Memtech International - China extends tax cut incentive till end-2017
- The Chinese government has extended its acquisition tax reduction on cars with engines of up to 1.6 litres till the end of 2017. The tax reduction from 10% to 5% on such cars was introduced in Oct 2015, and was due to expire in end-2016 but has since been extended to end- 2017 at a higher tax rate of 7.5%.
- We estimate that about 30% to 50% of Memtech’s automotive products end up in cars sold in China and view the incentive as a positive development.
- According to the China Association of Automobile Manufacturers, passenger vehicle production in China increased 17.6% YoY to 2.6m in Nov and grew 15.6% to 21.7m for the Jan-Nov period.
- We remain positive on the prospects for Memtech’s automotive segment given the importance of the industry to China’s economic growth.
- We maintain our BUY rating with a fair value of S$0.76.