Increases to XD Inc.'s (HKG:2400) CEO Compensation Might Cool off for now

Key Insights

• XD will host its Annual General Meeting on 25th of June
• CEO Yimeng Huang's total compensation includes salary of CN¥1.34m
• Total compensation is 171% above industry average
• XD's three-year loss to shareholders was 63% while its EPS grew by 20% over the past three years

The underwhelming share price performance of XD Inc. (HKG:2400) in the past three years would have disappointed many shareholders. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. The AGM coming up on the 25th of June could be an opportunity for shareholders to bring these concerns to the board's attention. They could also influence management through voting on resolutions such as executive remuneration. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

View our latest analysis for XD

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

According to our data, XD Inc. has a market capitalization of HK$9.5b, and paid its CEO total annual compensation worth CN¥6.1m over the year to December 2023. We note that's a decrease of 11% compared to last year. While we always look at total compensation first, our analysis shows that the salary component is less, at CN¥1.3m.

On comparing similar companies from the Hong Kong Entertainment industry with market caps ranging from HK$7.8b to HK$25b, we found that the median CEO total compensation was CN¥2.2m. Accordingly, our analysis reveals that XD Inc. pays Yimeng Huang north of the industry median. Moreover, Yimeng Huang also holds HK$3.3b worth of XD stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	CN¥1.3m	CN¥1.9m	22%
Other	CN¥4.7m	CN¥5.0m	78%
Total Compensation	CN¥6.1m	CN¥6.8m	100%

On an industry level, around 89% of total compensation represents salary and 11% is other remuneration. XD sets aside a smaller share of compensation for salary, in comparison to the overall industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at XD Inc.'s Growth Numbers

XD Inc. has seen its earnings per share (EPS) increase by 20% a year over the past three years. In the last year, its revenue is down 1.2%.

Shareholders would be glad to know that the company has improved itself over the last few years. While it would be good to see revenue growth, profits matter more in the end. 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 XD Inc. Been A Good Investment?

Few XD Inc. shareholders would feel satisfied with the return of -63% over three years. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. Shareholders would be keen to know what's holding the stock back when earnings have grown. The upcoming AGM will be a chance for shareholders to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.

So you may want to check if insiders are buying XD shares with their own money (free access).

Switching gears from XD, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com