Does China Electronics Huada Technology’s (HKG:85) CEO Salary Compare Well With Industry Peers?

Hongzhou Liu became the CEO of China Electronics Huada Technology Company Limited (HKG:85) in 2016, and we think it’s a good time to look at the executive’s compensation against the backdrop of overall company performance. This analysis will also assess whether China Electronics Huada Technology pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

See our latest analysis for China Electronics Huada Technology

How Does Total Compensation For Hongzhou Liu Compare With Other Companies In The Industry?

At the time of writing, our data shows that China Electronics Huada Technology Company Limited has a market capitalization of HK$1.6b, and reported total annual CEO compensation of HK$1.8m for the year to December 2019. We note that’s an increase of 17% above last year. While we always look at total compensation first, our analysis shows that the salary component is less, at HK$750k.

On examining similar-sized companies in the industry with market capitalizations between HK$775m and HK$3.1b, we discovered that the median CEO total compensation of that group was HK$2.0m. So it looks like China Electronics Huada Technology compensates Hongzhou Liu in line with the median for the industry.

Component20192018Proportion (2019)
Salary HK$750k HK$750k 41%
Other HK$1.1m HK$831k 59%
Total CompensationHK$1.8m HK$1.6m100%

On an industry level, roughly 83% of total compensation represents salary and 17% is other remuneration. China Electronics Huada Technology pays a modest slice of remuneration through salary, as compared to the broader industry. If non-salary compensation dominates total pay, it’s an indicator that the executive’s salary is tied to company performance.

ceo-compensation
SEHK:85 CEO Compensation July 30th 2020

A Look at China Electronics Huada Technology Company Limited’s Growth Numbers

Over the last three years, China Electronics Huada Technology Company Limited has shrunk its earnings per share by 28% per year. In the last year, its revenue changed by just 0.5%.

The decline in earnings is a bit concerning. And the flat revenue hardly impresses. It’s hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. We don’t have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has China Electronics Huada Technology Company Limited Been A Good Investment?

Given the total shareholder loss of 17% over three years, many shareholders in China Electronics Huada Technology Company Limited are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be lessto generous with CEO compensation.

To Conclude…

As we touched on above, China Electronics Huada Technology Company Limited is currently paying a compensation that’s close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Meanwhile, earnings growth and shareholder returns have been in the red for the last three years. We’d stop short of saying compensation is inappropriate, but we would understand if shareholders had questions regarding a future raise.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We did our research and identified 4 warning signs (and 2 which are potentially serious) in China Electronics Huada Technology we think you should know about.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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