1.8% (10.8) 55.6) (334.3) 9.6 $ 123.6% (45.3 20.76 $ 13% 43.5% 16.53 $ 2.3% (0.5 31.0% 24.91 $ 53% (10%) 2.9 (2.8% (0. Maxim Group LLC 3 406 .2% (10.0 15.2 31.8 291% 18.5 31.1) 1.8 2009 Full Yr 2010 Full Yr 1Q11E 31-Mar 2Q11E 30-Jun 3Q11E 30-Sep 4Q11E 31-Dec 2011E Full Yr 1Q12E 31-Mar 2Q121E 30-Jun 3Q12E 30-Sep 4Q12E 31-Dec 2012E Full Yr $ 4.3 60.0% 20.7% 1.8% (9.0% (11.5 46% 39.0 31.9 22% 29% (1.6) (6.9 (7.6% (7.47 $ 0.3 129.4) 0.7 2.77 $ 2.5) 25.74 $ 0.67 $ 18% 37.1%) (31.3% 19.9 35.2) 113.0 95.3% 6.5% 1.8) 25.9% (0.0 31.5 (3.6% 2.2 0.3 31.9) 17.0% 2.2) (0.4 35.0 13% 17.8% (38.9 (8%) 25.9 (4.

Maxim Group makes a market in Harbin Electric.5% 0.9% * Relative to Nasdaq Composite. attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer. enterprise value/sales. I.Harbin Electric. Inc. An Under Review (UR) rating represents a stock that the Firm has temporarily placed under review due to a material change.0% Expected Performance* Buy Hold Sell Expected total return of 15% or more over next 12 months Expected total return of plus or minus 14% over next 12 months Expected total negative return of at least 15% over next 12 months with Rating 64.0% 0. in the next 3 months. but are not limited to. a portion of which is generated by investment banking activities. earnings expectations or sales growth as they relate within an industry group or to the broader market. or will be directly or indirectly related to the specific recommendation or views expressed in this research report. the company’s failure to achieve our earnings and revenue estimates. Maxim Group expects to receive or intends to seek compensation for investment banking services from Harbin Electric. is. Inc. Individual sector analysis.com Maxim Group LLC Stock Rating System As of: % of Coverage Universe 5/3/2011 % of Ratings that Firm received Banking fees 24. Inc. (HRBN) DISCLOSURES Source: Investars.5% 31. unforeseen macroeconomic Maxim Group LLC 4 407 . sum of the parts analysis and discounted cash flow. Price Target Risks: Investment risks associated with the achievement of the price target include. Echo He. Valuation Methods: One or more of the following valuation methods are used by Maxim Group analysts in making a ratings or price projection: Analysis of companies P/E ratio. price/book ratio. Furthermore. including the firm’s total revenues. The research analyst(s) primarily responsible for the preparation of this research report have received compensation based upon various factors. no part of my compensation was.6% 3.

changing competitive pressures and adverse market conditions. both price volatility and fundamental risk are expected to be below the industry. Accordingly. Price Volatility: Because of the inherent fundamental criteria of the companies falling within this risk category. and/or a short operating history. refer to the most recent form 10-Q or 10-K that the company has filed with the SEC. (3) Raw material price increases. fundamental risk is expected to be above the industry. Investment Risks: Aside from general market and other economic risks. Speculative stocks may not be suitable for a significant class of individual investors. Accordingly. risks particular to our Harbin Electric. the company’s ability to recruit and retain competent personnel. changes in investor sentiment regarding the specific company or industry. lack of earnings. Speculative – Fundamental Criteria: This is a risk rating assigned to early-stage companies with minimal to no revenues. (2) Slowdown of Chinese economy. positive cash flow. (HRBN) and/or industry events that adversely impact demand for the company’s products and services. product obsolescence. Inc. the price volatility is expected to be significant with the possibility that the investment could eventually be worthless. positive cash flow. Price volatility: The price volatility of companies falling within this category is expected to be above the industry. Accordingly. balance sheet concerns. Medium – Fundamental Criteria: This is a risk rating assigned to companies that may have average revenue and earnings visibility. and is fairly liquid. Maxim Group LLC 5 408 . and (6) Potential equity issuance. and low market cap or public float. (4) High competition in industrial motor market. fundamental risk is expected to be significantly above the industry. rating include: (1) Failure of the proposed LBO to be completed. Accordingly. High-risk stocks may not be suitable for a significant class of individual investors. RISK RATINGS Risk ratings take into account both fundamental criteria and price volatility. Inc. Low – Fundamental Criteria: This is a risk rating assigned to companies that may have above-average revenue and earnings visibility. (5) Difficulties of developing linear motor market. both price volatility and fundamental risk are expected to approximate the industry average.Harbin Electric. and is fairly liquid. For a complete discussion of the risk factors that could affect the market price of the company’s shares. High – Fundamental Criteria: This is a risk rating assigned to companies having below-average revenue and earnings visibility. negative cash flow.

This report is not to be relied upon in substitution for the exercise of independent judgment. LLC (“Maxim”). based on their specific investment objectives. other reports that are inconsistent with. Information. is made regarding future performance. express or implied. or disclosed to another party. without the prior written consent of Maxim Group. the potential losses may exceed the amount of initial investment and. Investors in securities such as ADRs. Securities recommended. but Maxim makes no representation as to their accuracy or completeness. (HRBN) DISCLAIMERS Some companies that Maxim Group LLC follows are emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. including the possible loss of principal invested. This publication is confidential for the information of the addressee only and may not be reproduced in whole or in part. you may be required to pay more money to support these losses. the information presented in this report. The price. This communication is neither an offer to sell nor a solicitation of an offer to buy any securities mentioned herein. views and analytical methods of the analysts who prepared them and Maxim is under no obligation to ensure that such other reports are brought to the attention of any recipient of this report. opinions and estimates contained in this report reflect a judgment at its original date of publication by Maxim and are subject to change without notice. effectively assume this risk. The value of securities is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities. Maxim accepts no liability for loss arising from the use of the material presented in this report. and reach different conclusions from. Investors must make their own determination as to the appropriateness of an investment in any securities referred to herein. financial status and risk tolerance. offered or sold by Maxim: (1) are not insured by the Federal Deposit Insurance Company. Maxim may have issued.Harbin Electric. in such circumstances. and may in the future issue. Indeed. except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to Maxim. and no representation or warranty. Information and opinions presented in this report have been obtained or derived from sources believed by Maxim to be reliable. copies circulated. the values of which are influenced by currency volatility. value of and income from any of the securities mentioned in this report can fall as well as rise. Past performance should not be taken as an indication or guarantee of future performance. Inc. ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST Maxim Group LLC 6 409 . Those reports reflect the different assumptions. and (2) are subject to investment risks. (2) are not deposits or other obligations of any insured depository institution. in the case of some investments. The securities discussed in Maxim Group LLC research reports may not be suitable for some investors.

NASDAQ | Buy HRBN: 13D Suggests Privatization On Track $14. (949) 720-5775 mtobin@roth.$25.5E We believe today's announcement is the most significant for the HRBN privatization and view the remaining steps largely as formalities.11E 6.00 Feb-11 Aug-10 Sep-10 Nov-10 Dec-10 Mar-11 Jan-11 Jun-10 Oct-10 Apr-11 Jul-10 Intraday Price: $ 20. CFA.6 25% Form 13D's filed this morning suggest that the financing for HRBN's privatization is in place and the deal is on track for completion at $24 per share. Form 13D's were filed by HRBN Chairman Yang and by Abax Global Capital Ltd. Vol.25 4. EPS Growth Auditor: FRAZER FROST LLP EPS (Net) Yr Dec 1Q 2Q 3Q 4Q YEAR P/E —2010— 0.$18.Mark Tobin.75 3. in our view.0x s s s s Proposed $24 buyout price Received commitment for $400M term loan facility from China Development Bank Received commitment for up to $63. LLC | 24 Corporate Plaza | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC 410 .05 31.Price Target Cash (mil) Tot. 28 26 24 22 20 18 16 14 12 HRBN One-Year Price and Volume History 6.com Sales (800) 933-6830.5A —2011E— Curr 112.8M equity and debt financing from Abax Subject to customary closing conditions.25 1.72 . 12-Mo.00 $98.95 .79A 0.76E 5.014 $24. Avg. 2011 Global Energy & Industrials: China Harbin Electric.(mil) 3-Mo.50 0.8 $79.25 $585.9E 122. Key takeaways include: —2012E— Curr 3. Industry Update Stock Data 52-Week Low .1E 512.72A 6. (mil) Mkt.50 3.75 0.9x —2011E— Curr 0.62A 2.87E 0. (86) (21) 6141-5757 x 7825 ezhao@roth.66A 0. including shareholder approval EPS (Net): Pro-forma EPS for all periods Revenue ($ millions) Yr Dec 1Q 2Q 3Q 4Q YEAR —2010— 105. Inc.87E 3.72E 0. Cap.00 5.8E 140.2A 426.4A 106. Debt (mil) Est. This morning. 3Yr. Roth Capital Partners.5A 105.0 412.21 at 11:11am ET Important Disclosures & Regulation AC Certification(s) are located on page 3 to 4 of this report. We maintain our BUY rating and $24 price target.65E 0.65A 0.3E —2012E— Curr 625.5E 136.0x | HRBN .com Emma Jia Zhao.High Shares Out. Trading (800) 933-6820 CHINA FLASH NOTE | EQUITY RESEARCH | May 2.4A 109.00 2.

customized linear motors. COMPANY DESCRIPTION Harbin Electric. some of which could lead to delays in completing the transaction. Inc. Factors that may impede HRBN shares from reaching price target include s There are still numerous steps in the privatization process.HARBIN ELECTRIC. The development of urban railways can experience delays that out of control of HRBN. s Continued share weakness could lead to a lower takeout offer. such as delay in construction. linear motors and their integrated application systems. s A slow-down in China''s economic growth and continued inflation could impact sales and compress margins. May 2. oil pump for oilfield and linear motors for urban metro lines. The Company operates. Ltd (HTFE). Volatile raw materials costs HRBN is subject to market fluctuations and volatility of two major raw materials. can be largely affected by central and local government policies. INC. develops. 2011 VALUATION Our $24 PT is based on the offer price of the proposed buy-out. automobile specialty micro-motors. Harbin Tech Full Electric Co. copper and steel respectively. through its indirect wholly owned subsidiary. Two of HRBN''s major catalysts. RISKS Change in macro policies in China. manufactures and sells an array of industrial electric motors.. controller automation systems. Page 2 of 4 411 . The Company offers three key product lines: industrial electric motors. and other special motors. and automobile specialty micro-motors. engineers.

an investment in the stock may involve a high degree of risk and may not Page 3 of 4 412 . Neutral: A security.5 1.7 22. related to the specific recommendations or views expressed in this report. INC.3 5 8. Any opinions or estimates in this report are subject to change without notice. as of 05/02/11 Count Percent 41 20. Disclosures: ROTH makes a market in shares of Harbin Electric. an offer or solicitation of the securities discussed. except for the first box. This is not. at any given point in time. This report should not be used as a complete analysis of the company. LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. I also certify that no part of my compensation was. Not Covered (NC): ROTH does not publish research or have an opinion about this security. but are in no way guaranteed to be complete or accurate. Distribution of IB Services Firmwide IB Serv. The material. On September 28. which at the time the rating is instituted and or reiterated. Consequently.3 0 0 Rating Buy [B] Neutral [N] Sell [S] Count 202 60 4 Percent 75. Additional information is available upon request. industry or security discussed in the report. is or will be. Each box on the Rating and Price Target History chart above represents a date on which an analyst made a change to a rating or price target. indicates an expectation of a total return of at least 10% over the next 12 months. company and/or overall market risk and volatility. Additionally. LLC and its affiliates. are from sources believed to be reliable. buys and sells from customers on a principal basis./Past 12 Mos. ROTH changed its rating system in order to replace the Hold rating with Neutral. indicates an expectation that the price will depreciate by more than 10% over the next 12 months. May 2. 2011 Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. Distribution Ratings/IB Services shows the number of companies in each rating category from which Roth or an affiliate received compensation for investment banking services in the past 12 month. and as such. Ratings System Definitions . directly or indirectly. which at the time the rating is instituted and or reiterated. which at the time the rating is instituted and or reiterated. indicates an expectation of a total return between negative 10% and 10% over the next 12 months. Inc. information and facts discussed in this report other than the information regarding ROTH Capital Partners.HARBIN ELECTRIC. our investment rating on a stock and its implied price movement may not correspond to the stated 12month price target. Sell: A security.ROTH employs a rating system based on the following: Buy: A security. which may only represent the first note written during the past three years. ROTH Capital Partners. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements.5 Our rating system attempts to incorporate industry. however. 2010.

May 2. Member: FINRA/SIPC. 2011 be suitable for all investors. Page 4 of 4 413 . INC. Copyright 2011.HARBIN ELECTRIC. No part of this report may be reproduced in any form without the express written permission of ROTH.

) 31 Float (mil. William Blair & Company estimates Brian Drab. micro-motors.) 21 Average Daily Volume 404.com China-based Harbin Electric is a leading manufacturer of electric motors in China.72 2012E NA NA 6. Shanghai.72 $2.5x Return on Equity (TTM) 18.1 Book Value Per Share (MRQ) 5. CFA 312. 2011 Stock Rating: Outperform Company Profile:Aggressive Growth Symbol: HRBN (NASDAQ) Price: $18.  Global Industrial Infrastructure │Industrial Technology May 02.9x 6. Our final rating was Outperform. CFA +86 21 2327 2260 lcai@williamblair. based on the submission of a proposal from the CEO and his partners to the board of directors to acquire all the publicly held shares of the company at $24 per share. 414 .8123 tmulrooney@williamblair. Dropping Coverage We are dropping coverage of Harbin Electric. Please consult the last page of this report for all disclosures. Inc.9x 6.com Liping Cai.9 EBITDA (TTM) 103.): $560 Fiscal Year End: December Long-Term EPS Growth Rate: 25% Dividend/Yield: None 2010A Estimates EPS FY CY Valuation FY P/E CY P/E $2.0 Enterprise Value (mil.Equity Research Harbin Electric.364.003 Financial Data (Thomson Financial) Long-Term Debt/Total Capital (MRQ) 26. and rotary motors.72 2011E $2. Inc. Weihai.3 Two-Year Price Performance Chart $25 $20 $15 $10 $5 $0 12/31/09 12/31/10 Source: Thomson Financial.9x NA NA Trading Data (Thomson Financial) Shares Outstanding (mil. Manufacturing operations are located in the cities of Harbin.0 Enterprise Value/EBITDA (TTM) 5. The company generates about 90% of sales in China and 10% in international end-markets.com Tim Mulrooney 312.72 (52-Wk. and Xi’an.) 566.8280 bdrab@williamblair. including linear motors.: $15-$25) Market Value (mil.364.

May 2. Inc. and its affiliates beneficially own or control (either directly or through its managed accounts) 1% or more of the equity securities of Harbin Electric.C. 2) financial profile (earnings growth rate/consistency.L. or will be related. Core Growth (C) – Fundamental risk is approximately in line with the broader William Blair universe.C. but various regulations may prohibit us from doing so. Company profile is a fundamental assessment. Not Rated (NR) – the stock is currently not rated. L. Company Profile: The William Blair research philosophy is focused on quality growth companies. and 2) no part of his/her compensation was. Harbin Electric Inc. defined as companies for which William Blair has received compensation for investment banking services within the past 12 months.8280 2 415 .L. Other than certain periodical industry reports. industry outlook. Individual ratings reflect the expected performance of the stock relative to the broader market over the next 12 months. Aggressive Growth (A) – Fundamental risk is higher relative to the broader William Blair universe. uses a three-point system to rate stocks. 2009 . Liping Cai attests that 1) all of the views expressed in this research report accurately reflect his/her personal views about any and all of the securities and companies covered by this report. (HRBN) Previous Close: $18. over a longer-term horizon. of the business risk of the company relative to the broader William Blair universe.L. to the specific recommendations or views expressed by him/her in this report.C.L. Inc. economic environment. as of the end of the month ending not more than 40 days from the date herein. market leadership. L. Market Perform (M) – stock expected to perform approximately in line with the broader market over the next 12 months. Banking Relationships* Outperform (Buy) Market Perform (Hold) Underperform (Sell) Percent 8 2 0 *Percentage of companies in each rating category that are investment banking clients. valuation. etc. is a market maker in the security of Harbin Electric. We seek to update our research as appropriate.L. L. Factors assessed include: 1) durability and strength of franchise (management strength and track record. Stock Rating: William Blair & Company. The assessment of expected performance is a function of near-term company fundamentals. return on investment. and FactSet 8/11/09 . Established Growth (E) – Fundamental risk is lower relative to the broader William Blair universe. Growth companies by their nature tend to be more volatile than the overall stock market. and may have a long or short position. R = Restricted. William Blair & Company.C. cash flow generation. Outperform (O) – stock expected to outperform the broader market over the next 12 months.William Blair & Company. Underperform (U) – stock expected to underperform the broader market over the next 12 months.364. William Blair & Company. D = Dropped.O 12/31/10 Legend: I = Initiation. Additional information is available upon request. 3) other factors such as sector or industry conditions. accounting). the majority of reports are published at irregular intervals as deemed appropriate by the analyst. 2011 $26 $24 $22 $20 $18 $16 $14 $12 $10 $8 12/31/09 Source: William Blair & Company. distinctive capabilities). L. and other factors. confidence in long-term growth prospects. confidence in earnings estimates. balance sheet. is.72 Current Rating: Outperform Apr 29. directly or indirectly. Brian Drab. CFA 312.C. NR = Not Rated @ = Analyst Change Current Rating Distribution (as of 04/30/11) Coverage Universe Percent Outperform (Buy) Market Perform (Hold) Underperform (Sell) 58 31 1 Inv. L. Brian Drab.

THIS DOCUMENT IS NOT TO BE DISTRIBUTED OR PASSED ON TO ANY “RETAIL CLIENTS. LIMITED. L. CFA 312.” NO PERSONS OTHER THAN PERSONS TO WHOM THIS DOCUMENT IS DIRECTED SHOULD RELY ON IT OR ITS CONTENTS OR USE IT AS THE BASIS TO MAKE AN INVESTMENT DECISION.364. institutional sales. AND IS ONLY MADE AVAILABLE TO. William Blair & Company. No part of this material may be copied or duplicated in any form by any means or redistributed without the prior written consent of William Blair & Company. Our salespeople. AND IS DIRECTED ONLY AT. and other professionals may provide oral or written market commentary or trading strategies—to our clients and our trading desks—that are contrary to opinions expressed in this research.6 OF THE FSA HANDBOOK (BEING “ELIGIBLE COUNTERPARTIES” AND “PROFESSIONAL CLIENTS”). and in some instances in printed form. act as principal in.C. REGULATED BY THE FINANCIAL SERVICES AUTHORITY (FSA). corporate finance.C.L.L. Copyright 2011. traders.William Blair & Company. and buy or sell the securities referred to in this report. firm profitability. Our research is disseminated primarily electronically. THIS MATERIAL HAS BEEN APPROVED FOR DISTRIBUTION IN THE UNITED KINGDOM BY WILLIAM BLAIR INTERNATIONAL. PERSONS FALLING WITHIN COB 3. This research is for our clients only.8280 3 416 . including asset management. L. and retail brokerage. THE FACTUAL STATEMENTS HEREIN HAVE BEEN TAKEN FROM SOURCES WE BELIEVE TO BE RELIABLE.5 AND 3. L.L. The ratings and company profile assessments reflect the opinion of the individual analyst and are subject to change at any time.C. Our asset management and trading desks may make investment decisions that are inconsistent with recommendations or views expressed in this report. BUT SUCH STATEMENTS ARE MADE WITHOUT ANY REPRESENTATION AS TO ACCURACY OR COMPLETENESS OR OTHERWISE. including performance of his or her stock recommendations. L. “WILLIAM BLAIR & COMPANY” AND “WILLIAM BLAIR & COMPANY (SCRIPT)” ARE REGISTERED TRADEMARKS OF WILLIAM BLAIR & COMPANY. We will from time to time have long or short positions in. Electronic research is simultaneously available to all clients. contributions to all of the firm’s departments. Brian Drab. THIS IS NOT IN ANY SENSE A SOLICITATION OR OFFER OF THE PURCHASE OR SALE OF SECURITIES. PRICES SHOWN ARE APPROXIMATE. The compensation of the research analyst is based on a variety of factors.C. and competitive factors. OPINIONS EXPRESSED ARE OUR OWN UNLESS OTHERWISE STATED.L.

2011 China U. while others maintain a narrower range.S. As of the date of this report. there have been noteworthy events related to several of the pending transactions.Mark Tobin. (86) (21) 6141-5757 x 7825 ezhao@roth. no announcement has been made. 2011. HRBN) are trading at meaningful discounts to the respective proposed buy-out price. 2011).Privatization Update (2nd Edition) The attached industry report provides an update on the pending privatization activity within the U. three completed transactions. (949) 720-5775 mtobin@roth. Trading (800) 933-6820 INDUSTRY NOTE | CHINA EQUITY RESEARCH | April 20. s Reason for Report: Industry Update Roth Covered Companies Mentioned in this Report: CFSG FSIN HRBN $6. TCM announced the completion of its acquisition by Hanmax and Fosun. QXM announced that its proposed buy-out was abandoned permanently due to a lack of shareholder quorum.67 $8.-Listed China . LLC | 24 Corporate Plaza | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC 417 .24 $20. (949) 720-7149 ktao@roth. Shares of some companies (CSR.com Kun Tao. Since our initial report on this topic (dated March 31. CFA. On April 15. if not otherwise specified s s On April 7.S. 2011.com Sales (800) 933-6830. FSIN. 2011. HRBN released a Form 8-K indicating that the Chairman expected to announce a $24 bid on April 18.-listed Chinese sector. There are currently six companies that have buy-out activities ongoing. Important Disclosures & Regulation AC Certification(s) are located on the last page of this report. Roth Capital Partners. and one transaction that was abandoned.com Emma Jia Zhao. On April 15. We believe the former group could present an attractive investment opportunity for eventdriven investors. CFA.29 Buy Buy Buy Stock prices are as of previous day's close. 2011.

Parent Company Qiao Abax Global Capital Baring Private Equity Xing Universal Resources. Inc. Dunn & Crutcher LLP Gibson.9% of CFSG shares outstanding The offer price is 1.28 $3.0% NA (2) 20. Chairman & CEO.9 shares of XING common stock plus $0.1% 83.00 $8.0% 55. Pending 27-2008 delisting Board Financial Advisor Stephens Inc. Dunn & Crutcher LLP Not disclosed Arent Fox LLP NA Premium of bid price above the closing price on previous trading day before announcement Not disclosed.96 $3.3%) Under review by special committee (15.26 $4.28 $6.24 $20.51 $8.00 $3. 2011 cited CEO's indication that financing was lined-up Source: Company Filings Page 2 of 6 418 .32 $6.CHINA China Industry Note .10 -- -- -- -- -- -- -- -- Current Price (04/19/2011) -- $7.92 $1. Morgan Stanley Asia Morgan Stanley Asia Limited Limited Sheppard.2% Bid Price per share or ADS $10.6%) Under review by special committee (28.0% 39. Primavera China Fire & Security CFSG Undisclosed private equity firm China Security & Surveillance Technology CSR Chairman & CEO Qiao Xing Mobile Fushi Copperweld FSIN Harbin Electric HRBN Communication QXM (3) Sinoenergy SNEN Skywide Capital Management (owned by management) Tongjitang Chinese Medicines TCM Hanmax (controlled by CEO) / Fosun CEO & Director Chariman & CEO. special committee expected to close by the end of Q3'11 Abandoned for lack of Completed on Sepquorum in shareholder 29-2010 meeting on April-072011 Completed on April. (Nasdaq: XING) Announcement Date Oct-28-2010 Nov-11-2010 Mar-07-2011 Mar-08-2011 Nov-03-2010 Oct-11-2010 Sep-09-2010 Oct-12-2009 Nov-01-2010 Mar-10-2008 Pre-deal buyer/mgt ownership % 23.66 $6. Mullin.90 $4.5%) Under review by special committee.1% 61. Not disclosed Brean Murray. Buyers lined up financing. Carret & Co. no intention to raise offer price (4) -- -- -- -- Subject to Under review by shareholder vote. 2011 BMP Sunstone BJGP Buyers (as announced) Sanofi-Aventis Chemspec International CPC Chairman & CEO. Lewis & Bockius LLP Shearman & Sterling Shearman & Sterling Shearman & Sterling LLP / Maples and LLP LLP Calder Gibson.10 $9.95 $6.50 $10.50 $11.8 in cash.60 Premium 31% 27% NA 59% 26% 20% 10% 48% 14% 55% Price revision Date -- Mar-21-2011 -- -- -- -- -- -- -- -- Revised Price -- $8. Houlihan Lokey Barclays Capital Nomura International (HK) BofA Merrill Lynch Morgan Stanley & Co.29 -- -- -- -- Current discount to bid price Status -Completed on Feb24-2011 (10. we convert to dollar value using XING's closing price on Sept-8-2010 HRBN's 8-K filed on April 15. Richter & Hampton LLP / Thorp Alberga Board Legal Advisor (1) (2) (3) (4) Morgan.1%) NA (30.10 $19.20 Price day prior to announcement (1) $7.67 $4.April 20.00 Undisclosed price at a premium $6.9% 29.Withdrawn on Jun15-2011.2% 31.50 $24. Li Family and key management own 59.0% 39.55 $1.

VALUATION Our $11.50 per share. While we view Mr. 2011 China Fire & Security Group. Shanghai Hongtai. accompanied with imposed tariffs on steel exports. Page 3 of 6 419 .50 price target reflects the proposed Fu/Abax going private bid price. The premium multiple is based on our expectation for a >30% buy-out premium. accounting for more than half of quarterly revenue. in our opinion. and rapid decline in copper prices.55. Litigation risk. Factors that may impede CFSG shares from reaching price target include a buyout process does not materialize. Accordingly. Factors that may impede FSIN shares from reaching price target include failure of completion of the going private buyout. presenting financial and business risk. and Dalian Jinchuan. Concerns on over-capacity.5x multiple applied to our 2011 GAAP EPS estimate of $0. Inc. aluminum and steel prices. a shareholder class action lawsuit was filed against the Company and certain officers and directors. horizontal consolidations. Going private transaction risk. replacing Frazer Frost. we note that his tenure with FSIN is limited and he has yet to oversee the filing of an audited annual report for the company. The inability to complete this transaction could negatively impa