Here's Why Shareholders May Want To Be Cautious With Increasing Changhong Jiahua Holdings Limited's (HKG:3991) CEO Pay Packet

Key Insights

• Changhong Jiahua Holdings' Annual General Meeting to take place on 23rd of May
• Salary of HK$1.21m is part of CEO Jianqiu Zhu's total remuneration
• Total compensation is 146% above industry average
• Changhong Jiahua Holdings' EPS declined by 2.8% over the past three years while total shareholder return over the past three years was 73%

Our free stock report includes 3 warning signs investors should be aware of before investing in Changhong Jiahua Holdings. Read for free now.

Despite strong share price growth of 73% for Changhong Jiahua Holdings Limited (HKG:3991) over the last few years, earnings growth has been disappointing, which suggests something is amiss. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 23rd of May. 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 what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

Check out our latest analysis for Changhong Jiahua Holdings

Comparing Changhong Jiahua Holdings Limited's CEO Compensation With The Industry

At the time of writing, our data shows that Changhong Jiahua Holdings Limited has a market capitalization of HK$2.1b, and reported total annual CEO compensation of HK$13m for the year to December 2024. We note that's a decrease of 21% compared to last year. We think total compensation is more important but our data shows that the CEO salary is lower, at HK$1.2m.

On comparing similar companies from the Hong Kong Electronic industry with market caps ranging from HK$781m to HK$3.1b, we found that the median CEO total compensation was HK$5.3m. This suggests that Jianqiu Zhu is paid more than the median for the industry. Moreover, Jianqiu Zhu also holds HK$92m worth of Changhong Jiahua Holdings stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2024	2023	Proportion (2024)
Salary	HK$1.2m	HK$1.2m	9%
Other	HK$12m	HK$15m	91%
Total Compensation	HK$13m	HK$17m	100%

Speaking on an industry level, nearly 79% of total compensation represents salary, while the remainder of 21% is other remuneration. Changhong Jiahua Holdings pays a modest slice of remuneration through salary, as compared to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

Changhong Jiahua Holdings Limited's Growth

Over the last three years, Changhong Jiahua Holdings Limited has shrunk its earnings per share by 2.8% per year. It achieved revenue growth of 7.6% over the last year.

The lack of EPS growth is certainly uninspiring. The fairly low revenue growth fails to impress given that the EPS is down. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Changhong Jiahua Holdings Limited Been A Good Investment?

We think that the total shareholder return of 73%, over three years, would leave most Changhong Jiahua Holdings Limited shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. That's why we did our research, and identified 3 warning signs for Changhong Jiahua Holdings (of which 2 don't sit too well with us!) that you should know about in order to have a holistic understanding of the stock.

Important note: Changhong Jiahua Holdings 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.