Lingling Hu has been the CEO of Guangshen Railway Company Limited (HKG:525) since 2015, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Check out our latest analysis for Guangshen Railway
How Does Total Compensation For Lingling Hu Compare With Other Companies In The Industry?
At the time of writing, our data shows that Guangshen Railway Company Limited has a market capitalization of HK$18b, and reported total annual CEO compensation of CN¥553k for the year to December 2019. That's a notable increase of 17% on last year. Notably, the salary which is CN¥380.0k, represents most of the total compensation being paid.
On comparing similar companies from the same industry with market caps ranging from HK$7.8b to HK$25b, we found that the median CEO total compensation was CN¥6.9m. In other words, Guangshen Railway pays its CEO lower than the industry median.
| Component | 2019 | 2018 | Proportion (2019) |
| Salary | CN¥380k | CN¥333k | 69% |
| Other | CN¥173k | CN¥138k | 31% |
| Total Compensation | CN¥553k | CN¥471k | 100% |
On an industry level, roughly 76% of total compensation represents salary and 24% is other remuneration. Although there is a difference in how total compensation is set, Guangshen Railway more or less reflects the market in terms of setting the salary. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.
Guangshen Railway Company Limited's Growth
Over the last three years, Guangshen Railway Company Limited has shrunk its earnings per share by 73% per year. In the last year, its revenue is down 18%.
Overall this is not a very positive result for shareholders. And the fact that revenue is down year on year arguably paints an ugly picture. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has Guangshen Railway Company Limited Been A Good Investment?
Since shareholders would have lost about 63% over three years, some Guangshen Railway Company Limited investors would surely be feeling negative emotions. So shareholders would probably want the company to be lessto generous with CEO compensation.
To Conclude...
As we noted earlier, Guangshen Railway pays its CEO lower than the norm for similar-sized companies belonging to the same industry. While we are quite underwhelmed with EPS growth, the shareholder returns over the past three years have also failed to impress us. We can't say the CEO compensation is high, but shareholders will be cold to a bump at this stage, considering negative investor returns.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 1 warning sign for Guangshen Railway that you should be aware of before investing.
Important note: Guangshen Railway 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. 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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About SEHK:525
Guangshen Railway
Engages in the railway passenger and freight transportation businesses in the People’s Republic of China.
Solid track record with excellent balance sheet.
