Huabao Flavours & Fragrances Co., Ltd.'s (SZSE:300741) last week's 7.9% decline must have disappointed public companies who have a significant stake

Key Insights

• Huabao Flavours & Fragrances' significant public companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• 81% of the company is held by a single shareholder (Huabao International Holdings Limited)
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

To get a sense of who is truly in control of Huabao Flavours & Fragrances Co., Ltd. (SZSE:300741), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 81% to be precise, is public companies. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And following last week's 7.9% decline in share price, public companies suffered the most losses.

In the chart below, we zoom in on the different ownership groups of Huabao Flavours & Fragrances.

View our latest analysis for Huabao Flavours & Fragrances

What Does The Institutional Ownership Tell Us About Huabao Flavours & Fragrances?

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.

We can see that Huabao Flavours & Fragrances does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Huabao Flavours & Fragrances' historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Huabao Flavours & Fragrances. Huabao International Holdings Limited is currently the largest shareholder, with 81% of shares outstanding. This implies that they have majority interest control of the future of the company. With 3.4% and 0.2% of the shares outstanding respectively, Shanghai Junhe Licheng Investment Management Center (Limited Partnership) and China Southern Asset Management Co., Ltd. are the second and third largest shareholders.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Huabao Flavours & Fragrances

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own less than 1% of Huabao Flavours & Fragrances Co., Ltd.. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around CN¥57k worth of shares (at current prices). Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 13% stake in Huabao Flavours & Fragrances. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Public Company Ownership

Public companies currently own 81% of Huabao Flavours & Fragrances stock. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Take risks for example - Huabao Flavours & Fragrances has 4 warning signs (and 1 which shouldn't be ignored) we think you should know about.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.