Hengerda New Materials (Fujian) Co., Ltd.'s (SZSE:300946) CEO Zhenghua Lin is the most upbeat insider, and their holdings increased by 11% last week

Key Insights

• Insiders appear to have a vested interest in Hengerda New Materials (Fujian)'s growth, as seen by their sizeable ownership
• The largest shareholder of the company is Zhenghua Lin with a 66% stake
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

To get a sense of who is truly in control of Hengerda New Materials (Fujian) Co., Ltd. (SZSE:300946), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 70% to be precise, is individual insiders. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Clearly, insiders benefitted the most after the company's market cap rose by CN¥353m last week.

In the chart below, we zoom in on the different ownership groups of Hengerda New Materials (Fujian).

View our latest analysis for Hengerda New Materials (Fujian)

What Does The Institutional Ownership Tell Us About Hengerda New Materials (Fujian)?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

Less than 5% of Hengerda New Materials (Fujian) is held by institutional investors. This suggests that some funds have the company in their sights, but many have not yet bought shares in it. If the business gets stronger from here, we could see a situation where more institutions are keen to buy. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.

We note that hedge funds don't have a meaningful investment in Hengerda New Materials (Fujian). Looking at our data, we can see that the largest shareholder is the CEO Zhenghua Lin with 66% of shares outstanding. This essentially means that they have significant control over the outcome or future of the company, which is why insider ownership is usually looked upon favourably by prospective buyers. For context, the second largest shareholder holds about 2.2% of the shares outstanding, followed by an ownership of 1.6% by the third-largest shareholder. Interestingly, the second-largest shareholder, Zhengxiong Lin is also Senior Key Executive, again, pointing towards strong insider ownership amongst the company's top shareholders.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Hengerda New Materials (Fujian)

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our information suggests that insiders own more than half of Hengerda New Materials (Fujian) Co., Ltd.. This gives them effective control of the company. Given it has a market cap of CN¥3.6b, that means they have CN¥2.5b worth of shares. Most would be pleased to see the board is investing alongside them. You may wish todiscover (for free) if they have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 25% stake in Hengerda New Materials (Fujian). While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 2 warning signs for Hengerda New Materials (Fujian) (1 makes us a bit uncomfortable) that you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.