China Mengniu Dairy Company Limited (HKG:2319) is favoured by institutional owners who hold 49% of the company

By
Simply Wall St
Published
January 17, 2022
SEHK:2319
Source: Shutterstock

A look at the shareholders of China Mengniu Dairy Company Limited (HKG:2319) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 49% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Given the vast amount of money and research capacities at their disposal, institutional ownership tends to carry a lot of weight, especially with individual investors. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.

In the chart below, we zoom in on the different ownership groups of China Mengniu Dairy.

See our latest analysis for China Mengniu Dairy

ownership-breakdown
SEHK:2319 Ownership Breakdown January 17th 2022

What Does The Institutional Ownership Tell Us About China Mengniu Dairy?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

China Mengniu Dairy 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at China Mengniu Dairy's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
SEHK:2319 Earnings and Revenue Growth January 17th 2022

China Mengniu Dairy is not owned by hedge funds. Our data shows that COFCO Corporation is the largest shareholder with 23% of shares outstanding. For context, the second largest shareholder holds about 9.1% of the shares outstanding, followed by an ownership of 5.1% by the third-largest shareholder.

We did some more digging and found that 7 of the top shareholders account for roughly 50% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of China Mengniu Dairy

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 China Mengniu Dairy Company Limited. However, it's possible that insiders might have an indirect interest through a more complex structure. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own HK$29m of stock. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 28% stake in China Mengniu Dairy. 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

It seems that Private Companies own 23%, of the China Mengniu Dairy stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand China Mengniu Dairy better, we need to consider many other factors.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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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