We Think Shareholders Are Less Likely To Approve A Pay Rise For Nongfu Spring Co., Ltd.'s (HKG:9633) CEO For Now

Key Insights

• Nongfu Spring to hold its Annual General Meeting on 20th of May
• CEO Shanshan Zhong's total compensation includes salary of CN¥2.04m
• The total compensation is similar to the average for the industry
• Nongfu Spring's three-year loss to shareholders was 1.6% while its EPS grew by 19% over the past three years

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In the past three years, the share price of Nongfu Spring Co., Ltd. (HKG:9633) has struggled to generate growth for its shareholders. Despite positive EPS growth in the past few years, the share price hasn't tracked the fundamental performance of the company. The AGM coming up on the 20th of May could be an opportunity for shareholders to bring these concerns to the board's attention. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. Here's our take on why we think shareholders may want to be cautious of approving a raise for the CEO at the moment.

View our latest analysis for Nongfu Spring

Comparing Nongfu Spring Co., Ltd.'s CEO Compensation With The Industry

According to our data, Nongfu Spring Co., Ltd. has a market capitalization of HK$437b, and paid its CEO total annual compensation worth CN¥3.5m over the year to December 2024. This was the same as last year. We note that the salary of CN¥2.04m makes up a sizeable portion of the total compensation received by the CEO.

For comparison, other companies in the Hong Kong Beverage industry with market capitalizations above HK$62b, reported a median total CEO compensation of CN¥3.5m. So it looks like Nongfu Spring compensates Shanshan Zhong in line with the median for the industry. Furthermore, Shanshan Zhong directly owns HK$368b worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2024	2023	Proportion (2024)
Salary	CN¥2.0m	CN¥2.0m	58%
Other	CN¥1.5m	CN¥1.5m	42%
Total Compensation	CN¥3.5m	CN¥3.5m	100%

On an industry level, around 89% of total compensation represents salary and 11% is other remuneration. It's interesting to note that Nongfu Spring allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Nongfu Spring Co., Ltd.'s Growth

Over the past three years, Nongfu Spring Co., Ltd. has seen its earnings per share (EPS) grow by 19% per year. The trailing twelve months of revenue was pretty much the same as the prior period.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's also good to see modest revenue growth, suggesting the underlying business is healthy. 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 Nongfu Spring Co., Ltd. Been A Good Investment?

Given the total shareholder loss of 1.6% over three years, many shareholders in Nongfu Spring Co., Ltd. are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Despite the growth in its earnings, the share price decline in the past three years is certainly concerning. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. Shareholders would be keen to know what's holding the stock back when earnings have grown. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 1 warning sign for Nongfu Spring that investors should think about before committing capital to this stock.

Important note: Nongfu Spring 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.