Private equity firms among Hunan Aihua Group Co., Ltd's (SHSE:603989) largest stockholders and were hit after last week's 6.8% price drop

Key Insights

• The considerable ownership by private equity firms in Hunan Aihua Group indicates that they collectively have a greater say in management and business strategy
• The top 2 shareholders own 64% of the company
• Insiders own 16% of Hunan Aihua Group

To get a sense of who is truly in control of Hunan Aihua Group Co., Ltd (SHSE:603989), it is important to understand the ownership structure of the business. We can see that private equity firms own the lion's share in the company with 48% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private equity firms as a group endured the highest losses last week after market cap fell by CN¥427m.

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

See our latest analysis for Hunan Aihua Group

What Does The Institutional Ownership Tell Us About Hunan Aihua 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.

Less than 5% of Hunan Aihua Group 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. So if the company itself can improve over time, we may well see more institutional buyers in the future. 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.

Hunan Aihua Group is not owned by hedge funds. Hunan Aihua Investment Co., Ltd is currently the largest shareholder, with 48% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 16% and 6.1%, of the shares outstanding, respectively.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 64% stake.

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. 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 Hunan Aihua Group

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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 Hunan Aihua Group Co., Ltd. Insiders have a CN¥927m stake in this CN¥5.8b business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

With a 25% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Hunan Aihua Group. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

Private equity firms hold a 48% stake in Hunan Aihua Group. This suggests they can be influential in key policy decisions. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should be aware of the 2 warning signs we've spotted with Hunan Aihua Group .

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.