What We Learned About Kingworld Medicines Group's (HKG:1110) CEO Compensation

The CEO of Kingworld Medicines Group Limited (HKG:1110) is Li Sheng Zhao, and this article examines the executive's compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

See our latest analysis for Kingworld Medicines Group

Comparing Kingworld Medicines Group Limited's CEO Compensation With the industry

At the time of writing, our data shows that Kingworld Medicines Group Limited has a market capitalization of HK$486m, and reported total annual CEO compensation of CN¥1.6m for the year to December 2019. Notably, that's an increase of 31% over the year before. In particular, the salary of CN¥1.61m, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar-sized companies in the industry with market capitalizations below HK$1.6b, we found that the median total CEO compensation was CN¥1.7m. This suggests that Kingworld Medicines Group remunerates its CEO largely in line with the industry average. Moreover, Li Sheng Zhao also holds HK$247m worth of Kingworld Medicines Group stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Talking in terms of the industry, salary represented approximately 90% of total compensation out of all the companies we analyzed, while other remuneration made up 9.8% of the pie. Kingworld Medicines Group pays a high salary, concentrating more on this aspect of compensation in comparison to non-salary pay. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Kingworld Medicines Group Limited's Growth

Over the last three years, Kingworld Medicines Group Limited has shrunk its earnings per share by 25% per year. In the last year, its revenue is down 28%.

Few shareholders would be pleased to read that EPS have declined. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Kingworld Medicines Group Limited Been A Good Investment?

With a three year total loss of 25% for the shareholders, Kingworld Medicines Group Limited would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Kingworld Medicines Group pays its CEO a majority of compensation through a salary. As we noted earlier, Kingworld Medicines Group pays its CEO in line with similar-sized companies belonging to the same industry. Meanwhile, EPS growth and shareholder returns have been in the red for the last three years. It's tough to call out the compensation as inappropriate, but shareholders might not favor a raise before company performance improves.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. In our study, we found 5 warning signs for Kingworld Medicines Group you should be aware of, and 1 of them is a bit unpleasant.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.

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This article by Simply Wall St is general in nature. 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.
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