Here's Why Shareholders Should Examine Zhixin Group Holding Limited's (HKG:2187) CEO Compensation Package More Closely

Key Insights

• Zhixin Group Holding's Annual General Meeting to take place on 18th of June
• CEO Wengui Huang's total compensation includes salary of CN¥601.0k
• The total compensation is similar to the average for the industry
• Over the past three years, Zhixin Group Holding's EPS fell by 51% and over the past three years, the total loss to shareholders 27%

Shareholders will probably not be too impressed with the underwhelming results at Zhixin Group Holding Limited (HKG:2187) recently. At the upcoming AGM on 18th of June, shareholders can hear from the board including their plans for turning around performance. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. We present the case why we think CEO compensation is out of sync with company performance.

See our latest analysis for Zhixin Group Holding

How Does Total Compensation For Wengui Huang Compare With Other Companies In The Industry?

Our data indicates that Zhixin Group Holding Limited has a market capitalization of HK$688m, and total annual CEO compensation was reported as CN¥792k for the year to December 2023. That is, the compensation was roughly the same as last year. We note that the salary portion, which stands at CN¥601.0k constitutes the majority of total compensation received by the CEO.

In comparison with other companies in the Hong Kong Basic Materials industry with market capitalizations under HK$1.6b, the reported median total CEO compensation was CN¥821k. From this we gather that Wengui Huang is paid around the median for CEOs in the industry. Furthermore, Wengui Huang directly owns HK$109m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2023	2022	Proportion (2023)
Salary	CN¥601k	CN¥600k	76%
Other	CN¥191k	CN¥191k	24%
Total Compensation	CN¥792k	CN¥791k	100%

Speaking on an industry level, nearly 87% of total compensation represents salary, while the remainder of 13% is other remuneration. Zhixin Group Holding sets aside a smaller share of compensation for salary, in comparison to the overall industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Zhixin Group Holding Limited's Growth

Zhixin Group Holding Limited has reduced its earnings per share by 51% a year over the last three years. Its revenue is down 19% over the previous year.

Overall this is not a very positive result for shareholders. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Zhixin Group Holding Limited Been A Good Investment?

Since shareholders would have lost about 27% over three years, some Zhixin Group Holding Limited investors would surely be feeling negative emotions. So shareholders would probably want the company to be less generous with CEO compensation.

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.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. That's why we did our research, and identified 4 warning signs for Zhixin Group Holding (of which 2 shouldn't be ignored!) that you should know about in order to have a holistic understanding of the stock.

Switching gears from Zhixin Group Holding, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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.