Insiders were the key beneficiaries as Chengdu Kanghong Pharmaceutical Group Co., Ltd's (SZSE:002773) market cap rises to CN¥21b

Key Insights

• Significant insider control over Chengdu Kanghong Pharmaceutical Group implies vested interests in company growth
• 54% of the business is held by the top 2 shareholders
• 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 Chengdu Kanghong Pharmaceutical Group Co., Ltd (SZSE:002773), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are individual insiders with 39% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, insiders scored the highest last week as the company hit CN¥21b market cap following a 6.0% gain in the stock.

Let's take a closer look to see what the different types of shareholders can tell us about Chengdu Kanghong Pharmaceutical Group.

View our latest analysis for Chengdu Kanghong Pharmaceutical Group

What Does The Institutional Ownership Tell Us About Chengdu Kanghong Pharmaceutical Group?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that Chengdu Kanghong Pharmaceutical Group 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 Chengdu Kanghong Pharmaceutical Group's 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 Chengdu Kanghong Pharmaceutical Group. The company's largest shareholder is Chengdu Kanghong Technology (Group) Co., Ltd., with ownership of 32%. Meanwhile, the second and third largest shareholders, hold 23% and 8.7%, of the shares outstanding, respectively. Xiao Ke, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Chengdu Kanghong Pharmaceutical Group

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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

It seems insiders own a significant proportion of Chengdu Kanghong Pharmaceutical Group Co., Ltd. It has a market capitalization of just CN¥21b, and insiders have CN¥8.0b worth of shares in their own names. That's quite significant. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

With a 21% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Chengdu Kanghong Pharmaceutical Group. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Company Ownership

Our data indicates that Private Companies hold 32%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Chengdu Kanghong Pharmaceutical Group better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Chengdu Kanghong Pharmaceutical Group you should be aware of.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.

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