We Think Shareholders May Want To Consider A Review Of China Modern Dairy Holdings Ltd.'s (HKG:1117) CEO Compensation Package

Key Insights

• China Modern Dairy Holdings will host its Annual General Meeting on 12th of June
• Salary of CN¥2.39m is part of CEO Yugang Sun's total remuneration
• The overall pay is 172% above the industry average
• Over the past three years, China Modern Dairy Holdings' EPS fell by 43% and over the past three years, the total loss to shareholders 55%

The results at China Modern Dairy Holdings Ltd. (HKG:1117) have been quite disappointing recently and CEO Yugang Sun bears some responsibility for this. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 12th of June. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. The data we present below explains why we think CEO compensation is not consistent with recent performance.

See our latest analysis for China Modern Dairy Holdings

Comparing China Modern Dairy Holdings Ltd.'s CEO Compensation With The Industry

Our data indicates that China Modern Dairy Holdings Ltd. has a market capitalization of HK$6.1b, and total annual CEO compensation was reported as CN¥10m for the year to December 2023. That's a modest increase of 7.4% on the prior year. While we always look at total compensation first, our analysis shows that the salary component is less, at CN¥2.4m.

For comparison, other companies in the Hong Kong Food industry with market capitalizations ranging between HK$3.1b and HK$12b had a median total CEO compensation of CN¥3.8m. Hence, we can conclude that Yugang Sun is remunerated higher than the industry median.

Component	2023	2022	Proportion (2023)
Salary	CN¥2.4m	CN¥2.1m	23%
Other	CN¥8.0m	CN¥7.5m	77%
Total Compensation	CN¥10m	CN¥9.6m	100%

Speaking on an industry level, nearly 74% of total compensation represents salary, while the remainder of 26% is other remuneration. In China Modern Dairy Holdings' case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

A Look at China Modern Dairy Holdings Ltd.'s Growth Numbers

China Modern Dairy Holdings Ltd. has reduced its earnings per share by 43% a year over the last three years. In the last year, its revenue is up 9.5%.

The decline in EPS is a bit concerning. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has China Modern Dairy Holdings Ltd. Been A Good Investment?

Few China Modern Dairy Holdings Ltd. shareholders would feel satisfied with the return of -55% over three years. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

CEO compensation can have a massive impact on performance, but it's just one element. We've identified 3 warning signs for China Modern Dairy Holdings that investors should be aware of in a dynamic business environment.

Important note: China Modern Dairy Holdings is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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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.