We Think Shareholders Are Less Likely To Approve A Large Pay Rise For Sihuan Pharmaceutical Holdings Group Ltd.'s (HKG:460) CEO For Now

Despite strong share price growth of 139% for Sihuan Pharmaceutical Holdings Group Ltd. (HKG:460) over the last few years, earnings growth has been disappointing, which suggests something is amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 30 June 2021. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.

See our latest analysis for Sihuan Pharmaceutical Holdings Group

Comparing Sihuan Pharmaceutical Holdings Group Ltd.'s CEO Compensation With the industry

At the time of writing, our data shows that Sihuan Pharmaceutical Holdings Group Ltd. has a market capitalization of HK$33b, and reported total annual CEO compensation of CN¥6.0m for the year to December 2020. This was the same as last year. Notably, the salary of CN¥6.0m is the entirety of the CEO compensation.

In comparison with other companies in the industry with market capitalizations ranging from HK$16b to HK$50b, the reported median CEO total compensation was CN¥3.3m. Hence, we can conclude that Weicheng Guo is remunerated higher than the industry median. Furthermore, Weicheng Guo directly owns HK$1.1b worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2020	2019	Proportion (2020)
Salary	CN¥6.0m	CN¥6.0m	100%
Other	-	-	-
Total Compensation	CN¥6.0m	CN¥6.0m	100%

On an industry level, around 71% of total compensation represents salary and 29% is other remuneration. Speaking on a company level, Sihuan Pharmaceutical Holdings Group prefers to tread along a traditional path, disbursing all compensation through a salary. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Sihuan Pharmaceutical Holdings Group Ltd.'s Growth Numbers

Sihuan Pharmaceutical Holdings Group Ltd. has reduced its earnings per share by 29% a year over the last three years. It saw its revenue drop 14% over the last year.

Few shareholders would be pleased to read that EPS have declined. And the fact that revenue is down year on year arguably paints an ugly picture. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Sihuan Pharmaceutical Holdings Group Ltd. Been A Good Investment?

We think that the total shareholder return of 139%, over three years, would leave most Sihuan Pharmaceutical Holdings Group Ltd. shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

Sihuan Pharmaceutical Holdings Group rewards its CEO solely through a salary, ignoring non-salary benefits completely. While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us question whether these strong returns will continue. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 2 warning signs for Sihuan Pharmaceutical Holdings Group that you should be aware of before investing.

Important note: Sihuan Pharmaceutical Holdings Group 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.

When trading stocks or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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