2015 was not a good year for investors global stock markets falling and the price of oil being cut in less than half. Chinese stocks had their trading halted on two separate occasions in the very first week of trading and was the epicenter of the event that shocked the world’s markets.
However, even with such discouragement, there is one industry in China that is still experiencing growth even though the stocks in that industry could be, and will be, performing better.
The industry in the spotlight today is none other than the automotive industry.
Tax Reduction to Drive Sales
Even though the year didn’t start as well as it had ended for the Chinese automotive industry with June figures reporting a 3.4% YoY decline, the government’s new tax incentives were enough to bring the numbers back into the positive. Beijing cut the purchase tax in half for vehicles with an engine size of 1.6 liters or smaller until the end of 2016.
Implemented in October, the results have been astonishing so far with 17.6% and 15.4% YoY growth in sales of November and December respectively. China’s automotive industry is only looking to expand more in the future.
China MeiDong Auto Holdings Ltd (HKG:1268)
An automobile group which operates dealerships, MeiDong covers a balanced portfolio of mid to high end and luxury brands, namely BMW, Lexus, Toyota, and Hyundai. It offers customers a comprehensive array of products and services that are related to automobiles including the sale of new vehicles, provision of after-sales repair and maintenance services, sale of spare parts, and other value-added services.
The company boasts strong fundamentals and outstanding performance that has endured tough times fairly well.
In terms of fundamentals that can also be counted as an outstanding performance, MeiDong boasts an impressive record with profits more than doubling in the last 5 years to approximately HK$135 million in 2014.
MeiDong also provides one of the best returns in the market. With both ROI and ROE over 20%, the company is efficiently using its investment and its shareholders’ money.
Selling at just HK$0.76 per share, a shadow of its former peak of 2.15 with a P/E ratio of around 7 and a dividend yield of 4.94%, the highest in the market, MeiDong Auto Holdings is a buy.