Individual investors invested in Guangdong Zhongsheng Pharmaceutical Co., Ltd. (SZSE:002317) up 4.9% last week, insiders too were rewarded

Key Insights

• Significant control over Guangdong Zhongsheng Pharmaceutical by individual investors implies that the general public has more power to influence management and governance-related decisions
• 41% of the business is held by the top 25 shareholders
• Insiders own 28% of Guangdong Zhongsheng Pharmaceutical

To get a sense of who is truly in control of Guangdong Zhongsheng Pharmaceutical Co., Ltd. (SZSE:002317), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are individual investors with 58% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Individual investors gained the most after market cap touched CN¥9.4b last week, while insiders who own 28% also benefitted.

In the chart below, we zoom in on the different ownership groups of Guangdong Zhongsheng Pharmaceutical.

See our latest analysis for Guangdong Zhongsheng Pharmaceutical

What Does The Institutional Ownership Tell Us About Guangdong Zhongsheng Pharmaceutical?

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.

Guangdong Zhongsheng Pharmaceutical already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Guangdong Zhongsheng Pharmaceutical's historic earnings and revenue below, but keep in mind there's always more to the story.

Guangdong Zhongsheng Pharmaceutical is not owned by hedge funds. Yuli Zhang is currently the company's largest shareholder with 11% of shares outstanding. With 11% and 2.9% of the shares outstanding respectively, Yuchong Zhang and National Council for Social Security Fund are the second and third largest shareholders. Yuchong Zhang, who is the second-largest shareholder, also happens to hold the title of Senior Key Executive. Furthermore, CEO Yong Hong Chen is the owner of 1.6% of the company's shares.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Guangdong Zhongsheng Pharmaceutical

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own a reasonable proportion of Guangdong Zhongsheng Pharmaceutical Co., Ltd.. Insiders own CN¥2.6b worth of shares in the CN¥9.4b company. That's quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a substantial 58% stake in Guangdong Zhongsheng Pharmaceutical, suggesting it is a fairly popular stock. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Guangdong Zhongsheng Pharmaceutical you should know about.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.