Is Johnson Controls-Hitachi Air Conditioning India Limited's (NSE:JCHAC) CEO Paid At A Competitive Rate?

By
Simply Wall St
Published
May 31, 2020
NSEI:JCHAC

In 2017, Gurmeet Singh was appointed CEO of Johnson Controls-Hitachi Air Conditioning India Limited (NSE:JCHAC). First, this article will compare CEO compensation with compensation at similar sized companies. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. The aim of all this is to consider the appropriateness of CEO pay levels.

Check out our latest analysis for Johnson Controls-Hitachi Air Conditioning India

How Does Gurmeet Singh's Compensation Compare With Similar Sized Companies?

According to our data, Johnson Controls-Hitachi Air Conditioning India Limited has a market capitalization of ₹66b, and paid its CEO total annual compensation worth ₹19m over the year to March 2019. While we always look at total compensation first, we note that the salary component is less, at ₹11m. When we examined a selection of companies with market caps ranging from ₹30b to ₹121b, we found the median CEO total compensation was ₹35m.

Next, let's break down remuneration compositions to understand how the industry and company compare with each other. On an industry level, roughly 98% of total compensation represents salary and 1.9% is other remuneration. It's interesting to note that Johnson Controls-Hitachi Air Conditioning India allocates a smaller portion of compensation to salary in comparison to the broader industry.

Most shareholders would consider it a positive that Gurmeet Singh takes less total compensation than the CEOs of most similar size companies, leaving more for shareholders. However, before we heap on the praise, we should delve deeper to understand business performance. You can see, below, how CEO compensation at Johnson Controls-Hitachi Air Conditioning India has changed over time.

NSEI:JCHAC CEO Compensation June 1st 2020
NSEI:JCHAC CEO Compensation June 1st 2020

Is Johnson Controls-Hitachi Air Conditioning India Limited Growing?

Johnson Controls-Hitachi Air Conditioning India Limited has seen earnings per share (EPS) move positively by an average of 12% a year, over the last three years (using a line of best fit). In the last year, its revenue is up 10%.

This shows that the company has improved itself over the last few years. Good news for shareholders. It's also good to see decent revenue growth in the last year, suggesting the business is healthy and growing. Although we don't have analyst forecasts you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Johnson Controls-Hitachi Air Conditioning India Limited Been A Good Investment?

With a total shareholder return of 14% over three years, Johnson Controls-Hitachi Air Conditioning India Limited shareholders would, in general, be reasonably content. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.

In Summary...

It looks like Johnson Controls-Hitachi Air Conditioning India Limited pays its CEO less than similar sized companies.

Many would consider this to indicate that the pay is modest since the business is growing. While returns over the last few years haven't been top notch, there is nothing to suggest to us that Gurmeet Singh is overcompensated. Few would complain about reasonable CEO remuneration when the business is growing earnings per share. But for me, it's even better if insiders are also buying shares with their own cold, hard, cash. Moving away from CEO compensation for the moment, we've identified 1 warning sign for Johnson Controls-Hitachi Air Conditioning India that you should be aware of before investing.

Important note: Johnson Controls-Hitachi Air Conditioning India may not be the best stock to buy. 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. Thank you for reading.

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